BCF Pension Trust’s recently published ‘TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES’ for the year ended 31 March 2025 details the Trustees’ approach to managing climate-related risks and opportunities.
Strategic Climate Scenario Analysis Updated
The BCF Pension Trust has refreshed its climate scenario analysis for the fiscal year ending March 2025, moving from the Prudential Regulation Authority (PRA) methodology to the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) scenarios. This change was driven by a substantial shift in the Scheme’s investment strategy and the NGFS scenarios being increasingly recognized as leading reference scenarios offering greater granularity and ongoing updates (page 7).
Redington, the Trustees’ investment advisor, updated the approach. The NGFS scenarios categorize potential climate impacts into three types:
* Orderly Transition (1.5 or 2°C): Climate policies are introduced early and gradually become more stringent. Both physical and transition risks are relatively subdued. This scenario projects a -0.7% impact on the scheme (page 8).
* Disorderly Transition (1.5 or 2°C): Higher transition risk due to delayed or divergent policies. This scenario projects a -1.4% impact on the scheme (page 8).
* Hot House World: Insufficient global efforts lead to significant warming and severe physical risks. This scenario projects a -1.3% impact on the scheme (page 8).
The Trustees will incorporate these scenario results into their investment decision-making process (page 9).
New Targets for Data Coverage and Specificity
The Trustees have established two explicit targets to enhance data coverage for their climate metrics:
* Improve Gilt Portfolio Data Coverage: The first target is to include actual gilt portfolio data within the next three years. This target was not met in the current reporting period due to a lack of consensus on measuring sovereign emissions, with MSCI still working to implement recent guidance changes from the Partnership for Carbon Accounting Financials (PCAF) (page 12).
* Enhance Specificity for Secured Loans and Property: The second target is to improve the specificity of data quality for asset classes where proxy data is currently used, specifically secured loans and property. The Trustees plan to explore the feasibility of engaging with counterparties of secured loans to obtain more accurate emissions data (page 12).
These targets will be reviewed annually as part of the TCFD metrics dashboard produced by Redington and will be embedded in the Trustees’ governance, strategy, and risk management processes (page 12, 13).
Equity Allocation Introduced via Derivatives
For the fiscal year ending March 2025, the BCF Pension Trust introduced an allocation to equities through derivatives. This new allocation is reflected in the carbon metrics analysis, showing an asset value of 8 for Equity, contributing to the total portfolio. The data for this equity investment has been proxied to Global Equity, as direct underlying emissions data is not available (page 17, Appendix B).
This introduction of equities has led to a significant rise in the combined Scope 1 & 2 and Scope 3 carbon footprint metrics and carbon emissions, as well as a slight increase in the total portfolio Implied Temperature Rise (ITR) metric (page 17).
Engagement with Counterparties Planned for Data Improvement
The Trustees intend to engage more fully with some of the counterparties to their investments to understand their approach to climate change and to determine if more specific data can be provided to support metrics disclosure. This is particularly relevant for secured loans and property investments, where proxy data is currently used due to the unavailability of specific carbon data (page 10, 16).
Source