Climate risk

As a global investor, NILGOSC is concerned with global carbon emissions. By working together with like-minded investors, NILGOSC seeks to amplify its voice to encourage governments and companies to take action and to help create an investment environment which contributes to a low carbon economy. For example:

• NILGOSC has been a signatory to UN Principles of Responsible Investment (PRI) since 2007, regularly supporting PRI-facilitated engagements with governments and companies.
• NILGOSC has been a signatory to the CDP (formerly the Carbon Disclosure Project) since 2007, which is a not-for-profit charity that runs the global disclosure system for reporting and managing environmental impacts. NILGOSC regularly supports the CDP’s annual campaigns (most recently, the 2024 Non-Disclosure Campaign, 2024 Climate Change, Forests and Water programmes and the 2023/24 Science-Based Targets Campaign).
• In 2019, NILGOSC became a member of the Institutional Investors Group on Climate Change (IIGCC), which is the leading European-focused investor membership organisation for collaboration on climate change, representing over 400 members.
• NILGOSC signed the 2018, 2021, 2022 and 2024 Global Investor Statements to Governments on Climate Change. Issued ahead of COP 29, the 2024 Statement was signed by 534 investors managing more than $29 trillion USD in assets and is the most comprehensive to date, calling on governments to raise their climate ambition in line with the goal of limiting global temperature rise to 1.5°C.  It also calls on global leaders to commit to mandating climate-related disclosures across the financial system, ensuring comprehensive disclosures that are consistent, comparable, and decision-useful.
• NILGOSC is a supporter signatory to Climate Action 100+. Launched in 2017, it was initially a five-year investor-led initiative established to ensure the world’s largest corporate greenhouse gas emitters curb emissions, strengthen climate-related financial disclosures and improve governance on climate change risks. NILGOSC supported engagement and co-filed resolutions at the AGMs of numerous companies, seeking disclosure on topics such as spending plans, emissions policies and how broader business strategy aligned with the Paris Agreement. In one case, agreement was reached via engagement prior to the meeting and in another, the resolution was supported by shareholders and by company management; both of which reveal the influence that shareholders can have over a company’s activities. Building on the demonstrable success of Phase 1, Phase 2 of Climate Action 100+ commenced in 2023 and will run through to 2030. Focus has shifted from corporate climate-related disclosure, to the implementation of corporate climate transition plans. Alongside 700 global investors (responsible for more than $68 trillion USD in assets under management), NILGOSC continues to support the initiative.
• In 2025, NILGOSC co-signed and supported the launch of the Asset Owner Statement on Climate Stewardship, developed by a coalition of asset owners, totalling over $1.5 trillion USD in assets under management. The statement was drafted in response to complaints from asset managers of inconsistent demands from asset owners, and sets out key and consistent climate stewardship expectations, intended to: promote constructive dialogue; generate greater alignment between asset owners and managers; and ultimately raise the bar on climate stewardship across the investment sector.
• NILGOSC has also contributed to relevant consultations and working groups, such as the Department of Agriculture, Environment and Rural Affairs (DAERA) Cross-Sectoral Advisory Working Group on Climate Change Reporting by Public Bodies in Northern Ireland.

Other examples of NILGOSC’s engagement activity are listed at: Snapshot of NILGOSC’s ESG activity – NILGOSC

A full list of NILGOSC’s actively-managed equity holdings as at 31 March 2025 is available to review on the NILGOSC website.

NILGOSC exercises its right to vote, if possible, at all company meetings within its actively managed portfolios. NILGOSC expects the companies in which it invests to comply with ESG best practice and has developed a Voting policy which sets out NILGOSC’s expectations for good governance, including how companies manage their impact on society and the environment. It also sets out how NILGOSC addresses sustainability-related resolutions, including specific reference to climate risk and climate related financial disclosures.

NILGOSC recognises that many companies have begun the transition to a lower carbon world, including companies whose traditional business models were carbon intensive.  NILGOSC is supportive of companies seeking to diversify their business into renewables and low-carbon technologies and will support calls for greater disclosure of climate change risks and robust company strategies aligned with the Paris Agreement.  NILGOSC considers such action to be consistent with its fiduciary duty and is essential to achieve the goals of the Paris Agreement.  For example, NILGOSC expects that companies’ auditors should reference climate risk in their annual reports; and will therefore consider voting against the appointment and/or remuneration of the auditor if there is no disclosure in their report to indicate how they have considered climate risk.

NILGOSC publishes a record of its voting each quarter on the website, as well as an annual review. In the year to 30 June 2025: NILGOSC cast 2,840 votes at a total of 212 meetings, held by 192 globally listed companies. In total, 43.9% of all votes NILGOSC cast were made against management recommendations, which demonstrates that it is more active in expressing concerns through voting than the average shareholder (who demonstrated an average dissent level of 5.0%).   NILGOSC believes that all resolutions should be reviewed on a case-by-case basis, and supports proposals that are: compatible with its policies; follow good market practice; and are in the best interests of shareholders. Where possible, NILGOSC also engages directly. For companies listed in the UK or Europe, where NILGOSC intends to vote against management at a company’s Annual General Meeting, a letter will be issued to the company to advise of the voting decisions and to provide a rationale.

Most recently, in January 2025, NILGOSC started trialling a system called ‘Pass-through voting’.  For meetings of companies which are held in both the actively managed equity portfolios and in NILGOSC’s passively managed funds, NILGOSC can now direct how a proportional share of the votes for the passively managed holding are placed, allowing consistent voting across both types of holdings.

Over a third of NILGOSC’s assets are passively managed by Legal & General Investment Management (LGIM).  Passively-managed funds are designed to follow specific market indices and match their performance, meaning no active decision-making is undertaken regarding the underlying holdings. However, a decision can be made in the selection of which index to track.

As a means of mitigating climate risk in the Fund’s passive equity portfolio, in February 2022, NILGOSC transitioned its entire passive equity holding (£2.8bn at the time) to LGIM’s Low Carbon Transition Fund.  As a result, most of NILGOSC’s passive equities are now held in a fund which tracks and seeks to replicate the performance of a climate-tilted, carbon-transition index: the ‘Solactive L&G Low Carbon Transition Developed Market’ index.

The strategy behind the index is to self-decarbonise by reducing exposure to carbon emissions over time. The index has an overall objective, which is to meet the stricter of: a ‘carbon emission intensity reduction objective’ of at least 70% (except for the UK region, where the reduction is set to 60%) compared to the base regional index; or a ‘decarbonisation objective’ of at least 7% year-on-year. The universe of holdings within the index covers all developed markets but excludes companies on LGIM’s Future World Protection List, namely: companies considered perennial violators of the UN Global Compact; certain companies involved in controversial weapons manufacturing and production; and certain companies with involvement in mining and extraction of thermal coal, thermal coal power generation or oil sands. Each holding within the remaining universe is assigned a ‘carbon score’, based on three indicators: emissions intensity; reserves intensity; and green revenues. Using the overall climate scores, an adaptive tilt away from climate-laggards and towards climate-leaders is applied to capital allocation within the index.

A full list of the components of the Solactive L&G Low Carbon Transition Developed Market index, as well as regularly updated factsheets, are available on the Solactive website.

NILGOSC considers the disclosure of climate risks and opportunities to be essential if shareholders are to determine whether the companies in which they invest are adequately addressing the changing climate.

In 2015, the Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information. In 2017, the TCFD released its recommendations, and as a result of the TCFD’s success in developing a framework that has become the foundation for many national and international climate-related disclosure requirements, the taskforce was disbanded in 2023.

NILGOSC was named on the official list of supporters in June 2020, publishing its inaugural Climate-related Disclosures Report the following year, utilising the TCFD’s framework to describe and communicate the steps taken to manage climate-related risks and incorporate climate risk management into NILGOSC’s investment process.

NILGOSC has continued to voluntarily report on an annual basis. Disclosures are organised around the TCFD’s four thematic areas, representing the core elements of how organisations operate: governance; strategy; risk management; and metrics and targets. NILGOSC’s most recent TCFD-aligned report for the year ended 31 March 2025 is available to review at: NILGOSC Climate-related Disclosures Report demonstrating that the portion of the NILGOSC portfolio that can be measured (primarily composed of its actively-managed and passively-managed equity holdings) continues to emit less Scope 1 and 2 carbon dioxide equivalents than the benchmark comparator.

NILGOSC seeks to ensure that the investment managers and consultants it appoints have the necessary expertise in assessing climate risk. NILGOSC assesses these capabilities at the selection and appointment stage through the tender process and applies mandatory ESG criteria. NILGOSC will only appoint investment managers and consultants who have demonstrated that they meet an acceptable threshold for ESG capabilities. In making investment decisions, NILGOSC encourages its managers to address climate risks and opportunities in their investment research, analysis, decision-making and engagement activities.

More than half of the Fund’s assets are actively managed. NILGOSC delegates the selection of individual investments held to its externally appointed managers and does not impose restrictions on environmental, social or governance (ESG) grounds alone. However, NILGOSC has instructed its active investment managers to take account of climate risk considerations in their decision-making process, provided the primary financial obligation is not compromised. Where climate change produces a financial risk for a particular investment, NILGOSC expects this to be a fundamental part of the investment decision-making process and monitors such decisions accordingly.

All active investment managers are instructed to engage on NILGOSC’s behalf with those companies where ESG policies fall short of acceptable standards. All managers are required to report quarterly on engagement activity undertaken, the issues covered and any outcomes. The managers’ ability to provide evidence that they are taking ESG issues into account during the investment process forms part of NILGOSC’s quarterly evaluation of their performance.

Reporting against the Task Force on Climate-related Financial Disclosures (TCFD) recommendations has become part of the regulatory framework in many jurisdictions. NILGOSC procured the long-term provision of TCFD-aligned carbon analytics as part of the remit of its global custodian, Northern Trust, and to date, coverage has primarily focused on NILGOSC’s listed equity and corporate fixed income assets. To help plug some of the coverage gap, NILGOSC requests that all of its investment managers complete an annual Carbon Emissions Template. The outputs are compared to Northern Trust’s data where possible, as well as to the managers’ prior year submissions, and used as a tool for ongoing engagement with each of the managers. More detail is provided in the NILGOSC Climate-related Disclosures Report , but continued engagement with the managers has led to improved disclosure and improved data availability.

For the asset classes in which NILGOSC wishes to invest, a range of managers have been appointed to manage particular types of assets depending on their areas of expertise. NILGOSC delegates the selection of underlying individual investments to the managers, although each of its active investment managers is instructed to take account of climate risk in their decision-making process. Therefore, provided their primary financial obligation is not compromised, NILGOSC’s managers will often hold investments in low-carbon technologies, an example of an equity holding is provided below (and numerous case studies demonstrating how ESG considerations have or will impact NILGOSC’s managers’ investment decision making are provided each year in NILGOSC’s Stewardship Code Report.

In the case of alternative assets (like infrastructure), commitments to invest have been made in respect of a number of funds, each with its own specialist manager. NILGOSC’s strategic asset allocation to infrastructure is 7.5% of total fund value. NILGOSC continually monitors and works to build up its infrastructure portfolio, and is invested in funds which hold assets across the globe that form an important part of the emerging low-carbon economy.  Assets are located worldwide and in sectors such as: wind; solar; energy-from-waste; hydro-power generation; public transport systems; district heating; and battery storage.

Some infrastructure funds invest only in renewables. For example, in March 2021, NILGOSC committed €50m to Copenhagen Infrastructure Partners (CIP) Fund IV, which specifically focuses on developing and building renewable assets across Europe, N. America and Asia Pacific.  Most funds cover a range of sectors, and NILGOSC encourages its infrastructure and property managers to adopt sustainable asset management practices with respect to all of their holdings.

Examples of holdings in low carbon technologies in the NILGOSC portfolio include: