The UK pension fund Brunel will start “removing companies and investment managers that fail to perform on climate issues”, it announced on 27 January 2020. Brunel handles the investments of 10 local government pension schemes amounting to approximately £30 billion. The fund says that the financial sector “is not fit for purpose” in so far as tackling global warming is concerned and warned that they will expect businesses they invest in to do more.
“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”, Mark Mansley, Brunel’s Chief Investment Officer, said. He argued that the financial sector needs to be challenged in terms of how it “prices assets, manages risk, and benchmarks performance”. Brunel’s new policy regarding climate change and investments appears designed to do just that.
A five-point plan to build a financial system that is fit for a carbon-zero future stems from insights "gained in the course of procuring new asset managers”, says Brunel’s Chief Responsible Investment Officer Faith Ward in a statement released today.
Between now and 2022, all of Brunel's key investments must start aligning their emissions with the benchmarks set by the Paris Agreement on climate change. Ward warns that companies and investment managers which fail to perform as expected will “face the threat of votes against the re-appointment of Board members" or even "being removed from Brunel’s portfolios” altogether - after Brunel reviews the implementation of its policies in 2022.
The key objective of this policy is to fundamentally restructure the investment climate to ensure that it is “fit for purpose for a world where temperature rise needs to be kept to well below 2°C compared to pre-industrial levels”. Brunel's website says.
The Morningstar investment firm reports that climate change was "centre stage" for investors in 2019, resulting in a whopping 32% return for those firms with "sustainable investment mandates". The strongest funds with sustainable investment mandates include Pictet Global Environmental Opportunities, Schroder Global Cities RE, and Liontrust UK Ethical, which have produced returns for investors of 31.9%, 29.3% and 28.3% respectively. In 2019, 88 investors holding almost US$10 trillion in assets targeted 707 businesses "across 46 counties for not reporting their climate change, water security and deforestation data", according to the Carbon Disclosure Project (CPD). Just 100 corporations are responsible for 71% of all greenhouse gas emissions that drive global warming and climate change, the CPD said in a 2017 report.