The first Local Government Pension Scheme climate risk reports will be completed by December 2024, according to new government consultations, reports Pensions Expert.
Administering authorities will use the reports to set out their strategies and metrics for managing climate related risks and opportunities.
All LGPS authorities in England and Wales must comply with the regulations which will come into force by April 2023, the consultation by the Department for Levelling Up, Housing and Communities stated.
“The primary purpose of LGPS investments is to meet the scheme’s long-term pension liabilities by balancing risk and return appropriately,” said the department.
“However, the scale and market power of the LGPS give it an opportunity to drive change through the investment chain through asset managers to investee companies.”
The consultation says the government’s view is that the standard of the LGPS requirements should be as high as for private schemes, but that the rules will take account of the unique features of the LGPS, including its local administration and democratic accountability through the administering authorities.
The government has proposed that LGPS authorities maintain oversight of climate-linked risks and opportunities, and consider their impact on their funding and investment strategies.
Funds must also perform two sets of scenario analysis at least once during their reporting periods, that relate to their funding and investment approaches.
One of these scenarios must align with the Paris climate targets – assuming a 1.5ºC to 2ºC temperature increase above pre-industrial levels – while the other scenario may be selected at the discretion of the administering authority.