Strategic Re-risking and Portfolio Adjustments to Enhance Funding Resilience
The ConocoPhillips Pension Plan undertook a modest re-risking of its investment portfolio during the Plan year, while maintaining significant allocations to Liability Driven Investment (LDI) and high-quality sterling credit. This strategic adjustment was made in the context of the Plan’s strong financial position, being approximately 112% funded on a Solvency basis as at March 31, 2025. The new portfolio structure was in the process of implementation as of March 31, 2025. The strategic asset allocation as of March 31, 2025, includes 15% Global Equities, 15% Alternative Credit, 30% Buy & Maintain Credit, and 40% LDI. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 8)
Proactive Exploration of Longevity Risk Management
The Trustee is actively considering further exploring the possibility of managing longevity risk within the Plan. This consideration stems from analysis suggesting that the combination of physical and transition risks, particularly through a one-off immediate shock, could notably impact member longevity and thus the Plan’s financial position. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 19)
Refining Climate Scenario Analysis to Inform Long-Term Strategy
The Trustee updated its climate change scenario analysis in partnership with its investment consultant, actuarial, and covenant advisors in 2024 and again in 2025. This was done to reflect the most up-to-date market conditions, assumptions, and recent changes in the Plan’s investment strategy. The analysis aims to quantify the potential effects of climate change on the Plan’s assets, liabilities, and covenant, and to identify actions to address related risks and opportunities. The Trustee intends to update this analysis at least every three years, with annual testing for more frequent updates if material changes occur. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 9, 11, 18)
Commitment to Net-Zero Carbon Emissions Intensity by 2050
The Plan has set a goal of reaching Net Zero Carbon Emissions Intensity by 2050, aligning with the long-term operational net-zero ambition of ConocoPhillips. The Trustee believes this target is in the best financial interest of the Plan’s members. The Plan’s Carbon Journey Plan, which currently covers Scope 1 and 2 emissions, outlines annual reduction targets, aiming for 0.0 tCO2e/£m by 2049 and 2050. The Trustee is ahead of schedule in achieving this goal, with 2024 emissions at 36.0 tCO2e/£m against a journey plan target of 50.0 tCO2e/£m. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 5, 20, 27)
Governance Enhancements for Climate-Related Risks and Opportunities
The Trustee has established and maintains oversight of climate-related risks and opportunities, integrating them into the Plan’s broader strategy, risk management, and monitoring. Ownership of Responsible Investment (RI), including climate change, has been delegated to the Investment Committee. The Trustee’s policies, beliefs, and activities are documented in various climate-related documents, including the Statement of Investment Principles, Implementation Statement, Investment Advisor Objectives, Trustee Investment Beliefs, Risk Register, and Statement of Climate Governance. The Trustee also reviewed the Plan’s investment consultant against its strategic objectives, including an assessment of their work on ESG matters, in December 2024. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 7, 9)
Opportunities for Asset Managers
The ConocoPhillips Pension Plan is exploring opportunities to improve the management of climate risk, including the design of individual investment mandates. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 5) Additionally, the Trustee is considering ways to further mitigate risks efficiently and is exploring the possibility of managing longevity risk within the Plan. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 19) The Trustee also periodically reviews market opportunities to understand whether impact investments might be appropriate. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 21)
Governance Changes to Investment Management
The Trustee has delegated ownership of the oversight of Responsible Investment (RI), including climate-related risks and opportunities, to the Investment Committee. The Investment Committee meets at least quarterly, reporting to the Trustee Board and making recommendations. This structure aims to efficiently manage the wide range of issues related to RI. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 7) The Trustee has also prepared a “Trustee statement regarding the oversight of climate related risks and opportunities,” formally documenting the roles and responsibilities of both the Trustee and its advisors in relation to climate change. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 9, 29) The Trustee has set formal objectives for the Plan’s DB investment consultant, which include the requirement to consider risks and opportunities associated with all Responsible Investment matters, including climate change, with annual assessment. (ConocoPhillips Pension Plan, Trustee’s Climate Change report for the year ended 31 March 2025, page 10)
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