A Legal Framework for Impact case study - Brunel pension Partnership

Organisation details

Name: Brunel Pension Partnership

Signatory type: Asset Owner

HQ country: UK

Brunel Pension Partnership (Brunel) is one of eight national Local Government Pension Scheme (LGPS) pools in the United Kingdom, bringing together the LGPS funds of Avon, Buckinghamshire, Cornwall, Devon, Dorset, Gloucestershire, Oxfordshire, Somerset, Wiltshire and the Environment Agency. 

Widely recognised as a global leader in responsible investment, Brunel was established to consolidate the investment of pension assets from several LGPS funds to achieve cost savings, enhance investment opportunities and improve risk management. The partnership invests in equities, fixed income and alternative assets. Brunel has its own governance structure, ensuring that investment decisions are made in the best interests of the member funds and their beneficiaries.  

Covered in this case study

1. Portfolio-level Sustainability Goal: To align 100% of AUM in material high impact sectors^[1] in developed listed equities with net zero or equivalent criteria by 2030, extending to all sectors by 2040, to ensure portfolio companies are aligned or aligning (which we define) with net zero by 2050 

2. Motivations for Setting and Pursuing the Goal: Brunel set out three reinforcing motivations: its commitment to the Paris Climate Agreement, the necessity of system change to achieve net zero by 2050, and fulfilling its fiduciary duties by managing climate change–related risks and opportunities. 

3. Actions Taken and Outcomes to Date: Actions have included implementing the Paris Aligned Investment Initiative (PAII) Net-Zero Asset Owner framework, setting specific targets for decarbonisation and alignment, engaging in policy advocacy, and prioritising investment in climate solutions. Progress has been monitored through annual reports, with a comprehensive climate stocktake undertaken in 2022 to assess delivered actions, stakeholder views and future priorities. 

4. Assessment and Disclosure: Brunel has conducted climate stocktakes to assess its achievements, stakeholder perspectives on progress to date, priorities, and updates to scientific advice and investment best practice where applicable to shape policy. Brunel has also utilised recommendations from the Taskforce for Climate-related Financial Disclosure (TCFD) to report on its approach to managing climate risk. 

In the following sections, Brunel’s approach is explained in more detail. 

Investment beliefs, strategies and policies 

Brunel set out its beliefs, strategies and policies in detail on its website. Brunel’s 12 investment principles outline its commitment to long-term responsible investment, best-practice governance, leadership and innovation, responsible stewardship and collaboration (among others). Its beliefs were drafted in consultation with all participating funds. 

Brunel benefits from expert insights and has placed evidence and research at the heart of its investment decision-making. It aims to achieve sustainable financial returns through its balanced approach to risk and return, thereby serving the best interests of its members. 

For the purposes of this case study, Brunel has referred to its Climate Change Policy 2023 – 2030.  

Brunel’s policy commits its investment portfolios to net zero emissions by 2050 and delineates the short-term actions it must take to achieve this target, including engaging with investment managers and companies, collaborating with peers, engaging policymakers and investing in solutions.  

This approach is an extension of ESG integration, considering climate change as a systemic risk in addition to individual company ESG risks. It also considers the role Brunel can play within its portfolios and the wider economy to address climate change, aiming for real-world decarbonisation outcomes. 

Investors are exposed to the risks and opportunities presented by climate change. Managing these impacts is an essential component of an investor’s fiduciary duty. 

All sectors of society must do significantly more to limit the global temperature rise to 1.5°C above pre-industrial levels. Brunel believes this calls for significant change in the shape and structure of our economy and requires it to eliminate most or all fossil fuel use and achieve a net zero carbon economy by 2050.  

Pursuing efforts to limit the temperature increase to 1.5°C is entirely consistent with securing long-term financial returns and is aligned with the best long-term interests of Brunel’s clients. For society to achieve a net zero carbon future by 2050 (or before) requires systemic change in the investment industry. Brunel believes equipping and empowering its clients (and other investors) is central to this change. 

Goal setting (investment approach) 

Brunel has made several commitments, including: 

• Overall Strategy Target: Achieve net zero financed emissions by 2050, with a goal of limiting global temperature rise to 1.5°C, in accordance with the PAII 
• Product Governance Target: Ensure that 100% of AUM in material high impact sectors1 in developed listed equities are aligned or aligning with net zero by 2030, extending to all markets by 2040 
• Decarbonisation Targets: Reduce portfolio emissions by 50% by 2030, with an implied trajectory of at least 7% per annum reduction, and set additional decarbonisation targets to cover Scope 3 targets by June 2024 
• Public Policy: Contribute to a more favourable policy environment that supports low-carbon and nature-based solutions, challenging regulatory barriers, advocating for carbon pricing and supporting the development of voluntary carbon markets (and for its sovereign debt, engaging UK sovereign debt issuance on the UK government’s net zero commitments) through policymaker engagement.  
• Systemic Change in the Investment Industry: Aim for systemic change in the investment industry to support net zero by 2050 or before and keep the increase in global temperature well below 2°C 

Actions taken (investment process)

Below, Brunel has provided some examples of asset allocation, stewardship/collaborative engagement and policy engagement in pursuit of its climate goals.

Net zero financed emissions by 2050: 

• Policy Advocacy: Promoted development of policy instruments, taxonomies, product and sector standards that limit high-carbon technologies and support investment in low-carbon, nature-based and adaptation solutions – thus, Brunel advocated for expanded mandatory reporting on climate change. 
• Asset allocation: Prioritised demonstrating alignment of its private market portfolios through enhanced reporting and disclosure to meet portfolio goals. Invested in energy and climate transition solutions. 
• Stewardship: Analysed the risk data relating to its active holdings and conducted a specific Adaptation and Climate Resilience Engagement project linked to its most vulnerable holdings. Engaged with 100% of investment managers on emissions, disclosure levels and decarbonisation targets. Undertook biodiversity footprinting at the portfolio level (in progress) and targeted engagement with specific sectors. 

Evaluation, reporting and goal revision (where applicable) (investment outcomes):

Brunel has undertaken a range of actions to evaluate and report on its goals, including: 

• Reporting: Brunel published its annual TCFD report, along with additional portfolio-by-portfolio carbon metrics reporting. It is working towards consistency with the Taskforce on Nature-related Financial Disclosures (TNFD). It is developing biodiversity footprinting to enhance our analysis and disclosure. 
• Evaluation: Brunel conducted climate stocktakes to assess delivery, stakeholder views, priorities and updates in scientific advice and best practices. For example, during the 2022 stocktake, Brunel sought client feedback on its five-point plan. It publicly reported the outcomes of the climate stocktake and plans to repeat this exercise in 2025. Its Responsible Investment & Stewardship Outcomes Report provides further transparency and assurance concerning stewardship and voting outcomes. 

Key takeaways 

Brunel believes it must take action on climate change to preserve the value of its portfolio. Brunel believes its approach has helped ensure the actions it is taking are effective, focused on real-world decarbonisation and transparent to its members. Brunel’s Climate Change Policy will guide its work on climate change for the remainder of the decade. It will regularly monitor its implementation and provide annual public reports on its effectiveness.