Sustainable Ownership blogs
Our blogs on Sustainable Ownership and environmental, social and governance (ESG) issues will help you learn more about the Scheme's approach to its investments.
10/1/2023
Editorial
<p>Potential long term effects such as global warming have been attributed to climate change and we recognise some members may be concerned by these stories. But what do they mean in the context of pension schemes? How does tackling the climate crisis reflect Railpen’s core purpose of securing members’ futures? And why does climate change continue to sit highly on Railpen’s agenda? </p><p>We sought answers from Chandra Gopinathan, Senior Investment Manager at Railpen, who is also leading on the climate change work the company does. Here, Chandra helps us better understand the risks and opportunities of climate change for Railpen as an investor and caretaker of members’ pensions. </p><p><strong> </strong></p><p><strong>Chandra, ‘climate change’ has been researched and discussed for more than a century but seems to engulf the news now more than ever. Could you briefly explain what climate change is and how it is linked to pensions? </strong></p><p>Research indicates that climate change is a pressing area of discussion, now more than ever. Climate change is described as long-term shifts in temperatures and weather patterns. These shifts may be natural, but human activities can also be a driver of climate change and global warming.<br></p><p>Following the announcement of the UN Sustainable Development Goals in 2015, companies and investors have been incorporating climate considerations into their working practices. This includes the way in which companies operate and the way pension schemes invest their members’ money. <br></p><p>When it comes to pensions, climate change can have a direct impact on the returns on investments we make on behalf of our members. <br></p><p><strong> </strong></p><p><strong>Tell us about the work that Railpen does in the climate change area. </strong></p><p>Railpen invests the contributions that members and their employers pay into their pension. We do this to achieve the investment returns needed to give you an income in retirement. We carefully choose the companies and assets we invest in while making sure that they seek to address environmental, social and governance (ESG) issues in the way they operate. One of the key criteria we look for when we decide where to invest is a company’s consideration of - and efforts in - managing the implications of climate change on its business. This is because we recognise the impact it could have on the company’s business, the scheme’s investment and on humanity as a whole if left unaddressed. </p><p>We strive to invest in companies that can adapt their business models to deal with major threats or issues, such as the ones posed by climate change. We believe these companies will be most likely to do well in the long-term. <br></p><p><strong> </strong></p><p><strong>Is the work on managing climate risks on an investment portfolio sufficient? Surely there are many other external participants and factors that need to align to ensure that the world moves smoothly to a low carbon economy. </strong></p><p>It’s an ecosystem effort. Managing and reducing carbon emissions in a portfolio is good but does not always contribute to a greener economy. In order to achieve real world emissions impact, it is important to identify and address key climate risks in the companies we invest or plan to invest in. <br></p><p>However, it is more important to understand and support all participants of the ecosystem, including companies, policy makers, governments and consumers, on the activities they need to undertake to help us move to a low carbon economy. We use every tool at our disposal to encourage companies to act responsibly and address the impact of the climate crisis.<br></p><p>Railpen works closely with many industry leaders, most notably the Institutional Investor Group for Climate Change (IIGCC) , the UK Transition Plan Taskforce (TPT), Transition Pathway Initiative (TPI), International Sustainability Standards Board (ISSB) and with regulators and policy makers. Through this work we aim to encourage companies to clearly disclose climate risks and opportunities to their business and how they plan to address those. </p><p>We engage with companies on implementation of this disclosure and use our right to vote against companies that are not prepared. On the contrary, we invest in companies, assets, technologies and solutions that will be essential for the low carbon economy. The approach we take is outlined in Railpen’s annual <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/bq1cjgd1/tcfd-report-rps-2021.pdf" data-sf-ec-immutable="">Taskforce on Climate-Related Financial Disclosures</a>. <br></p><p><strong> </strong></p><p><strong>And Chandra, how do you ensure that member preferences and considerations on climate change are reflected in the work that you do on this issue?</strong></p><p>We know many members are interested in the work that we do, not just on the climate change front, but in all areas that support a sustainable future for them, and for all. This is why we strive to maintain a constant dialogue with our members. We conduct regular member surveys and hold member workshops to ensure we are getting feedback and opinion first hand. We do this because we care about our members’ views and opinions on the work that we do and on the sector as a whole. <br></p><p>Climate change very much remains one of the key sustainability themes that is of a great interest to members and we will continue to seek members’ input in our work going forward. In September 2022, we published our <a href="https://www.railpen.com/media/3gelmunf/so-member-report-2021.pdf" data-sf-ec-immutable="">Sustainable Ownership Member Review</a> which was designed specifically for members and provides the perfect starting point for anyone wanting to find out more about our work.</p><p> </p><p><strong>How does Railpen ensure that companies do not overstate their credentials when it comes to the climate transition (also known as ‘greenwashing’)?</strong><br></p><p>Firstly, let's bring clarity around what greenwashing means in the context of climate issues. Greenwashing refers to situations in which companies either misrepresent or exaggerate the activities they undertake to tackle climate transition. The term is also used when those companies use diversion tactics to distract stakeholders from key climate issues and their approach or lack of approach to addressing them.<br></p><p>We detect greenwashing through promoting clear and simple disclosure from the companies on our portfolio. We then evaluate companies for their governance, disclosure, emissions performance, transition planning, engagement, lobbying and social impact. With the strength of our screening and analysis, we aim to identify and highlight cases of greenwashing, by drawing on industry best practices guidelines, verification from independent sources of information, cross-referencing companies with sector peers and ongoing management meetings. </p><p> </p><p><strong>Are you optimistic about how things are progressing with regards to tackling the climate crisis and the efforts made globally?</strong></p><p>Decarbonising the real world remains a challenge faced by all. Even in 2022, there are more questions and challenges than solutions currently with politics still remaining a key driver. The silver lining, however, is that discussions around opportunities and potential solutions, are now much more frequent, honest and credible than they have ever been in the past, and the climate crisis seems to be getting more attention than ever. </p><p>Things are moving beyond headline ambitions, targets and communications, and there is a growing pool of resources and information for any business, investor or consumer interested in learning and doing their bit for tackling the climate change issue.</p><p>Legislation like the US Inflation Reduction Act and EU taxonomy are key milestones in supporting and encouraging the development of new climate technologies and climate-related disclosure.</p><p>To sum up, broadly speaking the picture is cautiously optimistic. There are the inevitable and constant new challenges to overcome which is part of the progress and effort in moving the climate agenda forward.</p><p><strong> </strong></p><p><strong>What has been the highlight of the work you’ve done in this area? What are you most proud of?</strong></p><p>There were a number of initiatives on the climate and sustainability side at Railpen during 2022, which we have been recognised for internally and externally, both on a national and international level. </p><p>We are proud to have been recognised and awarded for our work, and hopefully our members will be as well. Two notable ones include:<br></p><ul><li>The development of our own in-house analytical tool for climate and Net Zero assessment of companies (CRIANZA) which we have been applying to our portfolios.</li><li>Our contribution and leadership in the climate engagement space with our work with portfolio companies, regulators and initiatives like IIGCC (The Institutional Investors Group on Climate Change). Railpen, as part of an investor group, engaged with a number of companies, one being a leading US utility and steered it to a Net Zero commitment and increasing investments in renewable energy. We are also leading an initiative for bondholders to be able to increase their influence with companies in steering them to manage and adapt to climate change.<strong></strong></li></ul><p><strong></strong><strong>Looking ahead, what does 2023 hold for you? What will you be focusing on in your work when it comes to climate change?</strong></p><p>2023 will see us moving ahead on several fronts in climate-related work. The key focus will be on investments in the energy transition, climate transition planning and related engagement, biodiversity and natural capital solutions. We will also do a piece of work on improving and expanding our framework to analyse climate transition risk for companies. We look forward to communicating further details with our members as these projects progress forward.</p><p> </p>
<p>Potential long term effects such as global warming have been attributed to climate change and we recognise some members may be concerned by these stories. But what do they mean in the context of pension schemes? How does tackling the climate crisis reflect Railpen’s core purpose of securing members’ futures? And why does climate change continue to sit highly on Railpen’s agenda? </p><p>We sought answers from Chandra Gopinathan, Senior Investment Manager at Railpen, who is also leading on the climate change work the company does. Here, Chandra helps us better understand the risks and opportunities of climate change for Railpen as an investor and caretaker of members’ pensions. </p><p><strong> </strong></p><p><strong>Chandra, ‘climate change’ has been researched and discussed for more than a century but seems to engulf the news now more than ever. Could you briefly explain what climate change is and how it is linked to pensions? </strong></p><p>Research indicates that climate change is a pressing area of discussion, now more than ever. Climate change is described as long-term shifts in temperatures and weather patterns. These shifts may be natural, but human activities can also be a driver of climate change and global warming.<br></p><p>Following the announcement of the UN Sustainable Development Goals in 2015, companies and investors have been incorporating climate considerations into their working practices. This includes the way in which companies operate and the way pension schemes invest their members’ money. <br></p><p>When it comes to pensions, climate change can have a direct impact on the returns on investments we make on behalf of our members. <br></p><p><strong> </strong></p><p><strong>Tell us about the work that Railpen does in the climate change area. </strong></p><p>Railpen invests the contributions that members and their employers pay into their pension. We do this to achieve the investment returns needed to give you an income in retirement. We carefully choose the companies and assets we invest in while making sure that they seek to address environmental, social and governance (ESG) issues in the way they operate. One of the key criteria we look for when we decide where to invest is a company’s consideration of - and efforts in - managing the implications of climate change on its business. This is because we recognise the impact it could have on the company’s business, the scheme’s investment and on humanity as a whole if left unaddressed. </p><p>We strive to invest in companies that can adapt their business models to deal with major threats or issues, such as the ones posed by climate change. We believe these companies will be most likely to do well in the long-term. <br></p><p><strong> </strong></p><p><strong>Is the work on managing climate risks on an investment portfolio sufficient? Surely there are many other external participants and factors that need to align to ensure that the world moves smoothly to a low carbon economy. </strong></p><p>It’s an ecosystem effort. Managing and reducing carbon emissions in a portfolio is good but does not always contribute to a greener economy. In order to achieve real world emissions impact, it is important to identify and address key climate risks in the companies we invest or plan to invest in. <br></p><p>However, it is more important to understand and support all participants of the ecosystem, including companies, policy makers, governments and consumers, on the activities they need to undertake to help us move to a low carbon economy. We use every tool at our disposal to encourage companies to act responsibly and address the impact of the climate crisis.<br></p><p>Railpen works closely with many industry leaders, most notably the Institutional Investor Group for Climate Change (IIGCC) , the UK Transition Plan Taskforce (TPT), Transition Pathway Initiative (TPI), International Sustainability Standards Board (ISSB) and with regulators and policy makers. Through this work we aim to encourage companies to clearly disclose climate risks and opportunities to their business and how they plan to address those. </p><p>We engage with companies on implementation of this disclosure and use our right to vote against companies that are not prepared. On the contrary, we invest in companies, assets, technologies and solutions that will be essential for the low carbon economy. The approach we take is outlined in Railpen’s annual <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/bq1cjgd1/tcfd-report-rps-2021.pdf" data-sf-ec-immutable="">Taskforce on Climate-Related Financial Disclosures</a>. <br></p><p><strong> </strong></p><p><strong>And Chandra, how do you ensure that member preferences and considerations on climate change are reflected in the work that you do on this issue?</strong></p><p>We know many members are interested in the work that we do, not just on the climate change front, but in all areas that support a sustainable future for them, and for all. This is why we strive to maintain a constant dialogue with our members. We conduct regular member surveys and hold member workshops to ensure we are getting feedback and opinion first hand. We do this because we care about our members’ views and opinions on the work that we do and on the sector as a whole. <br></p><p>Climate change very much remains one of the key sustainability themes that is of a great interest to members and we will continue to seek members’ input in our work going forward. In September 2022, we published our <a href="https://www.railpen.com/media/3gelmunf/so-member-report-2021.pdf" data-sf-ec-immutable="">Sustainable Ownership Member Review</a> which was designed specifically for members and provides the perfect starting point for anyone wanting to find out more about our work.</p><p> </p><p><strong>How does Railpen ensure that companies do not overstate their credentials when it comes to the climate transition (also known as ‘greenwashing’)?</strong><br></p><p>Firstly, let's bring clarity around what greenwashing means in the context of climate issues. Greenwashing refers to situations in which companies either misrepresent or exaggerate the activities they undertake to tackle climate transition. The term is also used when those companies use diversion tactics to distract stakeholders from key climate issues and their approach or lack of approach to addressing them.<br></p><p>We detect greenwashing through promoting clear and simple disclosure from the companies on our portfolio. We then evaluate companies for their governance, disclosure, emissions performance, transition planning, engagement, lobbying and social impact. With the strength of our screening and analysis, we aim to identify and highlight cases of greenwashing, by drawing on industry best practices guidelines, verification from independent sources of information, cross-referencing companies with sector peers and ongoing management meetings. </p><p> </p><p><strong>Are you optimistic about how things are progressing with regards to tackling the climate crisis and the efforts made globally?</strong></p><p>Decarbonising the real world remains a challenge faced by all. Even in 2022, there are more questions and challenges than solutions currently with politics still remaining a key driver. The silver lining, however, is that discussions around opportunities and potential solutions, are now much more frequent, honest and credible than they have ever been in the past, and the climate crisis seems to be getting more attention than ever. </p><p>Things are moving beyond headline ambitions, targets and communications, and there is a growing pool of resources and information for any business, investor or consumer interested in learning and doing their bit for tackling the climate change issue.</p><p>Legislation like the US Inflation Reduction Act and EU taxonomy are key milestones in supporting and encouraging the development of new climate technologies and climate-related disclosure.</p><p>To sum up, broadly speaking the picture is cautiously optimistic. There are the inevitable and constant new challenges to overcome which is part of the progress and effort in moving the climate agenda forward.</p><p><strong> </strong></p><p><strong>What has been the highlight of the work you’ve done in this area? What are you most proud of?</strong></p><p>There were a number of initiatives on the climate and sustainability side at Railpen during 2022, which we have been recognised for internally and externally, both on a national and international level. </p><p>We are proud to have been recognised and awarded for our work, and hopefully our members will be as well. Two notable ones include:<br></p><ul><li>The development of our own in-house analytical tool for climate and Net Zero assessment of companies (CRIANZA) which we have been applying to our portfolios.</li><li>Our contribution and leadership in the climate engagement space with our work with portfolio companies, regulators and initiatives like IIGCC (The Institutional Investors Group on Climate Change). Railpen, as part of an investor group, engaged with a number of companies, one being a leading US utility and steered it to a Net Zero commitment and increasing investments in renewable energy. We are also leading an initiative for bondholders to be able to increase their influence with companies in steering them to manage and adapt to climate change.<strong></strong></li></ul><p><strong></strong><strong>Looking ahead, what does 2023 hold for you? What will you be focusing on in your work when it comes to climate change?</strong></p><p>2023 will see us moving ahead on several fronts in climate-related work. The key focus will be on investments in the energy transition, climate transition planning and related engagement, biodiversity and natural capital solutions. We will also do a piece of work on improving and expanding our framework to analyse climate transition risk for companies. We look forward to communicating further details with our members as these projects progress forward.</p><p> </p>
Blog
Why climate change matters to the RPS and its members?
As a responsible investor, Railpen continues to lead and collaborate to drive meaningful change and progress.
Potential long term effects such as global warming have been attributed to climate change and we recognise some members may be concerned by these stories. But what do they mean in the context of pension schemes? How does tackling the climate crisis reflect Railpen’s core purpose of securing members’ futures? And why does climate change continue to sit highly on Railpen’s agenda?
We sought answers from Chandra Gopinathan, Senior Investment Manager at Railpen, who is also leading on the climate change work the company does. Here, Chandra helps us better understand the risks and opportunities of climate change for Railpen as an investor and caretaker of members’ pensions.
Chandra, ‘climate change’ has been researched and discussed for more than a century but seems to engulf the news now more than ever. Could you briefly explain what climate change is and how it is linked to pensions?
Research indicates that climate change is a pressing area of discussion, now more than ever. Climate change is described as long-term shifts in temperatures and weather patterns. These shifts may be natural, but human activities can also be a driver of climate change and global warming.
Following the announcement of the UN Sustainable Development Goals in 2015, companies and investors have been incorporating climate considerations into their working practices. This includes the way in which companies operate and the way pension schemes invest their members’ money.
When it comes to pensions, climate change can have a direct impact on the returns on investments we make on behalf of our members.
Tell us about the work that Railpen does in the climate change area.
Railpen invests the contributions that members and their employers pay into their pension. We do this to achieve the investment returns needed to give you an income in retirement. We carefully choose the companies and assets we invest in while making sure that they seek to address environmental, social and governance (ESG) issues in the way they operate. One of the key criteria we look for when we decide where to invest is a company’s consideration of - and efforts in - managing the implications of climate change on its business. This is because we recognise the impact it could have on the company’s business, the scheme’s investment and on humanity as a whole if left unaddressed.
We strive to invest in companies that can adapt their business models to deal with major threats or issues, such as the ones posed by climate change. We believe these companies will be most likely to do well in the long-term.
Is the work on managing climate risks on an investment portfolio sufficient? Surely there are many other external participants and factors that need to align to ensure that the world moves smoothly to a low carbon economy.
It’s an ecosystem effort. Managing and reducing carbon emissions in a portfolio is good but does not always contribute to a greener economy. In order to achieve real world emissions impact, it is important to identify and address key climate risks in the companies we invest or plan to invest in.
However, it is more important to understand and support all participants of the ecosystem, including companies, policy makers, governments and consumers, on the activities they need to undertake to help us move to a low carbon economy. We use every tool at our disposal to encourage companies to act responsibly and address the impact of the climate crisis.
Railpen works closely with many industry leaders, most notably the Institutional Investor Group for Climate Change (IIGCC) , the UK Transition Plan Taskforce (TPT), Transition Pathway Initiative (TPI), International Sustainability Standards Board (ISSB) and with regulators and policy makers. Through this work we aim to encourage companies to clearly disclose climate risks and opportunities to their business and how they plan to address those.
We engage with companies on implementation of this disclosure and use our right to vote against companies that are not prepared. On the contrary, we invest in companies, assets, technologies and solutions that will be essential for the low carbon economy. The approach we take is outlined in Railpen’s annual Taskforce on Climate-Related Financial Disclosures.
And Chandra, how do you ensure that member preferences and considerations on climate change are reflected in the work that you do on this issue?
We know many members are interested in the work that we do, not just on the climate change front, but in all areas that support a sustainable future for them, and for all. This is why we strive to maintain a constant dialogue with our members. We conduct regular member surveys and hold member workshops to ensure we are getting feedback and opinion first hand. We do this because we care about our members’ views and opinions on the work that we do and on the sector as a whole.
Climate change very much remains one of the key sustainability themes that is of a great interest to members and we will continue to seek members’ input in our work going forward. In September 2022, we published our Sustainable Ownership Member Review which was designed specifically for members and provides the perfect starting point for anyone wanting to find out more about our work.
How does Railpen ensure that companies do not overstate their credentials when it comes to the climate transition (also known as ‘greenwashing’)?
Firstly, let's bring clarity around what greenwashing means in the context of climate issues. Greenwashing refers to situations in which companies either misrepresent or exaggerate the activities they undertake to tackle climate transition. The term is also used when those companies use diversion tactics to distract stakeholders from key climate issues and their approach or lack of approach to addressing them.
We detect greenwashing through promoting clear and simple disclosure from the companies on our portfolio. We then evaluate companies for their governance, disclosure, emissions performance, transition planning, engagement, lobbying and social impact. With the strength of our screening and analysis, we aim to identify and highlight cases of greenwashing, by drawing on industry best practices guidelines, verification from independent sources of information, cross-referencing companies with sector peers and ongoing management meetings.
Are you optimistic about how things are progressing with regards to tackling the climate crisis and the efforts made globally?
Decarbonising the real world remains a challenge faced by all. Even in 2022, there are more questions and challenges than solutions currently with politics still remaining a key driver. The silver lining, however, is that discussions around opportunities and potential solutions, are now much more frequent, honest and credible than they have ever been in the past, and the climate crisis seems to be getting more attention than ever.
Things are moving beyond headline ambitions, targets and communications, and there is a growing pool of resources and information for any business, investor or consumer interested in learning and doing their bit for tackling the climate change issue.
Legislation like the US Inflation Reduction Act and EU taxonomy are key milestones in supporting and encouraging the development of new climate technologies and climate-related disclosure.
To sum up, broadly speaking the picture is cautiously optimistic. There are the inevitable and constant new challenges to overcome which is part of the progress and effort in moving the climate agenda forward.
What has been the highlight of the work you’ve done in this area? What are you most proud of?
There were a number of initiatives on the climate and sustainability side at Railpen during 2022, which we have been recognised for internally and externally, both on a national and international level.
We are proud to have been recognised and awarded for our work, and hopefully our members will be as well. Two notable ones include:
- The development of our own in-house analytical tool for climate and Net Zero assessment of companies (CRIANZA) which we have been applying to our portfolios.
- Our contribution and leadership in the climate engagement space with our work with portfolio companies, regulators and initiatives like IIGCC (The Institutional Investors Group on Climate Change). Railpen, as part of an investor group, engaged with a number of companies, one being a leading US utility and steered it to a Net Zero commitment and increasing investments in renewable energy. We are also leading an initiative for bondholders to be able to increase their influence with companies in steering them to manage and adapt to climate change.
Looking ahead, what does 2023 hold for you? What will you be focusing on in your work when it comes to climate change?
2023 will see us moving ahead on several fronts in climate-related work. The key focus will be on investments in the energy transition, climate transition planning and related engagement, biodiversity and natural capital solutions. We will also do a piece of work on improving and expanding our framework to analyse climate transition risk for companies. We look forward to communicating further details with our members as these projects progress forward.
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