London Pensions Fund Authority Cuts Portfolio CO2 Intensity by 80%

Major pension fund cuts investment emissions by 80% in five years

The London Pensions Fund Authority has reduced carbon intensity across its listed equity and corporate bond holdings by nearly 80% since 2019. The authority published the figures in its latest Investor Climate Action Plan Progress Report, released in early 2025. More than 80% of the fund’s total investment portfolio now sits within emissions-reduction programmes.

These results follow the authority’s 2022 climate strategy. They show measurable progress on portfolio emissions, climate solutions investment, and company engagement. Multiple industry publications, including Pensions Age and IPE, have confirmed the core findings.

The authority manages billions in assets for local government pension scheme members across London. Its disclosure offers a detailed example of how large institutional investors can track and report climate-related portfolio changes over time.

How the authority structured its climate programme

LPFA launched its Investor Climate Action Plan in 2022. Initially, the plan focused on listed equities, which represented roughly half of total assets at that point. The authority later expanded the framework to include corporate bonds and portions of its real estate holdings.

According to IPE, responsible investment manager Paul Hewitt explained that the plan widened as the fund’s work developed. He noted that over 54% of the portfolio now falls under net zero targets and monitoring. The authority uses a 2019 emissions baseline and has set a 2030 reduction ambition.

IPE reported that LPFA aims to cut total emissions by 75% by 2030 compared with the 2019 baseline. This target applies across the asset classes covered by the plan. Consequently, the authority tracks progress annually and publishes updates through its climate action reports.

What the 2025 progress report shows

LPFA’s 2025 report states that emissions intensity across listed equities and corporate bonds reached 8.1 tonnes of CO2 equivalent per million pounds invested in June 2025. This compares with 8.2 tonnes in December 2024. The authority describes this as an almost 80% reduction from the 2019 baseline.

The report also outlines progress across multiple climate-related goals. LPFA met or exceeded targets on 11 of 21 investment-related objectives. Six targets were newly adopted and had not yet produced data at the time of reporting. The fund fell behind schedule on two targets, though it noted improvements were underway.

Data remained unavailable for the remaining two targets. The authority said it continues to work on measurement and reporting frameworks for these areas.

In addition, LPFA reported a 3% allocation to its Environment Opportunities asset class. This forms part of a broader commitment to allocate 5% of the fund to climate solutions. The authority also said more than half of its global equity holdings in material sectors were assessed as aligned or aligning with the Paris Agreement.

Operational emissions were already ahead of the fund’s 2030 reduction target. This suggests progress on the authority’s own direct emissions has moved faster than initially planned.

Methods used to reduce portfolio emissions intensity

The improvement came from portfolio adjustments and active ownership activities. IPE reported that part of the decline in listed equity carbon intensity resulted from fund managers divesting from extractive fossil fuel companies. However, the authority has also increased company engagement and climate alignment assessments.

The fund’s implied temperature rise metric improved to 1.7 degrees Celsius, down from 1.8 degrees previously. This leaves the portfolio 0.3 degrees ahead of target. The metric estimates the global warming pathway associated with the fund’s investments based on company climate commitments and emissions trajectories.

BusinessGreen reported earlier that LPFA described more than 80% of its roughly £8 billion fund as being managed for climate resilience. This framing aligns with the 2025 reporting on emissions-reduction coverage. It suggests the authority has broadened its approach beyond carbon metrics to include wider resilience and transition readiness considerations.

Engagement with investee companies has formed a significant part of the strategy. The authority uses voting rights and direct dialogue to encourage companies to adopt science-based targets and improve climate disclosure. This approach complements portfolio-level changes and allows the fund to influence transition plans at individual companies.

Carbon intensity fell to 8.1 tonnes per million pounds invested

• LPFA uses 2019 as its baseline year for measuring emissions reductions across the portfolio.
• Listed equity and corporate bond emissions intensity reached 8.1 tonnes of CO2 equivalent per million pounds invested in June 2025.
• The authority reports an almost 80% reduction in carbon intensity since the 2019 baseline.
• More than 80% of the total portfolio now falls within emissions-reduction initiatives and monitoring frameworks.
• LPFA met or exceeded targets on 11 of 21 investment-related climate goals as of early 2025.
• The fund has allocated 3% to climate solutions investments and aims to reach 5% over time.
• The portfolio’s implied temperature rise metric stands at 1.7 degrees Celsius, which is 0.3 degrees ahead of target.

Why large institutional investors track portfolio emissions

Pension funds face growing expectations to align investments with climate goals. Members, regulators, and policymakers increasingly ask how retirement savings contribute to or mitigate climate risk. As a result, many funds now publish climate-related disclosures and set portfolio-level targets.

LPFA’s approach demonstrates how a public pension fund can move beyond broad commitments to measurable outcomes. A near-80% cut in emissions intensity represents substantial progress, particularly when linked to a defined baseline and tracked consistently. In pension investing, long-duration liabilities align naturally with long-term climate horizons. Therefore, climate-related reporting can influence how peer funds design their own transition plans.

The report also highlights a common challenge in climate investing. Progress is easier to demonstrate in listed equities than in less liquid or more complex asset classes. LPFA acknowledges gaps in data and varying implementation speeds across different parts of the portfolio. This makes the 2025 report both encouraging and illustrative of current limitations in portfolio decarbonisation frameworks.

Nevertheless, the fund’s increasing allocation to climate solutions signals a shift from pure risk reduction toward capital deployment in transition-related opportunities. This approach links asset allocation to the broader energy transition rather than only reducing financed emissions on paper. If sustained, it may prove more relevant than emissions reduction alone.

What UK businesses should consider about investor climate expectations

Companies seeking investment or operating within pension fund portfolios face growing scrutiny on climate performance. Investors now routinely assess company emissions, transition plans, and alignment with temperature goals. Businesses that disclose emissions data and set credible targets may find it easier to attract capital from climate-focused funds.

For small and medium-sized enterprises, this trend creates both opportunity and pressure. On one hand, investors increasingly allocate capital to climate solutions and low-carbon sectors. On the other hand, companies with high emissions or unclear transition plans may face divestment or reduced access to funding. Therefore, understanding investor expectations around climate disclosure can help businesses position themselves more effectively.

SBS works with SMEs to measure and report carbon emissions through our net-zero programme for carbon reporting compliance. Many businesses now need to produce emissions data for investors, supply chain requirements, or public sector tenders. We help companies gather accurate data and develop credible reduction plans that meet external expectations.

Pension funds like LPFA also engage directly with companies on climate performance. Businesses that respond constructively to investor engagement may benefit from continued investment and support. Conversely, companies that ignore or dismiss investor concerns risk being excluded from portfolios. As a result, climate performance increasingly affects corporate reputation and access to capital.

We see this dynamic across sectors. Manufacturers, logistics firms, construction companies, and service providers all face questions about emissions and transition plans. Investors want to understand how businesses will adapt to net-zero pathways and manage climate-related risks. Companies that address these questions proactively tend to fare better in funding discussions and procurement processes.

For businesses considering climate action, several steps can help. First, measure your current emissions across Scopes 1, 2, and 3 where possible. Second, set realistic reduction targets based on your operations and sector. Third, disclose your progress transparently. These steps align with what investors increasingly expect and can improve your competitive position.

Training also matters. SBS Academy offers training on carbon measurement and climate disclosure for businesses that need to build internal capability. Understanding how to gather emissions data and communicate climate performance helps companies respond effectively to investor and customer expectations.

Where to find authoritative guidance on pension fund climate reporting

The UK government provides guidance on climate-related financial disclosure through the Department for Business and Trade. Pension schemes above certain asset thresholds must now produce Task Force on Climate-related Financial Disclosures reports. These requirements apply to occupational pension schemes and set out expectations for governance, strategy, risk management, and metrics.

The Financial Conduct Authority also publishes rules on climate-related disclosure for listed companies and asset managers. These rules affect how pension funds and their managers report climate information to members and the public. Businesses can review FCA guidance on climate-related disclosure requirements to understand regulatory expectations.

The Pensions Regulator offers resources on climate risk and governance for pension trustees. Its guidance explains how trustees should consider climate-related risks in investment decisions and scheme management. Businesses involved in pension scheme governance can access these resources through The Pensions Regulator’s website.

For broader context on institutional investor climate action, the Institutional Investors Group on Climate Change publishes frameworks and research. IIGCC represents investors managing trillions in assets and develops tools for net-zero investment strategies. Its Net Zero Investment Framework provides detailed guidance on target-setting and portfolio alignment.

Industry publications such as Pensions Age, IPE, and Professional Pensions regularly report on pension fund climate strategies and performance. These sources offer useful benchmarking information for businesses seeking to understand investor priorities and emerging practices in institutional climate action.