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Responsible Investment Annual Report 2019/20

The Avon Pension Fund has published its eighth Responsible Investment Annual Report. The report underlines the Funds recognition that transparency and disclosure of its Responsible Investing Policy and the related activities is an important element of being a responsible investor.

The report details the activities undertaken during 2019/20 by the Fund, our managers and our partners to deliver and support our Responsible Investing Policy.

This year’s key achievements include the doubling of our commitment to renewable infrastructure and increasing our assets allocated to sustainable equities from 3.5% to 10% of all assets.

As we recognise the importance of investor collaboration, another key development we were pleased to make was joining the Institutional Investors Group on Climate Change (IIGCC). This presents us with the opportunity to participate in policy advocacy and portfolio implementation work alongside many like-minded investors and will help us ensure we continue as a leader in the field of responsible investment.

Our Responsible Investment priorities remain unchanged for the coming year as does our commitment to create value for our beneficiaries and at the same time make a positive environmental and social impact.

PDF iconResponsible Investing Annual Report 2019/20

Investment Strategy Statement

Our Investment Strategy Statement (ISS) has now been published after the stakeholder consultation process has been completed.

The ISS is a technical document that is produced to comply with LGPS regulations and guidance. It sets out how the Fund will achieve its primary strategic objective of paying the pensions due over time.  This entails balancing the risk within the portfolio between generating returns and protecting capital and recognising our role as a responsible investor and the contribution we can make in addressing environmental, social and governance related issues while ensuring affordability for our employers.

We acknowledge it is difficult to achieve all the differing aspirations and objectives of our stakeholders; our strategy includes those that are aligned with the primary objective and where they do not increase the financial risk to the Fund and our ability to pay pensions.

This Statement incorporates changes resulting from the Fund’s most recent investment strategy review including changes to the asset allocation and the setting of climate change objectives. The setting of explicit climate objectives reflects the Fund’s belief that climate change presents a material financial risk to our assets and managing this risk is consistent with our over-arching fiduciary duty to the scheme members.

PDF iconInvestment Strategy Statement - September 2020

Focus on Investments: Sustainability and Coronavirus (COVID-19)

The economic and societal impact of Covid-19 is now becoming more apparent and poses many additional challenges for companies, consumers, governments and investors alike. In our last newsletter we communicated our plans to directly address the risks posed by climate change. As we start to adjust to the ‘new normal’ it is important we redouble our efforts to transform our portfolio for a lower carbon world.

Amidst the unprecedented market volatility in March, companies responding positively to the challenges of climate change, environmental sustainability and social well-being were able to demonstrate their value. Over the first three months of the year, the Fund’s low carbon global equities outperformed the mainstream equity market and our sustainable equity portfolio experienced roughly half of the severe declines suffered by its benchmark.

We continue to make progress in the following areas, which remain critical if we are to achieve our ambitious climate change goals:

Brunel Partnership wins two prestigious environmental finance awards

Brunel Pension Partnership has been named the Pension fund of the year by Environmental Finance. It also picked up another award for ESG Initiative of the Year.

Environmental Finance (EF) is an online news and analysis service set up over 20 years ago to report on sustainable investment, green finance and the people and companies active in environmental markets. Its Sustainable Investment Awards seek to recognise those asset managers, analysts and data providers that incorporate Environmental, Social and Governance (ESG) factors in their investments.

In awarding Brunel Pension Partnership with the prestigious Pension fund of the year EF praised Brunel for its clear and broad climate policy, active engagement, and ongoing push for disclosure improvements.

The second award ESG Initiative of the Year recognises the work Brunel carried out in conjunction with consultancy Chronos Sustainability. Where they developed a climate change framework designed to achieve investment returns whilst being in alignment with the goals of the Paris Climate Agreement.

Draft Investment Strategy Statement

We are currently consulting on our draft Investment Strategy Statement (ISS) with stakeholders.  It is a technical document that is drafted to comply with LGPS regulations and guidance.

The ISS sets out how the Fund will achieve its primary strategic objective of paying the pensions due over time.  This entails balancing the risk within the portfolio between generating returns and protecting capital, recognising our responsibility as a shareholder/investor and how the Fund can contribute to resolving materially financial global issues and at the same time ensuring it maintains affordability for employers. We acknowledge it is difficult to achieve all the differing aspirations and objectives of our stakeholders; our strategy includes those that are aligned with the primary objective and where they do not increase the financial risk to the Fund and our ability to pay pensions.

This Statement incorporates changes resulting from the Fund’s most recent investment strategy review including changes to the asset allocation and the setting of climate change objectives. The setting of explicit climate objectives reflects the Fund’s belief that climate change presents a material financial risk to our assets and managing this risk is consistent with our over-arching fiduciary duty to the scheme members.

Feedback on the ISS from scheme members will be considered alongside comments from other key stakeholders such as the Pension Board, employers and trade unions ahead of the document being finalised in September.

Please submit comments by 12 August 2020 to AvonPF_Investments@bathnes.gov.uk

PDF iconDraft Investment Strategy Statement

Brunel Pension Partnership Co-file a Shareholder Resolution at Barclays AGM

In January we published details of a landmark shareholder resolution co-filed by Brunel Pension Partnership calling on Barclays to set and disclose targets to phase out its financing of fossil fuel companies where they are not aligned with the goals of the Paris Climate Agreement. The outcome of the meeting has been hailed a success with Barclays’ own resolution winning majority support and committing them to becoming net carbon zero by 2050. The shareholder resolution won significant minority support in its own right, prompting the bank to consult with shareholders and explain the views received and actions taken publicly within six months.

The result is a great example of the power of Pooling and highlights now more than ever the value of shareholder engagement as the Fund seeks to deliver on its ambitious climate change objectives.

Further information relating to both resolutions can be found here: https://www.brunelpensionpartnership.org/2020/04/29/from-ambition-to-action-lpgs-investors-ask-barclays-to-firm-up-commitments-on-climate/

Brunel Pension Partnership’s official statement following the outcome of the Barclays AGM can be found here: https://www.brunelpensionpartnership.org/2020/05/07/barclays-climate-resolution-outcome/

Transforming our investment portfolio for a lower carbon world

We are all witnessing the impact of climate change on our lives and many of our employers have declared climate emergencies in recent months. The current global health crisis underscores the importance of mitigating such risks on a global scale. Climate change, in particular, represents a systemic risk to people, the planet, and to the investment returns which are necessary to enable payment of pensions. The need for action on the climate crisis is more critical now than ever before.

Avon Pension Fund, already recognised as a leader in Responsible Investment, has recently reviewed its investment strategy to support the transition to a greatly reduced carbon economy. The changes we have made will enable us to lower our carbon footprint and invest more capital in renewables, while preserving our ability to guarantee pension payments to beneficiaries.

Brunel Climate Change Policy: A five-point plan for building a financial system which is fit for a low carbon future

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 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 new 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 Pension Partnership co-file a shareholder resolution at Barclays AGM, putting climate change centre stage for the banking sector

Institutional investors managing over £130bn including Brunel Pension Partnership, one of Avon Pension Fund’s investment managers, have filed a shareholder resolution at Barclays alongside over 100 individual shareholders. It will be voted on by investors at Barclays’ annual general meeting in May 2020.

This landmark resolution – the first climate change resolution filed at a European bank – requests that Barclays publishes a plan to gradually stop the provision of financial services to companies in the energy sector, and to gas and electric utilities that are not aligned with the goals of the Paris climate agreement.

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