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Richard GreeningLAPFF Executive member

Novethic Conference, 11 February 2015

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LAPFF: who we are

Local Authority Pension Fund Forum

founded in1991

a voluntary association of

61 UK public sector pension funds with combined assets of

approximately £150 billion

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LAPFF: action on climate change

• 2001: focus on FTSE 100 corporate carbon reporting.

• 2002 - 2004: wrote to companies with poor disclosure

• 2004: attended a number of AGMs. All companies committed to look at reporting.

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LAPFF: approach

• 2004, adoption of a sector by sector approach.

• 2005: engagement with the oil and gas sector

• Subsequent engagement with food & drink and transport sectors

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LAPFF: policy

• 2007: push for tougher carbon targets and mandatory disclosure

• 2010: Trustee Guide and

Statement on Climate Change

‘Members interested in investment

opportunities afforded by a low-carbon

future which increase diversification and

provide long-term returns’

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The Scale of the Problem

• Key issue for oil & gas companies is stranded assets

• To stay within 2ºC means stabilising CO2e at 450 ppm

• Only 1/5 of current fossil fuel reserves of global publicly listed companies can be used to remain at 450 ppm

• This presents a major challenge to the business models of such companies and the board’s strategic focus.

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Collaboration

• Powerful tool to share resources and influence

• Member of Investor Network on Climate Risk (INCR) and signatory to Carbon Disclosure Project (CDP)

• ‘Investor Coalition; engagement, AGM attendance

• By 2014, all companies had reached an ‘A’ or ‘B’ band

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Investor coalition

• Investor coalition decided to focus on two highest carbon emitters in the UK, Shell and BP

• Met with both company chairmen to discuss ‘supportive but stretching’ resolutions

• Resolutions filed in Dec/Jan by coalition supported by an international group of institutional investors

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Shareholder resolutions

• ongoing operational emissions management

• asset portfolio resilience to the IEA scenarios

• low-carbon energy R&D and investment strategies

• relevant strategic KPIs and executive incentives

• public policy positions relating to climate change.

Resolutions ask for annual reporting from 2016 to include further information on:

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Shell

• 13 LAPFF member funds co-filed the resolution

• Investor coalition included the Church Investors Group and Rathbone Greenbank. The Environment Agency also co-filed.

• Overseas investors included Ilmarinen from Finland; three Swedish national pension funds, US and Canadian funds

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BP

• Chairman could see it was a ‘friendly resolution’

• In January, 11 LAPFF member funds co-filed the resolution

• Same UK co-filers in the main, overseas filers included Local Government Super (Australia)

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Company responses

• End Jan/early Feb, both companies advise support for the resolution

• A first for a shareholder resolution of this kind

• Emphasis on constructive nature of engagement

• Large international institutional co-filing group, support from other funds, press attention, peer position

Private & Confidential 13

Total

• LAPFF has engaged with Total since 2008, most recently in January of this year.

• Climate change has been a focus

Objectives of the Jan meeting were to• learn more about plans for UK shale gas

investment • to clarify how climate change

considerations influence the Company’s business strategy

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Investment Risk

“Smart investors can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a

very risky decision”.

Professor Lord Stern