Agenda item

To receive a presentation from Brunel Pension Partnership, the pension fund’s investment pooling manager, introducing its recently published Climate Change Policy.

The Committee received a presentation from Faith Ward, Laura Hobbs and Catherine Dix, Brunel Pension Partnership, the pension fund’s LGPS investment pooling manager.  The presentation summarised Brunel’s recently launched climate change policy.

Climate change presented a systemic and material risk to the stability of every economy and country, and therefore would impact Brunel’s clients, their beneficiaries and all portfolios holdings.

Investing to support the Paris agreement goals that deliver a below 2C°temperature increase was consistent with securing long-term financial returns and aligned with the best long-term interests of their clients.

To achieve a net-zero carbon future by 2050 (or before) required systemic change in the investment industry, and equipping and empowering investors was central to this change.

Carbon was not fully priced into the costs of goods and service, and therefore the market reaction to these matters was distorted.  It was not just a supply side problem as 76% of emissions came from the demand side.

Brunel’s policy was not to have a blanket divestment from all fossil fuel companies but instead “engagement with teeth” with companies was favoured.  Divestment was part of their ‘toolkit’ but only in a targeted way.  Brunel would undertake a ‘stocktake’ of their approach in 2023.

Examples of successful engagement and investor pressure were given.  Blackrock, the world’s largest asset manager and historically not very open about their approach to climate change risks, had recently joined Climate Action 100+.  Barclays, the world’s largest financier of fossil fuels, had recently announced changes to properly assess the climate change risks of new lending, and to phase out lending to companies not aligned with the goals of the Paris climate change agreement.

Some fossil fuel companies would be part of the transition to a lower/zero carbon economy.  It was important to distinguish between ‘good’ companies, such as Repsol and Shell who were looking to engage and change, and ‘bad’ companies, such as Chevron and Exxon who, to date, were not.

The Independent Adviser supported Brunel’s belief that engagement was better than blanket divestment, and that institutional investors should persevere to deliver change.  Divestment was likely to benefit state owned suppliers such as Saudi Arabia and Russia, who could not be influenced in the same way as publicly owned companies.  Brunel had low carbon and sustainable investment products available and the Committee should consider these as part of the review of the pension fund’s investment strategy.

Concerns were raised about the level of targets and the speed by which they would be met.  Brunel clarified that their aim was to be “well below two degrees” and for this to be achieved well before 2050.  They would like to do more but they wanted to make deliverable commitments.

A member did not believe that oil companies were necessarily the best option for providing renewable sources of energy and felt that often local companies would be a better option.  Brunel replied that such community led solutions were not currently suitable investment opportunities for pension funds due to their lack of scale and return.

There was a reminder from a member that the pension fund was there to provide pensions, and, therefore, it needed to be invested appropriately to make returns sufficient to meet those obligations.

The Chairman thanked Brunel for their presentation.

Noted