ESG – News
SHAPE UP OR SHIP OUT: £30BN LGPS POOL UPS THE PRESSURE ON CLIMATE CHANGE
Brunel Pension Partnership has pledged to push for a more cli- mate-aware financial system saying it will divest from compa- nies and investment managers that fail to perform on climate issues.
As one of eight pooled Local Government Pension Scheme funds, Brunel has outlined a new five-point plan to turn up the pressure on asset managers over climate change. Brunel’s chief responsible investment officer, Faith Ward, (pictured) said: “We have a climate emergency on our hands and it would be irresponsible of us to accept the status quo. We need to systematically change the investment industry in order to keep temperature rises to well below 2°C.” Historically, Ward and her team have stressed the merits of engagement over divestment, describing the latter as the “last resort.” The move represents a toughening up of the partner- ship’s policy.
As part of the policy, Brunel engaged 130 asset managers to review 530 investment strategies from a climate perspective. Those that fail to meet its standards will face the threat of votes against the reappointment of board members, or removal from Brunel’s portfolios when it carries out a stocktake in 2022, the pool said. Investment managers will have to demonstrate reduced exposure to climate risk and effective corporate engagement that puts companies and portfolios on a trajectory to align with a 2°C economy, Brunel said.
Brunel will demand that their material holdings take steps to align their emissions with Paris benchmarks and improve their climate management quality over the next two years. In return, the pool has committed to reporting on the propor- tion of its portfolios invested in low-carbon transition and on how its portfolios align with the goals of the Paris Agreement. As of January 2020, Brunel had transitioned half of its client’s funds into pooled vehicles. This followed Greater Manchester Pension Fund (GMPF), which is part of the Northern Pool, annoucing in it’s 2019 annual report that it would have lost out on £400m of invest- ment returns if it had divested from equities in BP and Centrica over the past three years. Nevertheless, it committed to divest- ing £2.5bn of its assets as part of its low carbon strategy.
INVESTORS CRANK UP THE HEAT ON BARCLAYS OVER CLIMATE CHANGE
Barclays has become the first European bank to face concerted shareholder action over its failure to act in line with the Paris Agreement as a group of 11 institutional investors filed a cli- mate change resolution to be read at its AGM in May. The resolution, led by campaign group ShareAction and backed by Brunel Pensions Partnership, LGPS Central and the Church of England among others, calls on Barclays to gradually cease funding energy firms which are not aligned with the goals of the Paris Climate agreement. Jason Fletcher, chief investment officer for the £45bn LGPS Central pool, is one of the investors who backed the call to action. “If the resolution is successful, we look forward to continuing to engage with the Barclays board on how it implements its Paris-aligned strategy. This is in line with what we’re ultimately asking of all companies across all sectors which we invest in, namely to get on course with the Paris agreement goals,” he said. Since the signing of that pact in 2015, Barclays provided more than $85bn (£65bn) to fossil fuel companies and financed pro- jects involving tar sands and oil and gas extraction in the Arc-
tic. This is despite the bank’s climate policy claiming that it endorses the Paris Agreement.
Barclays is the first European bank to face a formal climate change resolution at its AGM. Historically, climate campaign- ers have tended to tackle energy firms directly, but the recent initiative suggests that they are starting to focus on hitting pol- luting firms where it really hurts – in their wallets. Shifting the focus to the financiers of climate pollution, Share- Action revealed that Barclays is the sixth largest financial backer of the fossil fuel industry. Indeed, it has the highest level of fossil fuel financing of any bank in Europe. With Barclays’ AGM scheduled for May, the key question is what’s the likelihood of securing shareholder approval for the resolution. Previous attempts to tackle climate change financ- ing through shareholder resolutions have had limited success. Just last year, shareholders voted down an even more moderate resolution at South Africa’s Standard Bank. Campaigners had called on the bank to publically disclose its exposure to climate risks. However, the initiative was rejected by 61% of sharehold- ers. Similar resolutions were rejected for Australian lenders Westpac and ANZ. At Barclays’ last AGM, 504 shareholders attended. 24 resolu- tions were tabled and shareholders voted in line with the board 23 times.
Issue 90 | February 2020 | portfolio institutional | 23
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