11 Pension Protection Fund Climate Change Report 2022/23 STRATEGY AND RISK MANAGEMENT CONTINUED Putting sustainability at the heart of our strategy and culture In July 2023, we published our Sustainability Strategy to Four Sustainability Goals re昀氀ect our commitment to making a di昀昀erence by operating 2 We leveraged well-known sustainability frameworks (SASB Materiality Map for Asset Management/Insurance and the in a sustainable way and ensure the PPF’s longevity. Our 3 Forum for the Future’s Five-Capitals Model framework ) and overlaid our own ICARE values to determine four key ultimate ambition is to catalyse the growth of a more sustainability goals that the strategy will enable us to deliver. sustainable pensions industry. The strategy recognises various short, medium, long-term Our four Sustainability Goals climate and sustainability-related risks and opportunities that need to be accounted for in both our investments and our operations/procurement. Drawing up this strategy Demonstrating excellence in Ensuring e昀昀ective stakeholder engagement should enable us to mitigate those risks, create long-term responsible investment with integrity and respect value for our business, stay ahead of evolving regulatory sustainability requirements, and help us transition to Net Zero • Looking after our assets • Community impact by 2035 or sooner. We want to operate in a manner that is • Employee and stakeholder engagement 1 consistent with the Paris Agreement by minimising our own Financial Capital Human & Social Capital environmental impacts. In this way, we aim to protect our assets, our members’ futures, the pensions industry and the world around us. Embedding climate risk management into our Championing collaboration and leading Being accountable for minimising our Sustainability Strategy by example own environmental impacts Utilising a sustainability lens enhances our decision- • Diversity & inclusion • Operations making by providing us with an alternative way to consider • Business ethics • Supply chain the climate risks (and opportunities) that we may face, which can be incorporated into our enterprise-wide Risk Social Capital Natural & Manufactured Capital Management Framework. Our Sustainability Goals relating to our RI approach and our operations re昀氀ect the purposes of TCFD and align with its recommendations. We look to We also considered the UN Sustainable Development Goals (SDGs) and were able to map seven SDGs under the report regularly on our progress towards demonstrating four key goals: excellence in responsible investment and accountability in minimising our own environmental impacts (see more in Our six internal working groups have identi昀椀ed priority areas the Metrics and Targets section). (e.g., organisational emissions, climate risk management, diversity & inclusion, employee engagement & community Oversight of the strategy impact, responsible investment and sustainable procurement) As detailed in the previous Governance and Accountability that are material to the PPF’s business. These groups section, we have established a clear line of leadership and will ensure we embed sustainability in every decision- accountability for delivering the Sustainability Strategy making process. –starting at Board level and cascading down to our Sustainability Strategy Group and Sustainability Working Considering the external risks Groups, and 昀椀nally the creation of our Sustainability The external risks posed to the PPF, our members, levy Community to nurture engagement among all PPF payers and employees by the climate emergency could be employees (see panel overleaf). signi昀椀cant. Our approach to such risks is to recognise that our ability to manage or reduce them may be limited but Sustainability Strategy Group we can monitor them and assess their potential impact on A dedicated Sustainability Strategy Group was established in us. We are committed to playing our part in the areas we 2022 to drive the development and implementation of our can directly control and seeking to use our in昀氀uence to Sustainability Strategy. encourage others in the pensions industry to do the same. 1 The Paris Agreement aims to keep the increase in the average global temperature to well below 2°C above pre-industrial levels and pursue e昀昀orts to restrict the temperature increase to 1.5°C above pre-industrial levels. 2 Asset Management & Custody Activities and Insurance. Accessed 15/08/2023 via https://sasb.org/standards/download/. 3 The Five Capitals Model helps organisations create a vision of what sustainability looks like for their own operations, products, and services by providing a framework for understanding sustainability in terms of the economic idea of wealth creation or ‘capital’. The 昀椀ve capitals are Natural, Human, Social, Manufactured and Financial Capital.