LGPS pool invests in Emissions Trading Scheme for managing operational emissions
LGPS Central, a £43bn pension fund pool, has forged a partnership with carbon reduction firm C2Zero, marking a significant step towards its goal of achieving carbon neutrality by 2050. The partnership, which received the backing of academic Andreas Hoepner, encourages other enterprises to follow suit.
Through this alliance, LGPS Central will purchase Emissions Trading Scheme (ETS) allowances from C2Zero, a move that ensures their emissions are accounted for under a regulated cap-and-trade system. By acquiring these allowances, LGPS Central actively participates in the carbon market, working within the UK's robust, government-backed framework designed to progressively reduce overall emissions.
In addition to compliance, LGPS Central utilises C2Zero’s Carbon Cancellation Service. This service enables the organisation to retire or “cancel” emission allowances permanently, effectively removing that quantity of emissions from the market and advancing the overall reduction in emissions beyond regulatory requirements.
By operating within the UK ETS framework, LGPS Central's carbon management efforts are verifiable and align with legally binding targets, reinforcing their credibility. The UK's emissions trading system sets a limit on the amount of carbon that can be emitted, with firms able to purchase allowances within this cap. Each allowance equates to one tonne of CO2. Firms must then surrender allowances in proportion to their emissions.
The current trading price of one allowance is between £30 and £40. Patrick O'Hara, head of responsible investment and stewardship at LGPS Central, finds C2Zero’s solution attractive due to its access to carbon emissions allowances and the ability to remove the purchased allowances from circulation.
C2Zero's UK Carbon Cancellation Service (C4S) was opened in London in March 2024. This platform enables businesses and individuals to purchase Carbon Cancellation Certificates linked to UK Emissions Allowances, providing a solution that meets LGPS Central's aims of addressing operational emissions and is both measurable and transparent.
The UK's Emissions Trading Scheme aims to create a carbon price to drive further decarbonisation. The price of ETS has fallen over the last year due to a combination of weaker demand and a surplus of carbon allowances in the market. Despite this, LGPS Central remains committed to its carbon neutrality goal and the partnership with C2Zero provides a strategic avenue to achieve this.
The UK Carbon Cancellation Service (C4S) was launched as part of the Connect to Prosper initiative led by the former Lord Mayor of London, Alderman Professor Michael Mainelli. C2Zero was launched in Australia in 2021.
Andreas Hoepner, a professor of operational risk, banking and finance at University College Dublin and head of the Data Science Hub, as well as a member of the EU Platform (PSF) on Sustainable Finance, has expressed his encouragement for the approach taken by LGPS Central. He hopes that other enterprises will follow this example, paving the way for a greener, more sustainable future.
- LGPS Central's partnership with C2Zero, driven by professor Andreas Hoepner's endorsement, signifies a significant move towards the industry's adoption of environmental-science principles, such as the use of renewable-energy sources and the mitigation of climate-change effects.
- The C2Zero Carbon Cancellation Service, utilized by LGPS Central, not only ensures regulatory compliance but also allows the organization to contribute towards emissions reduction beyond legal requirements by permanently retiring emission allowances.
- Following LGPS Central's lead, other enterprises could replicate the strategic approach of working with carbon reduction firms like C2Zero to invest in renewable-energy, meet their energy needs, and contribute to a greener, more sustainable future.
