A 30 billion-pound ($39.3 billion) U.K. pension fund has threatened to fire managers that fail to curb their exposure to climate change and position for a low-carbon economy.
Brunel Pension Partnership also plans to vote against portfolio firms’ board members or divest from those that don’t make material steps to align their business with Paris Agreement benchmarks, it said in a statement. Brunel, which manages investments for 10 local governments, said it wanted to use “its influence to challenge the asset manager industry.”
“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 degrees Celsius economy,” said Brunel Chief Investment Officer Mark Mansley. “Managers that fail to do so face the threat of having their mandates removed.”
Brunel is adding its voice to a growing chorus of financial firms saying climate inaction has become a key investing risk. In the past two months alone, the $7 trillion behemoth BlackRock Inc. said it will put climate issues at the center of its investing strategy, while Goldman Sachs Group Inc. said it aims to provide $750 billion for sustainable finance growth areas over the next decade.
“Climate change is a rapidly escalating investment issue,” said Mansley. “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.”
As part of its new policy, Brunel said it will also stress-test its portfolios under a range of climate scenarios, and will report on the proportion that are invested in the low-carbon transition.
U.K. legislation to require pension funds to state how they take account of climate change took effect last year.
–With assistance from Benjamin Robertson.