UK £30bn pension fund threatens asset managers over climate risk

Brunel Pension Partnership believes the finance sector is ‘not fit for purpose’ and wants investment managers to align their emissions with the Paris benchmarks by 2022

A £30 billion pension fund in the UK has threatened to remove companies and investment managers that fail to take action on the climate crisis.

Brunel Pension Partnership, which manages pension money on behalf of 700,000 members and 10 government bodies, said they are required to take steps to align their emissions with the Paris benchmarks and improve their quality of climate management by 2022.

The fund believes the finance sector is “not fit for purpose” and has also threatened to vote against the re-appointment of Board members who don’t take action and could also sell stakes.

Some of the challenges within the financial sector identified by Brunel include an emphasis on short term rather than long term performance, 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.

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.”

The pension fund already allocates 35% of client infrastructure portfolio investments to renewable energy funds.

Emma Howard Boyd, Chair of the Environment Agency – whose pension fund is a Brunel client – added: “Now is the time for everyone in the finance sector to show leadership in response to the climate emergency. The Environment Agency Pension Fund was one of the first pension funds to recognise the financial risks from climate change. As investors we have a responsibility to our beneficiaries to ensure the assets entrusted to us are resilient to climate risks.

“I’m delighted to join with partners across the Brunel Partnership in calling for an investment industry fit for a net zero future.”

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