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Read paragraphs 166 to178 of part 3 of the Department for Work and Pensions' (DWP) for more on the requirement to set at least one target in relation to a climate change metric and to measure performance against that target.

Example steps to take

Taking the following actions may help you meet your obligation to set a target.

Select an appropriate target

Select a target for at least one of your metrics. You may use more than one if it is relevant to your investment strategy and the way in which you want to manage climate-related risks and opportunities. You could set more than one target on the same metric for different parts of your scheme portfolio or over a series of time periods, or you could set different targets on different metrics.

Set a framework for delivering against your targets

Define the time period for meeting your targets.

You will be able to manage climate risks and opportunities more effectively with a framework that includes interim targets. If you set a long term target of more than 10 years in the future with no interim targets, we would expect you to explain why in your report.

Engage with your service providers

As with other activities in this guidance, discuss your targets with your service providers and jointly review how your scheme’s plans fit with their terms of appointment.

Example: monitoring progress against a target

The trustees of the TUV pension scheme have previously calculated a weighted average carbon intensity (WACI) metric. They monitored progress and tried to lower the carbon intensity of their investments compared to the asset class benchmark. Not all relevant data was available, so the trustees made approximations for a material part of their scheme assets. They believed that the carbon intensity of their scheme portfolios was around 30% lower than the benchmark.

The trustees decide to disclose a WACI target in their climate report. They have recently been able to access better quality data for a material part of their investment portfolio and recalculate the metric to find that the carbon intensity is only 15% lower than the benchmark.

The trustees instruct:

  • their investment adviser to prepare a report on how they could reduce their carbon intensity by 15% by 2023 and align with their decarbonisation trajectory up to 2030
  • a specialist adviser to help reduce the operational carbon and energy intensity in their real asset portfolio
  • a specialist adviser to help them increase investment in projects that offset emissions

The trustees also set additional objectives:

  • to invest a percentage of their assets in renewables and clean technology by 2025
  • to identify significant concentrations of exposure to carbon-related assets in their portfolio
  • to develop a management and mitigation plan where concentrations of exposure exceed a threshold

What to report

When reporting on the steps you have taken, you must describe:

  • the target you set in relation to at least one of the metrics you calculated, and
  • as far as you are able, your scheme’s performance against that target

You should also describe:

  • the steps you are taking to achieve your target (or targets)
  • the method you used to measure performance against your target and any estimates you relied upon
  • if you have replaced or missed a target, a brief explanation why

If you choose to adopt more than one target, you should consider including the information above for all targets.