23 August 2023

Your GSK Pension and climate change
August 2023

What is 'climate change'?

Climate change refers to the change in global weather patterns, caused by the increasing levels of greenhouse gas emissions in the atmosphere. This leads to the increased frequency and severity of weather events, such as droughts, rises in sea-levels, floods, heatwaves and wildfires.

What does climate change have to do with my GSK pension?

The value of GSK pension plan investments might be impacted by the physical impacts of climate change or the move to a lower-emission economy.

The Trustees of the GSK pension plans believe that these risks can be financially material and therefore aim to guard against these risks where possible. This means aiming to reduce exposure to climate-related risks.

The Trustees also want to minimise the possible climate-related harm that could arise from their actions, provided this can be done without compromising their legal duties to members. There may also be investment opportunities that arise from the move to a lower-emission economy.

What are governments doing about climate change?

The Paris Agreement is an international treaty on climate change agreed by almost all the world’s nations. The Agreement aims to prevent the global average temperature from increasing by more than 2°C, compared to pre-industrial levels, and ideally to limit the increase to 1.5°C.

What are the GSK Pension Trustees doing about climate change?

The Trustees have set a target which is aligned to the Paris Agreement.

The medium-term target is to reduce carbon emissions associated with its investments by at least 50% by 2030 (compared to 2019 levels).
The long-term aim is to reduce carbon emissions to “net-zero” by 2050.

How do the Trustees measure progress against the target?

The Trustees use different measures to track progress against the target, but primarily look at the estimated carbon footprint of investments, which is used as a measure of the Plans’ investments in emission-intensive companies. These have reduced by c.40% from 2019 to 2022 across the DB and DC Sections.

To put this into context, the reduction in emissions from 2019 to 2022 across the Plans combined is broadly equivalent to removing 115,100 individual passenger flights from London to New York[1].

Whilst this shows a significant reduction in the carbon footprint since 2019, we need to take into consideration the impact of the Covid-19 pandemic. It’s likely that a significant proportion of this reduction reflects global actions to control the pandemic through 2020 and 2021 (for example, lower emissions from travel). In addition, the way data is measured is very much in its infancy. Over time, it is expected that the quality and availability of data will improve. Therefore, the Trustees have a cautious view about the extent to which the progress to date is permanent and this will be monitored very carefully in the coming years.

The Trustees’ full climate-related report has details of the estimated progress of the Plans’ carbon footprint since 2019 (details on how to access this report are set out below).

Do the GSK Trustees consider other environmental, social and governance issues?

Yes. Alongside an increased emphasis on climate-related factors, the Trustees also recognise the importance of other environmental, social and governance (“ESG”) factors as well as the importance of sustainability in a broader sense. This view is also reflected in the management of the Plans’ investments.

For all members, ESG considerations are factored into the selection and ongoing review of investment managers used to invest the assets, including a focus on how these managers are engaging with companies we invest in on these important topics.

For DC members, ESG considerations are integrated into the default investment strategy, the GSK Lifecycle Drawdown Option. The Trustees also offer a standalone ESG-focused fund in the self-select fund range, the “GSK Global Sustainable Equity Fund”.

Where can I find out more?

This is a brief summary of how the Trustees are addressing the impact of climate change on the GSK Plans’ investments. Each year, the Trustees issue a Task Force on Climate-related Financial Disclosures (“TCFD”) report which sets out how relevant climate-related risks and opportunities are considered by all stakeholders involved in the day-to-day management of the Plans. The full report includes more detail on the governance, strategy and risk management structures in place in respect of climate change, the wider range of climate metrics used to monitor progress and details of the scenario analysis undertaken to better understand the risks and opportunities posed by climate change.

To read this full report

Click on ‘Governance’
Select your pension plan
Under ‘Key Documents’, go to ‘Climate-related reports’
You can print or save the report if you want to

“GSK Plans” refer to GSK Pension Scheme, GSK Pension Fund, Glaxo Wellcome Contracted-Out Money Purchase Scheme and SmithKline Beecham Pension Plan.

“Trustees” refers to the Corporate Trustees of the Plans.

Note 1 - This is based on the absolute emissions (Scope 1 & 2) of the DB Sections (combined) and the total listed assets (equities and corporate bonds) of the default investment strategy of the DC Sections (combined). This assumes an average of 590kg CO2 equivalent per passenger per flight (source: travelnav.com). Please note this is based on having a lower number of financed emissions associated with the portfolio which is an indicator of reduced climate change risk and not equivalent to real-world emission reductions. Furthermore, it is important to note that absolute emissions are impacted by a wide range of factors and so numbers should be interpreted with caution.