For the first time the year, the Trustee has been able to report on the emissions attributable to the Scheme’s Liability Driven Investment (LDI) portfolio. This follows industry advancements in the calculation of emissions attributable to gilts held by investors. Gilts make up a significant proportion of the LDI portfolio held. Given the Trustee has not reported on the LDI portfolio previously, figures have been shown separately in the metrics section below so that the Trustee can continue to track changes in emissions attributable to the other aspects of the investment portfolio on a consistent basis from one year to the next. The assets excluded from reporting this year are the Scheme’s secure income holdings and asset-backed contribution arrangements. These assets have not been included due to practical issues around the determination of relevant data, as well as the lack of ability of the Trustee to manage climate-related risk in respect of some of these assets. The Trustee will continue to review whether data in respect of these assets should be published in future reporting.
Governance
Documentation of the Trustee’s policies and their implementation
The Trustee maintains a Statement of Investment Principles (‘SIP’), which sets out the Scheme’s policies on financial risks, including climate change and responsible ownership. The Trustee manages climate risk according to financial materiality in the context of the Scheme ’s expected lifetime and also against the other risks and opportunities with which it is presented.
The Trustee also publishes an annual Implementation Statement used to review its approach to responsible ownership and engagement with investee companies.
As part of the process of preparing the Implementation Statement, the Trustee considers the Scheme’s asset managers’ approaches to stewardship, including data on voting and engagement, as well as engagement case studies over a 12-month period. In particular, the statement includes examples of significant votes and engagements related to climate issues over the reporting period.
Delegation
The management of climate- related risk with respect to specific securities is delegated to the Scheme’s investment managers, who are all third-party firms independent of the Trustee and its sponsoring employers.
Monitoring the Scheme’s investment managers and consultant
The Investment Sub- Committee (‘ISC’) of the Trustee meets at least quarterly and receives performance monitoring reports from its investment consultant that include ratings providing a view on the ability of the Scheme’s investment managers to integrate climate risk management and other factors associated with environmental, social or governance (‘ESG’) issues into i nvestment processes.
The ratings also consider how active ownership activities undertaken by asset managers, including voting and engagement on climate-related issues, are used as part of investment processes.
In monitoring the Scheme’s managers, t he ISC takes account of the fact that ESG issues are more relevant for some parts of the portfolio. For example, ESG considerations do not currently play a significant role in the selection of gilts within the LDI portfolio but may have a greater influence on the selection of equities within actively managed target return holdings.
UTC UK Pension Scheme | TCFD Report | 31 December 2024
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