Over the 12- month period, the Scheme’s total Scope 1 and 2 carbon emissions and footprint have fallen. This resulted from a general fall in global emissions for developed and emerging market equity indices, to which the Sch eme’s equity and target return portfolios are exposed. In addition, a fall in emissions from corporate bond issuers invested in was also evident over the year. The overall decline in carbon emissions and footprint was dampened to an extent by the rise in reported emissions from the Scheme’s Target Return portfolio. This was driven by changes in the asset allocation for the main target return fund in which the Scheme is invested.
Scope 3 emissions reported were broadly unchanged over the year.
Data coverage targets for Scopes 1 and 2 are commented on further in the next section.
There was also an overall improvement in investee companies using science-based emission reduction targets – this is the ‘Alignment’ column in the table. This was due to a general increase in companies that have adopted such targets in recent years. 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 is the result of advancements in the calculation of emissions attributable to gilts held by investors. Given the Trustee has not reported on the LDI portfolio previously, the Trustee has set out the figures for this holding separately below. This has enabled the Trustee to continue to track changes in emissions attributable from the rest of the investment portfolio on a consistent basis from one year to the next. The key metrics for the Scheme’s LDI portfolio are summarised in the table below:
Total emissions (Scopes 1 & 2) (tCO 2 )
Data coverage (Scopes 1 & 2) (%)
Total emissions (Scope 3) (tCO 2 )
Data coverage (Scope 3) (%)
Asset class (allocation at effective date %)
Footprint (Scopes 1 & 2) (tCO 2 /£1m)
Footprint (Scope 3) (tCO 2 /£1m)
Alignment (%)
LDI portfolio (11%)
50,228
148
N/A
N/A
N/A
100
N/A
Source: investment manager. Data as at 31 December 2024.Absolute emissions have been provided on funded gilts only (i.e. excluding those on repo), using the Partnership for Carbon Accounting Financials (PCAF) approach. Emissions are defined as scope 12 in line with Department for Work and Pensions (DWP) guidance. The data provided by the investment manager and its interpretation is still developing and, consequently, it should not be assumed that the data used to calculate the metrics are consistent year-on-year.
The Trustee understands that Scope 3 emissions data for gilts are only available with a three+ year lag and have therefore not been reported by the investment manager.
The Trustee also understands that governments cannot verify their own emissions reductions targets with the Science Based Targets Initiative, given this is designed for use by companies. Independent Portfolio alignment assessment models such as Germanwatch and Climate Action Tracker suggest that the UK Government is aligned with the goals of the Paris Agreement, however such assessment models remain under review. Target used to manage climate-related risks and opportunities The Trustee’s initial target is to work with its investment managers to improve data coverage for Scope 1 and 2 emissions to 90% within the first three years of reporting, i.e. by 31 December 2025, with a view to setting emission reduction targets once that point has been reached.
Over the period, the data coverage on Scope 1 and 2 emissions improved to 89% (as per the above table and methodology) , and towards the Trustee’s overall target of 90%.
UTC UK Pension Scheme | TCFD Report | 31 December 2024
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