20 Pension Protection Fund Climate Change Report 2021/22 METRICS AND TARGETS CONTINUED High carbon impact sectors Next steps In line with TCFD recommendations, The Credit portfolio saw a similar we pay particular attention to contribution from Utilities to last year. As part of our Paris Portfolio our exposure to sectors that have Alignment Project (see page 10), a higher contribution to global We continue to engage with these we are identifying companies carbon emissions. Guided by these sectors – both directly and through that are our highest priority 16 our external managers – to transition engagement targets in the recommendations , we have focused on the Utilities, Materials to lower-carbon activities. As pro昀椀led transition to Net Zero, which and Energy sectors. on the case study on page 15, we will include many in these three continue to be an active signatory to high carbon impact sectors. We Consistent with last year, Utilities the Climate Action 100+ initiative to will work with our stewardship contributed the most carbon emissions ensure the world’s largest corporate services provider EOS and to our UK Credit portfolio. However, the greenhouse gas emitters take external fund managers to sector now contributes just 19 per cent necessary action on climate change. ensure this subset is held to of carbon emissions to our Equities clear and measurable progress, book (compared to 42 per cent last through both company level and year) as a result of our move to our sector level engagement. new climate-aware equity benchmark. Contribution to overall portfolio carbon emissions by high-impact sectors Equities Credit 9% Utilities now 19% 27% 13% contributes just 19 per cent of carbon 13% emissions in our Equities book. 23% 31% 65% UK Credit 51% Utilities Materials Energy Other 49% 16 Ener gy, Materials and Buildings, Transportation and Agriculture, Food and Certain information ©2022 MSCI ESG Research LLC. Reproduced by permission; no further distribution. Forest Products are identi昀椀ed by the TCFD as accounting for the largest proportion of GHG emissions, energy usage and water usage.