33 Pension Protection Fund Climate Change Report 2022/23 METRICS AND TARGETS CONTINUED Forestry CASE STUDY Sustainable Assets Forestry is a key asset class where we see sustainable We believe that considering climate-related issues and the investment opportunities. Forestry helps to mitigate CO Leading the transition to a low carbon economy can also bring about 2 emissions by storing carbon, making it one of the few viable restructure of a opportunities from an investment perspective. This year, nature-based investment solutions that can help progress we have started to aggregate a high-level breakdown of towards a Net Zero world. Well-managed forests can also forestry asset the Fund’s exposure to investments that can be classi昀椀ed increase biodiversity. as sustainable (see de昀椀nition right). This is still a work in Leveraging existing positions and progress, and we hope to provide more detail in coming Certi昀椀cation Standards for PPF’s share of timberland manager relationships to optimise years, particularly as green taxonomies become more 2022 future investment exposure is a key established within 昀椀nancial markets. part of our portfolio management Our data providers incorporate some sustainable or 98.5% Certi昀椀ed timberland in accordance process. This year, we ensured low-carbon solutions datapoints or 昀氀ags into their climate with the FSC and/or PEFC that a restructuring of one of our existing hardwood forestry assets reports for public markets, and we have enhanced this with 0.9% Timberland in the process of certi昀椀cation met with our investment and additional green revenue data from our Equity index provider in accordance with the FSC and/or PEFC ESG requirements. (as our Equity climate-aware benchmark index includes Land that is sustainably managed in 0.0% green revenue exposure within its optimisation process). accordance with the FSC and/or PEFC, The Tasmanian Forestry Trust is a but that cannot be certi昀椀ed mature 170,000-hectare hardwood Exposure to Sustainable Assets per asset class: Other 0.5% plantation in Australia. We were able Percentage of to secure long-term direct exposure exposure by We are pleased to see that almost all our assets continue to this important asset by forming asset class to AUM to be certi昀椀ed to the highest international standards (FSC and leading a consortium of three sustainable assets (USDm) and/or PEFC). The small percentage that falls under the pension funds to enable a ‘buy- out’. In this way we were able to Equities 7.0% $185 Category ‘Other’ is allocated to new planting sites, and the meet the liquidity requirements of Credit 4.7% $159 manager is expecting the area to be certi昀椀ed when planting existing investors. is completed. UK Credit 9.0% $193 Apart from certi昀椀cation statistics, we also ask our managers EMD Debt 0.8% $11 to report carbon sequestration data. All of them have Forestry 100.0% $1,164 reported to us, however since there is no standardised Other Private Markets 3.5% $433 methodology yet, we are unable at the moment to compare and aggregate data. To address this, we are working with What we have classi昀椀ed as ‘sustainable’: our external consultant to establish a methodology. • Equities: Companies with green revenue exposure or exposure to products and services classi昀椀ed as low-carbon solutions • Credit, UK Credit, EMD Debt: Bonds classi昀椀ed as Green, Social, Sustainability Bond or Sustainability Linked (across corporate, sovereign and supranational issuers) • Forestry: Forests that are certi昀椀ed by international bodies and/or are managed in a sustainable manner • Other Private Markets: Infrastructure Equity and Debt renewable power assets. We have some underlying information about some of our Private Markets assets, especially those within our Infrastructure Equity and Debt portfolios. However, because the information is not standardised by format or source, it is currently challenging and very resource-intensive to identify. We have therefore started by including a few assets that are more straightforward to classify at this stage (e.g. renewable power assets) but will continue to re昀椀ne this for future reports.