London’s local government pension funds set out their stance on nature risks
London CIV has published its first nature-related risk report, signalling how biodiversity loss, water stress and ecosystem decline are becoming financial considerations for local authority pension funds
A little-known fact about London is that it is one of the most biodiverse cities in the world. From peregrine falcons nesting at the Houses of Parliament to beavers in Enfield, deer in Richmond Park and foxes roaming residential streets, the UK’s capital is home to a surprising range of wildlife.
It is perhaps fitting, then, that London’s local authority pension funds are sharpening their focus on biodiversity within their investment portfolios.
Earlier this week, London CIV, which manages the assets of 32 Local Government Pension Scheme (LGPS) funds across London and surrounding boroughs, set out its ambitions on nature in its first report aligned with the Taskforce on Nature-related Financial Disclosures (TNFD).
Acknowledging that nature-related risks ultimately translate into financial risks, the pool highlighted its growing allocation to nature-based solutions. A fund launched in 2023 has already committed capital to the JPM Campbell Global Forest & Climate Solutions Fund II, the Manulife Hancock Timberland and Farmland Fund, and Gresham House Forest Fund VI.
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However, the TNFD report goes beyond commitments to specialist nature strategies. London CIV also used the exercise to assess how its broader manager base is integrating nature-related risk. Of the 13 ACS managers surveyed, 12 said they incorporate nature-related risks into ESG scorecards. Yet only eight have undertaken deeper analysis to assess their portfolios’ exposure.
The pool said it plans to survey managers every two years and expects reporting on material nature-related risks to become more robust over time.
One of the more revealing elements of the report is its assessment of nature dependencies. Water is flagged as a key physical risk, which is hardly surprising for a city built on the Thames, much of it close to sea level and vulnerable to rising temperatures. Flood risk, water flow regulation and long-term water supply are all highlighted as material considerations.
This has particular relevance given that many London CIV partner funds have significant allocations to local real estate and infrastructure, asset classes that could be exposed to sea level rise and extreme weather events.
The report also identifies agriculture and forestry as the sub-industries with the highest average materiality ratings. While relatively few current holdings have been flagged as directly “value at risk”, London CIV acknowledges that indirect exposures, particularly through supply chains, are not yet fully captured. Expanding that analysis will be a priority in future iterations, it said.
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