The Local Authority Pension Fund Forum (LAPFF) is intensifying its engagement with water utilities to tackle pressing environmental issues, including pollution from storm overflows and the growing risks posed by per- and polyfluoroalkyl substances (PFAS), commonly known as forever chemicals.
The Forum is also broadening its focus to encompass other environmental contaminants like microplastics.
LAPFF is encouraging water companies to demonstrate how they are addressing both legacy pollution challenges and emerging risks. This includes identifying and detailing financially material physical climate-related impacts and disclosing adaptation measures. These measures are expected to be company-specific and embedded within a range of 'reasonable outcomes,' rather than a single 'preferred' scenario.
Significant regulatory changes are underway within the UK water sector, with the government dismantling Ofwat and transitioning to a new integrated water regulator. This reform, recommended in the government-commissioned 2025 Independent Water Commission: review of the water sector, the Cunliffe Report, and detailed in the January 2026 DEFRA Water White Paper A New Vision for Water,
signals a shift towards more coordinated, system-wide oversight. LAPFF supports sector-wide collaboration to foster a more resilient and sustainable water system.
Specifically, LAPFF met with Pennon, the parent company of South West Water, in Q1 to discuss environmental performance and regulatory changes. Pennon reported strengthened capability through an expanded ESG function and the creation of a dedicated Chief Strategy and Regulatory Affairs role. The company also outlined material improvements, including continued delivery of the 'Upstream Thinking' catchment programme and the energising of two new renewable energy sites.
On storm overflows, Pennon confirmed progress, stating that 291 overflow improvements have been completed, all bathing-water overflows have been addressed, and the company is committed to achieving fewer than ten overflows a year by 2040. This commitment is a key metric LAPFF is using to assess progress.
Regarding emerging contaminants, Pennon described active PFAS monitoring in coordination with the Drinking Water Inspectorate (DWI) and participation in national trials. The company is also partnering with the University of Exeter's CREWW to develop PFAS removal methods and advance microplastics detection and research.
Pennon also discussed the 2026 Water White Paper and the sector's transition to a new single regulator, welcoming the shift from a water-sector to a water-system approach. The company noted its active involvement in transition planning and supported the reintroduction of a Chief Engineer to enhance asset health oversight. Pennon recognised the importance of improved regional planning and better alignment between regulators and the unique geographic and socio-economic context of the South West.
LAPFF noted Pennon's support for the 'polluter pays' principle, cautioning that end-of-pipe solutions alone are unsustainable for bill payers. This aligns with LAPFF's broader focus on effective water stewardship as a member of the Valuing Water Finance Initiative (VWFI), a coalition of 108 investors representing US$18.1 trillion in Assets Under Management (AUM). The initiative calls on companies to meet the Corporate Expectations for Valuing Water, which guides how companies should manage, protect, and value freshwater across their operations and supply chains.
LAPFF signed a letter circulated to 56 companies across four water-intensive industries—food, beverage, apparel, and high-tech. This letter reinforces investor attention to mitigating water risk and reflects key themes from Ceres' 2025 VWFI benchmark analysis, which identified significant gaps in companies' awareness and management of water-related risks.
The Brent Pension Fund, through its membership in LAPFF, is actively participating in these engagements to promote responsible investment and influence corporate behaviour on critical environmental matters. The Forum's engagement with water utilities has a longstanding focus on pollution from storm overflows and the necessary upgrades to ageing infrastructure. While specific timelines for concrete outcomes beyond reported progress are not provided, the ongoing monitoring of companies' actions and future plans suggests a continued drive for tangible improvements in environmental performance.
Pennon (South West Water's parent company) faced a significant incident related to a cryptosporidium outbreak in Brixham in March 2026, which resulted in more than 140 confirmed cases, several hospitalisations, and a prolonged boil water notice affecting thousands of households. South West Water pleaded guilty to supplying water unfit for human consumption following this outbreak.
For further details on the Pension Board's activities, refer to the Agenda frontsheet and the Public reports pack.