The Conference called for a rapid decarbonisation of the energy system as the key to keeping the goal of 1.5°C within reach. This requires accelerating clean energy transition both from the demand and supply side, while such transformation should be orderly, just and equitable and also account for energy security. To accelerate the energy transition, the COP 28 Presidency took a leading role in launching the Global Renewables and Energy Efficiency Pledge. With the endorsement of 130 national governments (as of 11 December, including the European Union (EU)), the Pledge stipulates that signatories commit to work together to triple the world’s installed renewable energy generation capacity to at least 11,000 gigawatts by 2030 and to collectively double the global average annual rate of energy efficiency improvements from around two per cent to over four per cent every year until 2030.

Read a summary of many of the other outcomes of the Conference.

The Financial Conduct Authority (FCA) published Policy Statement PS23/16 in November 2023 containing details of the UK Sustainability Disclosure Requirements (SDR) and investment labels regime to ensure that financial products that are marketed as sustainable should do as they claim and have the evidence to back it up. It is intended that the disclosure requirements will help to overcome information asymmetries, and the regime contains an anti-greenwashing rule that will apply to all FCA-authorised firms.

The outgoing Prime Minister announced the establishment of a new Department for Energy Security and Net Zero. The Department for Business, Energy and Industrial Strategy has been broken up as part of this reorganisation. The new department is tasked with “delivering security of energy supply, ensuring properly functioning markets, greater energy efficiency and seizing the opportunities of net zero to lead the world in new green industries.”

RIEL’s restriction on any further investments being made in Russia, Belarus or Ukraine as a direct response to the Russian invasion of Ukraine in February 2022 remains in effect. The Fund does not have any significant exposure to these markets.

Together with its investment managers, the Trustee takes steps to actively monitor and take account of ESG issues when investing the Fund’s assets. The Trustee exercises voting and other rights associated with the assets it holds and engages with companies it invests in so that management can work to address investor concerns. The Trustee’s Asset & Liability Committee (ALCO) has approved the ROP and this was reviewed once during the reporting period (at the February ALCO meeting). The ROP includes principles which the Trustee and investment managers (on its behalf) apply to the investment process. The Trustee is prepared to sell assets that do not comply with those principles. Investment decisions are made by the Trustee taking account of all relevant factors in line with trustee duties to act in members’ best financial interests. The responsible ownership governance process is integral to the investment management process overseen by ALCO. The Trustee’s executive team and retained investment adviser, RIEL, is responsible for strategic investment management and asset allocation which incorporates responsible ownership. ALCO has an ESG sub-committee (ESGC) with delegated responsibility for developing policy, monitoring and reporting of ESG issues.

Aon carries on its role advising the Trustee on responsible ownership issues, in particular, the Climate Disclosures. Aon carried out climate scenario analysis for the Trustee in 2021 using its proprietary models, the results of which are set out in the 2021 Climate Disclosures. Schemes are obliged to revisit their scenario analysis at least every three years. Although there have been significant changes to the portfolio recently, the Trustee views these as reducing climate risk and ongoing funding improvements provide further protection against climate impacts on the portfolio and the sponsor covenant. The policy intention is that scenario analysis can influence Fund strategic and risk decisions, however, the buy-in focused strategic decision has taken priority over any investment activity that might have taken place in response to identified climate risk or opportunity. The Aon scenario work indicated that the Fund is resilient to climate change (based on current knowledge and projected climate paths).

During the reporting period, the Trustee has received reporting on all ESG activity in the Fund and has received regular training on ESG issues, including climate change. The ESGC met each quarter to oversee implementation of the ROP and respond to market developments and public consultations.