Brunel Pension Partnership, Bristol, England, revamped its climate-change policy after a one-year consultation that will bring changes to its portfolios, asset managers and engagement activity, it said in a news release Wednesday.
The £35 billion ($42.2 billion) local government pension scheme pool invests for 10 local government pension funds.
"Few areas of our industry have evolved as rapidly as climate change in recent years, so the onus is on asset owners and managers to be nimble in response," said Faith Ward, chief responsible investment officer at Brunel, in the news release. In addition to managing climate risks, it is just as important to take advantage of opportunities that are often in private markets, Ms. Ward said.
The new climate change policy "will not only affect how we design and evolve our portfolios. It will also impact how we recruit and monitor the managers we appoint to run mandates on those portfolios. Finally, it will impact how we engage more broadly beyond our partnership, whether coordinating with other asset owners on RI issues, or pressuring companies to improve their practices," Ms. Ward said.
Brunel was an early adopter of a climate-change policy in 2020 that called for net-zero by 2050. This latest version represents higher ambitions to manage climate-change risk across its portfolios, it said in the release.
The pension pool worked with Chronos Sustainability to get an independent assessment from multiple stakeholders on its policy's content and impact. While Brunel's approach is considered impactful, Rory Sullivan, CEO of Chronos, said in the release that expectations on asset owners have grown since 2020, including demand for innovative net-zero investment products, performance and impact data, and more company and public policy engagement.
Changes in the new policy include embedding recommended objectives and targets more thoroughly, in portfolio alignment, stewardship, and engagement with managers and general partners.
"One area of focus will be on driving real and substantial change in how investment managers invest," the policy said. "We expect them to think deeply about all aspects of how they invest and how they engage with the companies and other entities in which they invest. We will challenge them to provide investment products that deliver on both our investment and climate change objectives. We will press them to think carefully and critically about the companies and other entities they invest in, and to justify their investments in companies with higher greenhouse gas emissions."
Asset managers will be held to reporting rules such as the U.K.'s Sustainability Disclosure Requirements, and expected to "materially reduce climate exposures," the policy said, and any climate controversial holdings must be justified.
The policy also "recognizes climate change's umbilical links to other urgent issues," including biodiversity, diversity, equity and inclusion, human rights and social issues, and supply chain management, the release said. A similar assessment will be made in 2025.
