Brunel Pension Partnership launches new finance strategy to align with net-zero future

The Partnership has also warned that organisations and investment managers that fail to demonstrate reduced exposure to climate risks could be voted against 

Brunel Pension Partnership, one of eight Local Government Pension Scheme funds across the UK that accounts for 10 likeminded pension funds, has outlined a new five-point plan to align its financial portfolio with a zero-carbon future.

Over the next two years, Brunel will demand that all material holdings within the funds take steps to align emissions reductions with the needs of the Paris Agreement while simultaneously improving management and disclosure practices in relation to climate-related risks.

Brunel’s chief executive Laura Chappell said: “Our clients have high ambitions on climate change, but the finance sector does not currently offer a sufficient range or quality of climate-aware products and expertise across all asset classes to meet their needs.

“We want to enable our clients to integrate climate change mitigation and adaptation across their investment strategies in a substantive way.”

Brunel engaged 130 asset managers and reviewed 530 investment strategies from a climate perspective in the build-up to the creation of the new strategy. It covers the areas of policy, products, portfolios in terms of areas of influence and positive impact and persuasion are the major steps Brunel will take to shape fund portfolios.

The Partnership has also warned that organisations and investment managers that fail to demonstrate reduced exposure to climate risks could be voted against during board member re-appointments or removed from Brunel’s portfolio altogether when a stocktake occurs in 2022.

Brunel issued the new strategy, in part, to overcome specific challenges the Partnership identified in the sector including an emphasis on short-term performances over long-term potential and “backwards-looking investment risks models” that failed to take future climate risks into account.

Net-zero alignment

In response to the new strategy, the Wiltshire Pension Fund has already allocated approximately 20% of its assets into Brunel’s Low Carbon Passive Equity portfolio.

Another pension fund that is a Brunel client is that of the Environment Agency, which has committed to reaching net-zero carbon in its operations and supply chain by 2030 – two decades ahead of the UK Government’s national target.

The Agency’s chair, Emma Howard Boyd, said: “Now is the time for everyone in the finance sector to show leadership in response to the climate emergency. The Environment Agency Pension Fund was one of the first pension funds to recognise the financial risks from climate change.

“As investors, we have a responsibility to our beneficiaries to ensure the assets entrusted to us are resilient to climate risks. I’m delighted to join with partners across the Brunel Partnership in calling for an investment industry fit for a net-zero future.”

At a government level, trustees of the £700m Parliamentary Pension Fund have been urged to respond to the climate emergency by 300 MPs who have asked that the fund divests from holdings in fossil fuel companies such as BP and Royal Dutch Shell.

The launch of the strategy comes days after the Church of England’s three National Investing Bodies (NIBS) – the Church Commissioners for England, the Church of England Pensions Board and CBF Church of England Funds – representing more than £12bn, joined the UN’s Net-Zero Asset Owner Alliance.

Matt Mace