LGPS Pools Relies on ETS for Managing Operational Emissions
In a significant move towards sustainability, LGPS Central, a pension fund pool with a value of £43bn, has announced a partnership with Australian carbon reduction firm C2Zero. The collaboration aims to accelerate LGPS Central's journey towards becoming carbon neutral by 2050.
C2Zero, launched in 2021, opened its UK Carbon Cancellation Service (C4S) in London in March 2024. This service enables businesses and individuals to purchase Carbon Cancellation Certificates linked to UK Emissions Allowances. LGPS Central will purchase ETS Emission Allowances through C2Zero's Carbon Cancellation Service, although the volume of the transaction has not been disclosed.
The UK's Emissions Trading Scheme (ETS) aims to create a carbon price that drives further decarbonisation. Firms must then surrender allowances in proportion to their emissions. One allowance in the UK's ETS equates to one tonne of CO2. The price of one allowance currently trades between £30 and £40.
The partnership between LGPS Central and C2Zero is attractive for several reasons. For LGPS Central, the ability to remove the purchased allowances from circulation was also appealing. This partnership will significantly support LGPS Central's goal of becoming carbon neutral by 2050.
C2Zero specializes in carbon reduction and sustainability services, helping LGPS Central to more accurately assess their carbon footprint across investments and operations. This collaboration enables LGPS Central to implement effective carbon management strategies, invest in credible carbon offset projects, and enhance transparency in their progress towards net zero.
The initiative received the backing of academic Andreas Hoepner, professor of operational risk, banking and finance at University College Dublin. Hoepner is also the head of the Data Science Hub and a member of the EU Platform (PSF) on Sustainable Finance. He expressed encouragement for LGPS Central's innovative and robust approach to addressing operational emissions.
Prices in the ETS are expected to be less volatile than those in the voluntary carbon market. This stability could make it an attractive option for organisations seeking to offset their carbon emissions.
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. However, the price of ETS has fallen over the last year due to weaker demand and a surplus of carbon allowances in the market.
The partnership strengthens LGPS Central’s capacity to meet their climate commitments systematically and credibly, making their 2050 carbon neutrality target more achievable. 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.
In conclusion, LGPS Central's partnership with C2Zero is a significant step towards achieving their carbon neutrality goal by 2050. This collaboration will enable LGPS Central to measure, reduce, and offset carbon emissions more effectively, contributing to a more sustainable future.
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