Investment pool of LGPS relies on ETS for handling operational emissions
LGPS Central Partners with C2Zero to Achieve Carbon Neutrality
LGPS Central, the collective investment pool for several UK local government pension schemes, has partnered with carbon reduction firm C2Zero. This strategic alliance aims to help LGPS Central measure, manage, and reduce the carbon footprint of its investment portfolio, moving towards carbon neutrality by 2050.
The partnership with C2Zero offers data, analytics, and advisory support, enabling LGPS Central to systematically integrate climate considerations into its investment decision-making process. C2Zero's expertise in carbon accounting and sustainability will be instrumental in identifying the carbon emissions associated with LGPS Central's investments, setting science-based targets for carbon reduction, and implementing strategies to shift investments towards more sustainable, low-carbon assets.
The collaboration also involves the purchase of Emission Allowances through C2Zero's Carbon Cancellation Service (C4S), though the exact volume of the transaction remains undisclosed. C4S is a platform that enables businesses and individuals to purchase Carbon Cancellation Certificates linked to UK Emissions Allowances.
The UK's Emissions Trading Scheme (UK ETS) plays a complementary role in this process. As a cap-and-trade system, the UK ETS sets a limit on total emissions and allows companies to buy and sell emission allowances, thereby encouraging cost-effective reductions in greenhouse gas emissions. One allowance in the UK ETS equates to one tonne of CO2.
The price of a single allowance currently ranges between £30 and £40. Prices in the ETS market are expected to be less volatile than those in the voluntary carbon market. The initiative received the backing of academic Andreas Hoepner, a professor and member of the EU Platform (PSF) on Sustainable Finance.
The UK's emissions trading system sets a limit on the amount of carbon that can be emitted, with firms able to purchase allowances within this cap. Firms must then surrender allowances in proportion to their emissions. This regulatory environment makes carbon efficiency increasingly important, further motivating LGPS Central to decarbonize its portfolio through its partnership with C2Zero.
Patrick O'Hara, head of responsible investment and stewardship at LGPS Central, finds C2Zero's solution attractive because it provides access to carbon emissions allowances and the ability to remove purchased allowances from circulation. The partnership meets the aims of addressing operational emissions in a measurable and transparent way.
The exact nature of the partnership beyond the purchase of emission allowances was not specified in the article. C4S was launched as part of the Connect to Prosper initiative led by the former Lord Mayor of London, Alderman Professor Michael Mainelli.
This strategic alliance is a significant step towards LGPS Central's goal of carbon neutrality, aligning with broader UK climate goals. The initiative is also expected to inspire other enterprises to follow this example, as Professor Hoepner encourages the approach taken by LGPS Central in addressing operational emissions. The price of ETS allowances has decreased over the last year due to weaker demand and a surplus of carbon allowances in the market. However, the long-term trend towards decarbonization and the increasing importance of carbon efficiency suggest that this partnership will play a crucial role in achieving LGPS Central's ambitious goals.
- LGPS Central's strategic alliance with C2Zero will help integrate climate considerations into the environmental-science sector by systematically altering investment choices to favor low-carbon industry assets, thereby contributing to the reduction of climate-change impacts.
- As LGPS Central and C2Zero collaborate to purchase Emission Allowances through C2Zero's Carbon Cancellation Service (C4S), they not only contribute to the finance sector's transition but also bolster the science behind setting science-based targets for carbon reduction, fostering a greener and more sustainable future for all.
