At Lothian Pension Fund, we recognise climate change as a systemic issue presenting financially material investment risks but also opportunities to invest in climate mitigation and adaption. Our Climate Change Policy enhances and extends our approach to climate change, building upon our Statement of Responsible Investment Principles, which sets out our approach to all aspects of responsible investment.
Our Climate Change Policy was approved by our Pensions Committee in March 2025. It sets out our investment beliefs on climate change, why it’s a priority, our role as investors and the actions we’re taking to enhance the resilience of our investment strategy as well as how we support the real-world transition to net zero. We recognise that this is a complex, multi-decade transition, which will require a significant change in the shape and structure of the global economy, including a shift away from fossil fuels.
Our climate change commitments and ambitions:
1. To support the goal of transitioning the real economy to net zero greenhouse gas emissions by 2050
· We do this primarily through engagement with investee companies and policymakers, collaborating with like-minded investors where appropriate
2. To promote a managed decline for the fossil fuel sector
· We’ve introduced a presumption against continued investment in laggard oil & gas companies
3. To report annually in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
· We measure and report annually on the carbon-equivalent emissions intensity of our equity and corporate bond portfolios, and aim to extend this to additional asset classes as more data becomes available
4. To develop a climate action plan - to support the resilience of our investment strategy to climate change:
· Identification and assessment of climate risks at an asset level: We consider climate-related risks and opportunities within our investment decision making processes
o We identify climate leaders and laggards
o Through engagement, we aim to encourage companies to align with the goals of the Paris Agreement - where material risks remain following engagement activity, we retain the ability to divest
o We avoid subscribing to new equity and fixed income issuance from companies whose business plans we assess as incompatible with the aims of the Paris Agreement
· Portfolio Alignment: We focus our efforts on engagement and advocacy to drive real world decarbonisation
o Our ambition is that over the next 5 years we will increase the alignment of our investee companies to a future low-carbon world
· Capital Allocation: We measure and report on the percentage of our assets allocated to climate solutions
o We aim to position the Fund to benefit from the energy transition by having more exposure (across the Fund) to climate solutions than in companies whose primary business is related to fossil fuels.
Emmanuel Bocquet quote:
“Our new Climate Change Policy achieves the right balance between implementing our commitments on climate and ensuring we maintain an appropriately unconstrained investment universe to deliver the required risk-adjusted investment returns over the long term for our employers and members. Introducing a presumption against holding shares in laggard oil and gas companies increases our scrutiny of the overall sector and helps us identify and encourage those firms we view as better aligned with our goals”.
We’re grateful for your interest in our responsible investment work. You can learn more in our other publications, including ENGAGE, our Stewardship Report and our Annual Report.