Brunel Pension Partnership has pledged to push for a more climate-aware financial system saying it will divest from companies and investment managers that fail to perform on climate issues.
As one of eight pooled Local Government Pension Scheme funds, Brunel has outlined a new five-point plan to turn up the pressure on asset managers over climate change.
Chief responsible investment officer, Faith Ward (pictured) said, “We have a climate emergency on our hands and it would be irresponsible of us to accept the status quo. We need to systematically change the investment industry in order to keep temperature rise to well below 2°C.”
Historically, Ward and her team have stressed the merits of engagement over divestment, describing the latter as “last resort.” The move represents a toughening up of the partnership’s policy. Previously Ward and her team stressed engagement over divestment, which Brunel had described as a “last resort.”
As part of the policy, Brunel engaged 130 asset managers to review 530 investment strategies from a climate perspective. Those that fail to meet its standards will face the threat of votes against the reappointment of board members, or removal from Brunel’s portfolios when it carries out a stocktake in 2022, Brunel said.
Investment managers will have to demonstrate reduced exposure to climate risk and effective corporate engagement that puts companies and portfolios on a trajectory to align with a 2°C economy, Brunel said.
Brunel will demand that their material holdings take steps to align their emissions with Paris benchmarks and improve their climate management quality over the next two years.
In return, the pool has committed to reporting on the proportion of its portfolios invested in low-carbon transition and on how its portfolios align with the goals of the Paris Agreement.
As of January 2020, Brunel had transitioned half of its client’s funds into pooled vehicles.
Earlier this week, Greater Manchester Pension Fund (GMPF), which is part of the Northern Pool, said in it’s 2019 annual report that it would have lost out on £400m of investment returns if it had divested from equities in BP and Centrica over the last three years. Nevertheless, it committed to divesting £2.5bn of its assets to a low carbon approach.