Brunel unveils green investment roadmap

Brunel Pension Partnership has thrown down the gauntlet to the asset management industry by issuing a radical set of climate policies, as it attempts to reduce the carbon intensity of its investments.

The pool’s five-point plan includes mandating asset managers to stress test its portfolios’ resilience to various climate scenarios and justify any fossil fuel-intensive companies they continue to invest in.

Managers that fail to demonstrate reduced exposure to climate risk and effective corporate engagement that puts companies on a trajectory to align with a 2°C future, as outlined in the Paris Climate Treaty, will be replaced.

Brunel aims to cut the carbon footprint of its listed equity portfolios by at least 7% year-on-year from 2020. That would equate to over 20% lower carbon intensity than the benchmark by 2022.

Chief responsible investment officer, Faith Ward, 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.”

Brunel will also urge its material holdings to improve their climate management quality, using the Transition Pathway Initiative assessment framework.

The framework – which was developed in 2017 by the Environment Agency Pension Fund and the Church of England National Investing Bodies – evaluates and tracks the quality of companies’ management of their greenhouse gas emissions and how companies’ planned or expected future carbon performance compares to international targets and national pledges made as part of the Paris Agreement.

Ward said the pool had identified an “unwillingness by asset managers to invest in the low carbon economy” and “backward-looking investment risk models that are inherently flawed at taking future climate risk into account.”

While developing the principles, the pool had consulted with its 10 LGPS clients, all of which had shown their support, said Ward.

Wiltshire Pension Fund announced in January that it has allocated approximately 20% of its assets into Brunel’s Low Carbon Passive Equity portfolio.