Brunel Pension Partnership - Responsible Investment

Through collaboration with stakeholders, Brunel Pension Partnership (Brunel) is forging better futures by investing for a world worth living in. When Brunel committed to an ambitious plan to build a more climate-aware financial system, Chronos was proud to support them in this work.

Brunel brings together circa £30 billion investments of 10 like-minded Local Government Pension Scheme funds.

It believes in making long-term sustainable investments supported by robust and transparent process with the fundamental aim of protecting the interests of its clients and their members. Through collaboration with stakeholders Brunel is forging better futures by investing for a world worth living in.

In January 2020, Brunel set out a ground-breaking approach to managing climate-related financial risk. Chronos has since supported Brunel in the development of its climate-change framework and associated policies and reporting.

Brunel and Chronos were jointly recognised for delivering the ‘ESG Initiative of the Year’ at the Environmental Finance Sustainable Investment Awards 2020.

Brunel’s Responsible Investment policy sets out how Brunel will deliver on some of its investment principles for all stakeholders, most particularly the nearly 700,000 beneficiaries of Brunel Pension Partnership Funds.

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, Gloucestershire, Oxfordshire, Somerset and Wiltshire and The Environment Agency.

Brunel’s Responsible Investment and Stewardship Outcomes Report.

Chronos supported the creation of this report which reiterates Brunel’s commitment to contribute to a more sustainable and resilient financial system and details its annual performance on issues such as climate change, tax transparency, diversity and sustainable supply chains.

Brunel’s climate change policy -‘A five-point plan to build a financial system fit for a carbon-zero future' builds on insights gained in the course of procuring new asset managers for Brunel's 10 LGPS clients.

Brunel engaged 130 asset managers and reviewed 530 investment strategies from a climate perspective.

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.

  Specific challenges within the finance sector identified by Brunel include:

An emphasis on short-term rather than long-term performance, which drives short-term thinking by investors and companies
An unwillingness by asset managers to invest in the low carbon economy, especially in areas which depend on public support or where technologies are perceived to be unproven
Backward-looking investment risk models that are inherently flawed at taking future climate risk into account
Instances of perverse incentives and conflicts of interest throughout the system – not least, the use of conventional market-weighted benchmarks to measure performance, when climate risk is not adequately priced by the market

Brunel's five-point plan

Brunel already conducts carbon footprints of its listed equity portfolios and allocates 35% of client infrastructure portfolio investments to renewable energy funds. Building on these strong foundations, its new policy commits the partnership to taking action as follows.

Policy – Brunel will encourage policymakers to adopt policies such as a meaningful price on carbon and removal of fossil fuel subsidies
Products – Brunel will identify product areas where there is client demand for more innovative products, and invest in their development.
Portfolios – Brunel will stress-test its portfolios under a range of climate scenarios. It will challenge its investment managers to demonstrate reduced exposure to climate risk and effective corporate engagement that puts companies on a trajectory to align with a 2°C future. Managers that fail to do so will be replaced.
Positive Impact – Brunel will report on the proportion of its portfolios invested in the low-carbon transition and on how its portfolios align with the goals of the Paris Agreement.
Persuasion – Brunel will engage with its material holdings to persuade them to improve their climate management quality, using the Transition Pathway Initiative assessment framework. It will ask its material holdings to advance at least one level on the TPI management quality staircase each year, with the aspiration of all material holdings being on TPI Level 4 by 2022. In cases where companies fail to show progress, Brunel will vote against the reappointment of the Chair and other board members.

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