West Midlands becomes latest pension fund to publish Net Zero plan as UK gears up for COP26

Regulatory engagement, decarbonisation and shareholder voting are all tools cited by pension funds wanting to hit climate targets

West Midlands Pension Fund has become the latest UK scheme to outline its climate strategy as the country prepares to host key global climate negotiations next month.  

The £18.5bn local authority pension scheme has committed to Net Zero by 2050, and plans to halve both portfolio and operational emissions by the end of the decade. 

A number of measures have already been taken to decarbonise the scheme’s portfolio over the last two years, it said, including allocating £2bn to sustainable and low-carbon equities, and reducing its exposure to fossil fuel reserves by almost 40%. 

West Midlands will roll its climate assessments out to infrastructure and real estate by 2026, and will push asset managers to increase their offerings of Net-Zero aligned products, as part of the new commitment – one of a growing number by UK and overseas pension funds on the run up to COP26, which will take place in Scotland in November. 

Earlier this week, Border to Coast, the ‘pension pool’ managing £55bn for 11 local authorities in England, also committed to Net Zero, and laid out a raft of initiatives to help it get there. It said that it would develop interim targets, invest in green solutions and work with peers to improve data and disclosure – especially for asset classes with less developed ESG expectations, such as private equity. 

Both the West Midlands Pension Fund and Border to Coast emphasised the importance of engaging with regulators as part of their new strategies. West Midlands said it would have dialogue with rulemakers on carbon pricing, Net Zero pathways and securing increased shareholder rights.

On engagement with portfolio companies, Border to Coast plans to introduce a “clear escalation and voting policy” on climate change, including voting against the chairs of high-emitters with inadequate climate policies and supporting climate resolutions that align with its new policy. 

Yesterday, the UK Government was advised to consult on whether to introduce rules requiring default pension funds to align with the country’s climate goals. The recommendation was made by the parliament’s influential Work and Pensions Select Committee in a report ahead of COP26. 

Last week, the £21.5bn UK’s Local Pensions Partnership Investments pool said it planned to join the UN-convened Net Zero Asset Manager Initiative as part of its Net Zero commitment.