A £30bn pool of pension funds is threatening to fire investment managers that fail to reduce their exposure to climate risk, condemning the financial system as “not fit for purpose” for addressing the issue.
In a combative new policy launched today, the Brunel Pension Partnership is demanding companies in its portfolio take steps to align their emissions with the Paris Agreement targets, and that its investment managers cut their exposure to climate risk.
Companies that do not make sufficient changes by 2022 risk Brunel voting against the re-appointment of board members or removing the firm from its portfolio, while managers who fail to make enough progress face losing their mandates, Brunel said.
“We are in a climate emergency, and we need [companies] to be acting more quickly,” Brunel chief responsible investment officer Faith Ward told City A.M.
“We are looking for a step-change from the industry and for them to really address this issue,” she added.
Announcing the new climate policy, Brunel criticised the financial sector’s “emphasis on short-term rather than long-term performance, which drives short-term thinking by investors and companies”, as well as “unwillingness by asset managers to invest in the low carbon economy”.
Blackrock recently announced that it would put environmental sustainability at the centre of its investment strategy, following sustained criticism from activists and investors that the world’s largest asset manager was failing to use its power to help tackle climate change.
Ward said Brunel “strongly welcomed” Blackrock’s announcement, and called on “other large asset managers to do likewise”.
Emma Howard Boyd, head of the Environment Agency, whose pension fund is a Brunel client, said it was important for the financial sector to “show leadership in response to the climate emergency.”
“As investors we have a responsibility to our beneficiaries to ensure the assets entrusted to us are resilient to climate risks,” Howard Boyd said.
Ward said Brunel wanted the new policy to “send a message” to its current and future asset managers.
“We really do mean it, she said. “You will be fired if we don’t feel that you’re on the same journey as us.”