A £30bn British pension fund has threatened to sack investment managers that do not take action on the climate crisis, criticising the sector as “not fit for purpose”.
Brunel Pension Partnership, which manages pension money for nine councils in south-west England as well as for the Environment Agency, said it would review the mandates of asset managers that don’t reduce exposure to climate risk by 2022.
The Bristol-based pension fund will demand that companies in which it invests take steps to align their emissions with targets agreed at the 2015 Paris climate summit. Brunel will vote against the reappointment of board members of companies that who are not doing enough, and could also sell its stakes from 2022 onwards.
Its new policy reflects the increasing pressure on the role of the asset management sector in abetting the climate crisis. Research by InfluenceMap, a non-profit, found that the portfolios of the world’s 15 largest asset managers were overweight in polluting companies, while the largest US managers opposed the majority of climate-based shareholder votes at the companies in which they invested.
Mark Mansley, Brunel’s chief investment officer, 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.”
Brunel’s money is spread between more than 130 investment managers, some of whom control hundreds of billions or even trillions of pounds in assets. Brunel’s managers include Aberdeen Standard, Invesco, Legal & General Investment Management, Royal London Asset Management and Wellington Management.
While many asset managers have all but ignored environmental campaigners, the prospect of asset owners such as pension funds withdrawing their lucrative business has prompted some big investors to reassess their climate policies. BlackRock, the world’s largest investment manager with more than $6.9tn (£5.3tn) in assets and another manager of Brunel’s assets, last week bowed to pressure to improve its response to the climate crisis, saying it would divest from companies producing thermal coal and increasingly offer fossil fuel-free products, among other initiatives.
Brunel said it had found short-termist thinking and an unwillingness among asset managers to invest in companies pursuing low-carbon technologies, and added that risk models used by investors often relied on flawed assumptions that did not take into account climate risks.
Emma Howard Boyd, chair of the Environment Agency, said: “Now is the time for everyone in the finance sector to show leadership in response to the climate emergency.”