Why the £30bn Brunel Pension Partnership's climate pledge is so important

“Not fit for purpose,” is how the £30bn Brunell Pension Partnership described the finance sector’s response to the climate crisis, and it's hard to argue with that assessment.

One of eight pooled local authority pension scheme funds, the Partnership is proposing to do something about that, committing to use its influence to challenge the fund management industry’s terminal complacency in the face of the biggest challenge of the age.

And it goes beyond barking. The Partnership's promise has bite.

Between now and 2022, Brunel will demand that the money managers it uses demonstrate reduced exposure to climate risk and engage effectively with companies with respect to climate change.

Those that fail to do so could find themselves fired by Brunel.

Similarly, its investee companies will be told to take take steps to align with the benchmarks set by the Paris Clinate Accords and to improve their climate management quality.

Again, the refuseniks face sanctions, ranging from votes against the re-appointment of their board directors to the potential removal from Brunel’s portfolios when the partnership carries out a review of the policy’s effectiveness in 2022.

Brunel's stance matters

What it is asking the fund mangers it uses to do is something they all ought to be doing given the economic harm and the damage to investment returns that the climate crisis will inflict.

But this is an industry for which the phrase “absentee landlords” remains depressingly apt.

Despite the recent promise by BlackRock, the world’s biggest money manager, to put climate change at the centre of what it does, two recent studies have demonstrated the scale of the problem.

One was by Share Action, and one was by InfluenceMap. While they both looked at slightly different things, and used different methodologies, their conclusions were remarkably similar.

They found a stark difference in the way asset managers are reacting to the climate crisis.

European ones were found to have a reasonably good record. By contrast, their US (including BlackRock) and Asian peers were some way behind the curve.

Much of the fund management world is still treating the climate crisis like the three wise monkeys, despite the mounting evidence of the problems it is causing, and the disturbing reality that we’ve only seen the tip of the rapidly melting iceberg.

Capital is the resource businesses, financiers and fund mangers run on. If it becomes a struggle for climate laggards to get their hands on it they wil have to respond.

In investment terms, the £30bn Brunel has in its arsenal is not a lot of money. BlackRock, for example, has $7tn (£5.35tn) under managemnet. But Brunel is not alone. More and more big investors are making similar statements, adopting similar policies.

This is a movement whose time has come.