£30bn Pension Partnership calls finance sector ‘not fit for purpose’ for addressing climate change

27 January 2020

Brunel publishes op its website:

“In an ambitious new climate policy, Brunel Pension Partnership commits itself to push for a more climate-aware financial system, and to removing companies and investment managers that fail to perform on climate issues. Brunel Pension Partnership, one of eight pooled Local Government Pension Scheme funds across the UK, has set out a groundbreaking new approach to managing climate-related financial risk. Its new climate policy, published today, commits Brunel to using its influence to challenge the asset manager industry, which it describes as “not fit for purpose” for addressing climate change. Brunel’s new 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 engaged 130 asset managers and reviewed 530 investment strategies from a climate perspective.

Chief Investment Officer Mark Mansley said, “Climate change is a rapidly escalating investment issue. We found that the finance sector is part of the problem, when it could and should be part of the solution for addressing climate change. How the sector prices assets, manages risk, and benchmarks performance all need to be challenged.”\” Some of the practical implications of the policy state that between now and 2022, Brunel will demand that their material holdings take steps to align their emissions with Paris benchmarks and improve their climate management quality. Those that fail to do so will face the threat of votes against the re-appointment of Board members, or being removed from Brunel’s portfolios when the partnership carries out a stocktake of its policy’s effectiveness in 2022. Equally, Brunel will challenge their investment managers 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. Managers that fail to do so face the threat of having their mandates removed.

Chief Executive Officer 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.””

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