Climate change

How we encourage the companies we invest in to take responsibility for reducing their impact on the climate.

Climate change case studies

Select the specific topics below to learn more about our work on addressing climate-related issues with the companies we invest your pension in.

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Video: What we mean by the climate transition

Watch this short video to learn more about our approach to the climate transition.

Nucor and WEC Energy case study

Climate change - considering the impact on our investments and returns

  • What was the issue?

    We assess the companies we invest in so we can understand which companies are most affected by climate change risks and how.

    Two of the companies we assessed in 2023 were Nucor, a large US-based steel producer with a high emissions footprint and WEC Energy, a substantial US electric utility with a reliance on coal-fired generation.

    Our assessment uncovered that Nucor is also North America’s largest recycler of scrap metal and a leading scrap broker, with significant use of electric arc furnace technology (highly efficient).

    We also found that WEC Energy was committed to reducing its emissions and transitioning to a mix of renewables, nuclear and gas-fired power generation.

  • What did we need to do?
    We needed to engage with both companies and to influence them to become more climate-aware and mitigate the climate risks they faced which, if left unchecked, could have an impact on the long-term value of our investments in them.

  • What approach did we take?

    We engaged with Nucor on setting robust climate targets, improving their climate disclosure and developing a decarbonisation strategy.

     With WEC Energy, we focused our conversations with the company on accelerating this phase-out of coal, setting net-zero targets and improving climate governance.

  • What was the outcome?

    Nucor lowered the emissions intensity of its steelmaking operations through, for instance, increasing recycling and procuring renewables power for its electricity use. It also achieved a better externally assessed score for the quality of its climate-change management as a result of improvements made.

    WEC Energy improved its climate reporting and scenario analysis, as well as increasing its renewables investments and accelerating its targets for the phasing out of coal. Its climate management quality score also improved.

Bracks solar farm case study

Climate change - considering the impact on our investments and returns

  • What was the issue?

    The effects of climate change are already having a major impact on people’s lives, as well as company operations and business models, across the world. It’s one of the biggest issues we think about when making investment decisions, as we want to get the best possible investment returns for members.

    Railpen bought Bracks solar farm from global energy renewal company BayWa r.e. in 2022. A solar farm is a large collection of photovoltaic solar panels that absorb the sun’s energy and turn it into electricity. The Bracks solar farm will generate enough clean energy for about 8,000 homes. It’s the second deal we’ve done with BayWa r.e. We also bought Tralorg Wind Farm in 2019.

    Achieving net zero across our portfolio is something we’ve committed to, so the Bracks deal was the latest in a series of investments in renewable energy. Renewable energy is energy that comes from natural sources, like sunlight or wind, and is replenished at a higher rate than it is consumed.

  • What did we need to do?

    The project would have a positive effect on the environment, harnessing clean and renewable energy from the sun, and helping reduce greenhouse gas emissions and dependence on fossil fuels. But we still had to think about environmental, social and governance (ESG) issues. We wanted to check for any risks to us generating good investment returns for members.

  • What approach did we take?

    We designed a process that identified the ESG issues we needed to think about before the deal went ahead. We looked at industry standards, regulations, academic research and a variety of other things all connected to the solar photovoltaic sector.

     The main issues we identified included: 

    • Biodiversity
    • Corporate governance
    • Cybersecurity
    • Physical climate risk
    • Health and safety

    We thought about the risks involved in the project and what was in place to reduce the impact of those risks.

    Over 80% of solar cell manufacturing takes place in China, and the country plays a big role in producing the key materials such as solar-grade polysilicon. About 54% of Chinese polysilicon is processed in the Xinjiang region, where the Muslim Uyghur population has been subject to forced labour. It was discovered in 2021 that some suppliers in the region may have received incentives to employ members of the Uyghur population under coercive conditions. 

    Railpen expects the companies it invests in to follow good business practices. These include the Ten Principles of the UN Global Compact (UNGC). UNGC Principle 4 is the elimination of all forms of forced and compulsory labour.>

    We spoke to the project developers about the issue of forced labour. We wanted to understand their approach to procurement – how they choose the suppliers they work with. 

    We also reviewed all the policies and practices in place to make sure the risk of forced labour in the supply chain was managed properly. By talking to the people behind the project, we got more details about the manufacturer’s approach, including auditing, whistleblowing, and employee engagement.

  • What was the outcome?

    After this detailed assessment process, we decided that ESG risks were sufficiently mitigated and the investment could go ahead. 

    However, we know that China remains a high-risk area when it comes to forced labour. So we’ll be doing the same level of checks on any similar deals in the future. 

    And we’re continuing to carefully monitor the key risks on the Bracks project, including responsible procurement.

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Case study - fair pay

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Case study - governance

Find out how we've worked with companies to improve their governance and mitigate risks.

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.