11 Pension Protection Fund Climate Change Report 2021/22 STRATEGY AND RISK MANAGEMENT CONTINUED Increasing our internal access to portfolio data Standardising reporting frameworks Considering our operational We regularly review the climate-related services of our We see real value in pushing the We have also joined eFront’s ESG emissions main ESG data provider, MSCI, which is rapidly expanding its Next steps industry to agree on more common Outreach pilot project, which will Most of our material exposure to breadth and depth of analysis, especially within its scenario climate reporting frameworks and work with private equity and credit climate-related risks exists in the analysis and climate value-at-risk (CVaR) measurements. We strongly support tools such as the expansion templates, and being able to share managers to collect relevant ESG downstream ‘昀椀nanced emissions’ Much of this expansion feeds directly into our portfolio of the Transition Pathway Initiative (TPI) into our experience and thoughts on metrics on their underlying portfolio in our investment value chain. and risk management system, Aladdin, so we can now run more credit issuers, and the new ASCOR project this. We played an active role in a companies to feed into investor As a result, we focus our strategy comprehensive TCFD assessments for our listed Equity and by the Principles for Responsible Investment working group led by the Pensions and reporting – an important step in and risk management primarily Credit portfolios in the moment. We have also acquired (PRI) to develop a robust carbon and climate-risk Lifetime Savings Association (PLSA), addressing the lack of ESG data and on these 昀椀nanced emissions, access to a new sustainability module in our private markets assessment framework for sovereigns. As this is the Investment Association (IA) and reporting from private companies. The as recommended by the investment software, eFront, which allows us to conduct work in progress, however, we have started to assess Association of British Insurers (ABI) solution will be available to over 2,500 Greenhouse Gas Protocol Scope key ESG risk analysis for our Alternatives funds. More our sovereign exposure using newly proposed tasked with developing a standard private markets managers, reaching Calculation Guidance. progress is still needed, however, in the coverage of private approaches, starting with our UK Gilts portfolio, TCFD template for reporting carbon over 70,000 private companies. markets and real assets, especially on carbon emissions and which we detail later in this report. emissions. The template was recently However, in support of the transition/physical risks. 昀椀nalised and we plan to roll it out to Government’s commitment managers shortly. to reduce its impact on the We have broader ESG data and scores available through environment we’re also our portfolio management systems for 70 per cent of the reporting against the Greening Fund’s net asset value (NAV), accounting for almost all of Government Commitments our listed holdings. Within these systems, the access to (GGC). This includes reporting more speci昀椀c carbon emissions data – whilst lower than on the environmental impact the broader ESG scores – has increased over the past year of our operations out of our 5 from 30 per cent to around 55 per cent of NAV . two shared-lease buildings in The di昀케culty in assigning carbon emissions and Croydon and London, both understanding our exposure for our sovereign debt holdings of which use energy from continues to limit this coverage. Over the next year we renewable sources and have hope to see an expansion in tools addressing sovereign zero Scope 1 greenhouse gas markets to help inform our strategy further. emissions from combustion. We will evolve this as part of our plans to develop an organisation-wide, holistic sustainability strategy. We can now run comprehensive TCFD assessments for our listed Equity and Credit portfolios in the moment. 5 The percentage of carbon emissions data is lower than broader ESG data, due to a more limited amount of datapoints for sovereigns, supranationals and agencies.