Brunel Pension Partnership Limited (Brunel) is one of eight national pooled funds and manages the investment of the pension assets for the funds of Avon, Buckinghamshire, Cornwall, Devon, Dorset, Environment Agency, Gloucestershire, Oxfordshire, Somerset and Wiltshire. Brunel manages circa £30 billion investments on behalf of these 10 Local Government Pension Scheme funds.
The state of play in the finance sector
The case for urgent action on climate change is clear. Global average temperatures are already 1°C above pre-industrial levels, the rate at which capital is being invested in low carbon infrastructure is approximately half of that required, and the pace at which regulators and policy makers are acting is far too slow.
Some of the underlying causes of these problems lie within the investment system, and financial markets more generally. While there are commendable exceptions, the finance sector is not fit for purpose. How we price, manage and most specifically how we benchmark financial performance needs to be challenged in order to achieve a world where temperature rise is kept to well below 2°C compared to pre-industrial levels.
Brunel’s role in driving change
If the financial system is not fit for purpose, we cannot respond effectively to climate change. As an organisation, we have done much already within our direct sphere of influence. We have exerted influence on our investment managers and service providers and on the specific investments we have made. While these efforts are important and valuable, we know there is more to be done.
The state of play in the finance sector and our role within it means our focus must be on shaping and influencing the investment system to ensure it is fit for purpose. Our priority is to catalyse change at scale, not only through our own efforts but in partnership with others, and by enabling our Clients to be agents of change in their own right.
The Brunel climate change policy – ‘A five-point plan to build a financial system which is fit for a carbon-zero future’ – builds on insights gained in the course of procuring new asset managers for its 10 LGPS clients:
Brunel’s 5-point plan
- Policy: Encourage policy makers to establish comprehensive and robust climate change policy frameworks. These need to deliver significant reductions in greenhouse gas emissions, accelerate progress towards the low carbon economy, and enable effective adaptation to the unavoidable impacts of climate change.
- Products: Increase the number and range of products available to our Clients and the wider investment market that deliver substantial climate change benefits and sustainable investment returns.
- Portfolios: Ensure our investment portfolios are resilient under a range of climate change scenarios (both mitigation and adaptation) by adopting best practices on climate risk management and working with our managers to further improve and develop our processes.
- Positive Impact: Enable investments in activities that directly support the low carbon transition and that enable effective adaptation to the unavoidable impacts of climate change.
- Persuasion: Challenge and encourage companies and other entities in which we invest and contract with to support the transition to the low carbon economy, and to ensure that they are resilient to the unavoidable impacts of climate change.
Tony Bartlett, Head of Business Finance & Pensions at Avon Pension Fund voiced support for the policy, saying, “This ground-breaking policy sets out ambitious expectations for our investment managers and assets, which will enable us to protect our beneficiaries’ pensions well into the future. And it demonstrates the power of partnership - within the Brunel pool and beyond - that will be required to respond effectively to the financial risks posed by climate change.”
To find out more about the Brunel Pension Partnership climate change policy