Net zero for Local Government Pension Schemes

The fast view

• As pressure to act on climate intensifies, Local Government Pension Schemes are developing strategies to deliver on their net-zero commitments.
• There are multiple pathways to net zero. Those following the IIGCC framework comprise two broad components: ‘reduce the problem’ (i.e., lower emissions) and ‘invest in climate solutions’.
• This paper assesses the merits and drawbacks of investment approaches aimed at ‘reducing the problem’.
• We also explore how investing in climate solutions can offer long-term investors like the LGPS access to a powerful structural-growth tailwind, a real-world contribution towards net-zero objectives, and potential portfolio diversification.
• We model an allocation to the Ninety One Global Environment strategy within a representative LGPS portfolio, to illustrate an allocation to climate solutions within the LGPS portfolio context.