2022 Responsible Investment and Stewardship Outcomes - For the year ending 31 December 2021
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2022
Responsible Investment and
Stewardship Outcomes
For the year ending 31 December 2021
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 3
Delivering stronger investment returns over the
long term, protecting our clients’ interests through
contributing to a more sustainable and resilient Executive Summary
financial system, which supports sustainable
economic growth and a thriving society.
Brunel Pension Partnership Limited (Brunel) is one of eight national
Local Government Pension Scheme (LGPS) Pools, bringing together
Leaders Net-zero 35.5%
circa £35 billion investments of 10 likeminded pension funds: Avon,
Buckinghamshire, Cornwall, Devon, Dorset, Environment Agency,
Gloucestershire, Oxfordshire, Somerset, and Wiltshire.
Recognised as leaders in by 2050, 50% carbon emission reduction in carbon intensity
We would like to acknowledge the significant support and contribution of our
investment industry intensity reduction by 2030 from 2019 baseline
clients to our work on Climate Change, Responsible Investment and Stewardship
underpinning our mutual commitment to investing for a world worth living in.
38% 1,137 50%
We believe in making long-term
sustainable investments supported by
robust and transparent processes
We are here to protect the interests of
our clients and their beneficiaries
female Boards of companies held milestones EOS engaged with at 839 50% of engagement objectives set
In collaboration with all our stakeholders in Brunel active portfolios - up from companies on Brunel’s behalf in year saw progress against one or
we are forging better futures by investing 34.4% in 2020 more milestones
for a world worth living in
27
of world’s largest banks targeted on
100% 1,322
of listed market portfolios launched company meetings at which votes
Paris alignment (17 funds) were cast
Brunel is authorised and regulated by the Financial Conduct authority as a full-service MiFID firm.
We use the name ‘Brunel’ to refer to the FCA-authorised and regulated company. Company registration number 10429110 .
Authorised and regulated by the Financial Conduct Authority No. 790168.
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 4 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 5
Message from our Chair Introduction from our CEO
It is a pleasure to introduce our Responsible Investment & Short-term progress offers hope, but medium-term progress matters
Stewardship Outcomes Report for the last year. For all those more. The publication of our third Responsible Investment and
asset owners and managers committed to Responsible Stewardship Outcomes Report edges us closer to a medium-
Investment, change must begin at home. That principle lies term assessment. It shows that we have continued to make
behind this report, now in its third year. Denise Le Gal progress across our RI themes, even as we widened our RI scope, Laura Chappell
Chair developed our approach, and launched a number of new funds. Chief Executive Officer
Brunel is a persistent, sometimes outspoken advocate for industry change
across a number of key areas of Responsible Investment. We have committed
ourselves to clear principles and to ambitious targets, and to reporting on our
success against those targets. Our Responsible Investment (RI) Investment and stewardship, however
approach is built on three pillars: to complicated in practice, ultimately Our values
The year 2020 had already shone a spotlight on some of the themes covered
integrate sustainability criteria into our reflect values that need to inform
by this report, from mental health to diversity and inclusion. The events of 2021 Responsibility
operations and investment activities; practices inside investment companies
have only intensified that focus, not simply because lockdowns returned, but We proritise our duty of
to collaborate with others across themselves. Extreme change – as we
also because it became clear that changes in attitudes to these themes would care to our stakeholders.
the industry and support effective all experienced through 2020-21 – has
persist far beyond those lockdowns. The extraordinary transformation of life during
policymaking; and to be transparent a habit of putting values to the test.
2020-21 has also enabled individuals, companies and governments to think more Courage
in our activities. These three pillars Since then, Russia’s invasion of Ukraine
deeply about systemic issues – and systemic risks. From climate change to cyber We make bold decisions
underpin our operations, providing a was an event with not only major
to labour rights, we have a historic opportunity to accelerate progress. and blaze new trails to
bedrock for our team, our clients and ethical and geopolitical resonance
All the more reason, then, to see where are we succeeding and where our managers. – but major market implications, too. achieve progress
we need to improve. We hope these pages demonstrate that our holistic For the best companies, such seismic
Fundamentally, we seek broader Partnership
approach, whereby we apply our principles across all our stakeholder changes offer a chance to interrogate
industry change through effective
relationships and all our activities, is resulting in an investment approach that is yourself and your processes. Over the We empower people
stewardship and engagement,
in line with our ambition as a company: forging better futures by investing for a reporting period, we saw the extreme through culture, community
as we believe the best change is
world worth living in. shake-up in social and working & coordination
never only a negative move. Our
practices – caused by lockdowns –
approach to RI and stewardship Passion
as an opportunity for staff to review
has always been two-pronged – not
our values statement and ensure it Our shared belief in what
simply criticising bad behaviour by
truly describes Brunel. We were very we do will always be key
companies and investors but seeking
pleased with the result and will keep to our success.
Denise Le Gal to help transform it. We are cautious
our people strategy under review as
Chair, Brunel Pension Partnership of investing in companies that do
the market evolves in 2022.
not take social and environmental
risks seriously – it also makes good Reviewing our approach also meant
fiduciary sense. But it is even better a more decisive focus on mental
to address the underlying problem, health. Internally, we reviewed
too, and investors have the power our own support mechanisms and
to change how companies operate, ensured we were talking about
especially when they work together. mental health. We tried to normalise
the subject externally, too – in an
However, it is not enough for asset
owners and managers to simply try to
change other companies. Responsible
WINNER CLIMATE RELATED
Winner:
RISK MANAGEMENT
INNOVATION
European IPE Awards 2021
PORTFOLIO CONSTRUCTION &
• Climate Related Risk Management
DIVERSIFICATION
• Innovation
• Portfolio Construction & Diversification
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 6 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 7
Contents
Op-Ed in Professional Pensions, transitioned around £4 billion of client participation at COP 26. Investing for a world Climate Change
I argued that a focus on mental assets to the new indices. Integrating
health doesn’t just make ethical Net Zero ambitions into index
But that means that our approach worth living in Page 51
must continue to evolve. In this year’s
sense for companies, but makes construction in this way was a historic
report, we cover the same themes Page 8
business sense too. achievement and demonstrates that
as before but have added a new
Other challenges were less specific to
RI ambitions can be a spur to major
one, too. Biodiversity is a theme close
Net Zero architecture:
investment innovations.
the year, reflecting systemic realities. to my own heart and one which All hands on deck Building Paris-aligned
One such focus was cost savings –
our Annual Report demonstrated
2021 was also the year that we
formally committed to achieving Net
has major implications across both
climate change and investing.
Page 12 indices
our achievements in that area. On Zero by no later than 2050, through Page 61
Evolution must happen at multiple
diversity and inclusion, we know we the Paris Aligned Investment Initiative
still have some way to go, but we – Net-Zero Asset Owner Commitment,
levels – and sometimes you need to Risk landscape –
return to first principles. Late in 2021,
were particularly proud when Helen We were also instrumental in
we began our Climate Stocktake, a CIO perspective Tax and Cost,
Price, in her role as co-Chair of the developing the toolkit, the Net Zero
Asset Owner Diversity Working Group, Investment Framework (NZIF), that
process whereby we are consulting Page 14 Transparency
with multiple stakeholders across our
launched the Diversity Charter, helps all investors reach this goal.
partnership, our industry and wider
and Fairness
with signatories representing more
The new benchmark series and NZIF society to see whether our broader
Marking progress Page 62
than £1 trillion in AUM – signatories
were just two of the reasons that our approach to climate investing is still
make a number of commitments to
work was widely recognised by the fit for purpose. Part of that process Page 16
improving, monitoring and reporting
on diversity in their companies.
broader industry. Pensions for Purpose is ensuring our approach engages Cyber
chose Brunel as winner of its Paris properly with our other RI priorities.
Another structural challenge was the Alignment Award; Environmental Biodiversity Page 64
Indeed, as the content this report
need to provide our clients with the Finance named Brunel as its asset
benefits of index investing – chiefly owner ‘Investment Team of the Year’;
highlights, RI themes can never be Page 18
treated in isolation. If investors instead
diversification and low fees – without and Brunel won in three Europe-
integrate their RI priorities, then the
Circular Economy
sacrificing our climate ambitions. wide categories at the IPE Awards in
results can be good for people,
Responsible Stewardship & Supply Chain
The dominance of indices weighted Madrid: Innovation, Climate Related
by market capitalisation provides a Risk Management, and Portfolio
planet and profits alike.
Page 26 Management
structural impediment to achieving Construction & Diversification. Page 69
this goal, but Brunel worked closely
Recognition of this kind matters to
with FTSE Russell to develop a new
series of Paris-aligned benchmarks that
Brunel because we want not merely Clients at the centre Fast Fashion
to improve our own approach
weight constituents according to a
but to change the industry – and Laura Chappell
Page 38 Conflict Minerals Semiconductor
range of key climate metrics (such as Supply Chain
achieving the latter is easier if our Chief Executive Officer
reserves) using TPI data. We have since Antimicrobial Resistance (AMR)
own approach to RI is recognised as Brunel Pension Partnership
an example to follow. The same logic Diversity, Equity
applies to Faith Ward’s high-profile and Inclusion Brunel roles and
Page 40 responsibilities
Appendix
COP 26 Meet the Team
Page 45
Human rights and
social issues
Page 46
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 8 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 9
Investing for a world
worth living in
Our partnership commitments Our priority is to manage our fiduciary and has done so in ways any amount Setting priorities
duties to our clients and embedding of training and research could
on climate change and In setting our RI priorities and formed it: the nine Local Authorities we proactively elicited the views of
responsible investment (RI) is central ever have achieved. Our learning
responsible Investment, in line to how we do that. Responsible continues, as we attempt to find
stewardship objectives, we start with and the Environmental Agency. all stakeholders. Issues raised have
with our shared values, aim our investment principles. We engage included the role of banks, the
investment is the acknowledgement ways to manage the complexities of The governance structures and
extensively with our partner clients (who circular economy and managing
to help our clients provide that the economy operates these interrelationships and translate transparency of our clients supports
are also our shareholders) as well as methane, but the most commonly-
interdependently with civil society them into frameworks that can assist the flow of information that enables
not only for their members’ our stakeholders. When Brunel says raised topics were biodiversity and
and the physical environment. Where both our own and others investment Brunel to reflect the views of our
retirement, but for the world these interdependences exist, but decision making.
that it puts clients at the centre of what
stakeholders in its priorities. For
climate change.
they will retire into. the organisation’s does, it does not do
are not acknowledged or properly example, in 2021 Brunel participated In order to engage and stimulate
Our 12 investment principles, co- so glibly. Brunel is owned and operated
considered, it can lead to the creation in employer forums, client AGMs and discussion across our stakeholder base,
created with our client partners, aim to solely for the benefit of those who
of systemic risks, with associated a range of other events by which we have used frameworks such as the
convey this commitment to evidence-
financially material impacts.
gathering, research, innovation and
The events of the last two years have collaboration that enables Brunel
accelerated our understanding of to be an effective steward of the
Brunel RI and Stewardship Priorities
the interdependencies, and systemic assets under its management and to
risks – whether we are beneficiaries, provide leadership and support to the
employers, policy makers or investors, wider industry. Top down
• Investment risks
• Client priorities
Policy
Brunel Pension Partnership Investment Principles makers and
• Long-term investors • Leadership and innovation Biodiversity regulators
• Responsible investors • Right risk for right return Circular economy and
Policy and supply chain management
• Best practice governance • Full risk evaluation regulation Reporting
• Decisions informed through experts and • Responsible stewardship Climate change Asset managers Stakeholder
knowledgeable officers and committees engagement
• Cost effective solutions Engagement
• Evidence and research at the heart of Cyber specialists Client workshops
• Transparent and accountable Best
investments practice Collaborations
Industry outreach
• Collaboration Brunel team
Diversity, equity and inclusion
Blogs, podcasts
The complete wording for these principles is available on our website.
and videos
Human rights and social issues
Stakeholder
views Tax and cost, transparency Companies
and fairness and assets
Bottom up from
Brunel portfolios
• Asset-specific risks
• Event risk
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 10 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 11
Top Long-Term Global Risks Circular economy
and supply chain
Over the next 5-10 years management
UN Sustainable Development Goals, as that recognizes that a business will A good example of this analysis is our
well as the work of the World Economic have impacts inwards (sustainability decision to prioritise banks, engaging
Forum (WEF), which produces a topics that are financially material with them directly (see case study on Human rights
number of reports, including an annual influencing enterprise value) and page 37). and social issues Cyber security
Global Risk Report1. impacts outwards (sustainability
So, how do we check we haven’t
topics that are material to the Climate change
From these discussions, Brunel’s missed anything? The whole
economy, the environment, and
Board, clients and other stakeholders organisation uses resources like the
people). This is important to Brunel as
highlighted that they would like WEF reports, daily news feeds, input
we are exposed to risks arising from
Brunel to proactively seek additional from our asset managers and other
the whole economy and from right
opportunities to both amplify and service providers. Combined with
across financial markets. Universal
increase our work on biodiversity. talking to other investors, policy
ownership2 recognises the impact one Climate action Extreme Biodiversity
Natural Human Social
Involuntary Adverse tech Geoeconomic
Geopolitical
Biodiversity was formerly a sub- makers and academics at events failure weather loss resource environmental cohesion
migration advances confrontation
resource
asset or component of our portfolios crises damage erosion contestation
theme captured under supply chain and private meetings, it equips us to
has on another asset. For example,
management. However, in light of this be aware of new and emerging risks.
flood risk in real estate is exacerbated
request, biodiversity is now a distinct The opportunity to discuss such risks
by climate change, arising from
priority area. In creating a new is a standard agenda item of both
coal-fired electricity generation. It
priority, we also took the opportunity the Brunel Investment Risk Committee
also recognises the impact to the
to update the priority area headings and the Brunel Investment Committee
economy and society more broadly. Tax and cost,
and redistribute other activities to and, at a strategic level, as part of transparency
better balance resources and reflect Another consideration is timing: are Executive Committee and Brunel and fairness
the breadth and depth of our work. there other pressures on the company Board meetings (page 38).
that mean it is likely to be more Biodiversity Diversity, equity
As illustrated in the diagram above, We have mapped our Brunel RI and inclusion
receptive to investor engagement
other inputs into setting Brunel’s priorities to the long-term risks (as
on a topic? For example, is there
RI priorities include an evaluation being long-term investors is another
policy interest, or regulator interest Economic
nvironmental
E Geopolitical
Societal
Technological
of regulations, best practice and investment principle) identified by
or wider investor interest that would
asset-specific risk (or idiosyncratic the Risk Perception Survey, 2021, Source: World Economic Forum Global Risks Report 2022
enable collaboration? All these
risk). Asset- or sector-specific risk published Global Risk Report 2022, by
factors increase the probability of a
is considered through the lens of way of illustration.
successful outcome and therefore
‘double materiality’, the concept
the allocation of time and resource.
Managing Systemic Risks
Brunel’s approach to managing systemic risk is to leverage its role in the finance system. Brunel, in partnership with its
clients, sits at the top of the investment chain. Brunel outsources the management of 100% of its AUM and specialises
in portfolio construction and risk management through the selection, appointment, and monitoring asset managers.
We work collaboratively with other investors, policy makers and regulators to build capacity to manage these risks
1
Global Risks Report 2022, 11 January 2022 - https://www.weforum.org/reports/global-risks-report-2022 and opportunities. In summary, we use our position and processes to amplify our impact in managing risks and
Brunel has used the work of Ellen Quigley (as outlined in our 2021 report) and therefore recommends: Quigley, 2020, Universal Ownership and
2
delivering of sustainable outcomes.
Systemic Risks - https://www.cambridge.org/engage/coe/article-details/5fadc442ad40b800113d6637
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 12 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 13
All hands on deck
Faith Ward was
named Personality
of the Year 2021 at
the Environmental
Finance Awards
Brunel received the
Pensions for Purpose
Faith Ward formally received the award Paris Alignment Helen Price was named
in Spring 2022 Award 2021 ICGN Rising Star 2021
Brunel has seven RI priorities, each The work is not limited to our specialist arrangements and risk management It is recommended that all staff have Resourcing corporate engagement
of which comes with a set of RI team (see back cover) – the whole processes (Compliance and Risk RI or sustainability-related personal
stewardship objectives, and where of Brunel is integrally involved. Taking team); leading on cost and tax objectives, which is the central As outlined above, our approach is asset manager case studies as well
appropriate, specific targets. The the lead is the Investment team, transparency (Investment Operations component of our performance to leverage our outsourced model as those documenting our selection
priorities drive an extensive and which is responsible for the selection, team), leading client engagement management process. Brunel to maximise impact. As such, our processes aim to provide evidence
demanding programme of work. appointment, and monitoring of asset (Client Relationship team) or ensuring does not routinely use bonuses or first line of asset-level engagement of this in practice. Our second line is
managers, including all the associated that, in our own operations, we variable pay as part of its approach and stewardship is via our appointed a specialist engagement provider,
Brunel’s philosophy of working in asset managers. As Brunel outsources who provides additional engagement
ESG risks and opportunities. Although practice what we preach (HR & to remuneration. We do, however,
partnership is illustrated through its 100% of day-to-day asset selection resource and executes our voting
all our team members already have Finance teams)– see Walk the Talk. have capacity to use small, one-off
approach to responsible investment to asset managers, it is essential that intentions across our listed active
strong ESG knowledge, many have recognition awards to acknowledge
and through its delivery of its Staff ranked our culture, mission, ESG risk integration and stewardship fund assets (segregated). Finally, our
chosen to enhance this knowledge exceptional efforts by an individual
stewardship objectives. Brunel expects values and commitment to capabilities are assessed as part third line is the internal team; working
through the Chartered Financial or team, which could include
all its clients, staff, asset managers, responsible investment as their top of appointment and monitoring directly, but often collaboratively,
Institute’s (CFA) UK ESG and Climate stewardship and investment activities.
and service providers to embrace and reason for joining the organisation3. processes, and that it is reflected in Brunel will undertake direct
modules. Others have attended
deliver on their responsible investment This deeply embedded commitment our internal policies. Our inclusion of engagement with businesses.
thematic training, including at Alliance
and stewardship priorities and focuses. to responsible investment and to
Bernstein’s Climate Change and
We expand on how we convey and making long-term, sustainable
Investment Academy, in partnership
monitor expectations to managers, investments, supported by robust
with The Earth Institute, Columbia
and to service and data providers and transparent processes, Walking the Talk
University (where their study involves six
throughout this report, but this is only emanates from Brunel’s Board. The
modules of training with live Q&A). Our Responsible Investment Policy commits Brunel to • Brunel website updated with Conflicts of Interest
possible through the dedication and Board approves and is collectively
integrate RI into everything we do, including our own Statement, updated Modern Human Slavery
commitment of our own team. All Brunel teams are vital to delivering accountable for Brunel RI, Climate
operations. There are examples of this throughout the statement
our stewardship objectives, whether and Stewardship Policies. More details
report but, more broadly, we work in partnership with
those teams are embedding RI on roles, responsibilities and assurance • Enhanced cost transparency
Future-Fit, a-not-for-profit organisation that aims to
and climate into our contractual is detailed on page 75.
encourage business alignment with the Sustainable • Enhanced cyber security
3
Staff Survey 2021 Development Goals (SDGs).
Postponed action
Key areas of progress in 2021
One of the priority areas we did not progress in 2021
• Sustainable Transport to work – Electric Vehicle scheme was the use of offsets for our residual operational carbon
emissions. This was postponed due to it being a lower
• Modern Human Slavery - minimum standard for due
priority given office closures and the lack of travel due to
diligence included in outsourcing policy
Covid restrictions. It is an area we will be picking up in 2022.
• New office energy supplier with enhanced green
Next steps
credentials. Brunel’s electricity is still from 100%
renewable sources. • Exploring ways to manage our direct climate impacts
and, where necessary, the use of carbon offsets
• Office waste management - efforts to reduce waste
to landfill included a food waste service, adding to • Exploring ways in which we can enhance our own
our existing recycling sorting bins. diversity and potentially becoming National Living
Wage-certified
Brunel has been fortunate to be recognised for its achievements in several areas, quite often having been nominated by a third party.
Brunel does not pay to participate in any awards and does not routinely attend events that are solely for the purpose of collecting such an award.
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 14 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 15
Risk landscape – CIO perspective Breakdown of Brunel Assets Under Management
6% 3% A
ctive equities
1% A
ctive fixed income
1% Infrastructure
5% Other
Passive equities
Passive fixed income
As at 31
Private Debt
Across 2021, there was continued economic and asset price recovery 22% December 2021 41%
Private Equity
from the bottom of the COVID-induced decline of March 2020. Property
David Vickers Secured Income
Markets had already quickly recovered due to the extraordinary 6%
CIO
fiscal and monetary response of governments and central 1% 16%
banks around the world. Further momentum was added by
Biden’s inauguration at the start of the year and by Janet Yellen,
appointed as Biden’s Secretary of the Treasury, making the case
for more fiscal stimulus.
undergo profound systems change, in 2019, but we will also be seeking general infrastructure. Private Debt
which requires not just the building of to build on our momentum and Cycle II has a growing weighting in
renewable sources of energy, but of leadership and update our policy to ESG-incentivised loans, whereby the
the full infrastructure that would be consider the huge strides the scientific, borrower can reduce the debt cost
needed to support it. Storage is a key academic and investment industries by meeting a pre-defined set of ESG
What kept risk markets moving point of coming to an end. What is and Meituan, as well as the private missing component here. have made over the last year. criteria. Secured Income cycle I has
upwards after that was the success of new and has caught policy makers off education sector, whose business a 27% allocation to the Greencoat
Sadly, it is also clear that we cannot However, our approach to Responsible
the vaccination programme, which guard is that the “transitory” factors model was upended under the Renewable Income Fund – in cycle II,
undo the damage that has been done Investment does not address climate
provided investors the opportunity have in fact persisted and become sweeping reforms. Assets have that allocation rises to 40% allocation,
– we have breached many of our alone – far from it. We made significant
to believe that the world would embedded in wage negotiations repriced already in many sectors, with a similar allocation anticipated for
planetary boundaries (the safe space progress over 2021 in creating
largely be able to resume business – and so have bled though to a presenting, as some see it, a great cycle III. In short, we believe a mixed
for human development) and so we mechanisms to support improved
as usual. The announcement of a degree of permanence. Seven opportunity. However, the larger approach has the flexibility to enable
are in damage- limitation mode. As practices in both our own industry –
successful vaccine in November 2020 percent, however, is clearly not likely question in investors’ minds which the greatest impact across different
such, further investment is needed in and the companies we invest in. On
also proved to be a turning point to be the sustained level, as much of lingers is around the invest-ability of asset classes.
mitigation and adaption technologies the former, the publication of a new
within asset classes. It set the tone for today’s figure comprises the surge in China, and whether a pivot towards a to cope with the changes that are Asset Owner Diversity Charter – and its Looking forward, 2022 will bring its
2021as hitherto unloved companies demand for goods at a time when policy of common prosperity weakens upon us. Even under a successful adoption by investors with combined own challenges; first and foremost
caught in Covid’s cross hairs rallied supply chains are still not fully repaired the case particularly for Western programme, however, climate change AUM of more than £1 trillion – was a the ongoing fallout from Russia’s
aggressively and growth-orientated following global lockdowns and a capital that often does not have the will still rise by at 1.5 degrees. Brunel’s particularly significant example of our invasion of Ukraine. Other issues that
winners (like Zoom) that saw us all retrenchment in the labour force. In same right afforded to it that local own approach will continue to provide impact. As an investor, then, we target already loomed large at the end of
through lockdown began to stall. early 2022, markets were anticipating capital does. capital to those areas which we feel positive impact – just not always within 2021 are likely to become yet greater
Bond markets also began to sell off as rate rises from the Federal Reserve are increasingly necessary and much the technical constraints imposed by challenges as a result of the invasion
COP 26 in Glasgow loomed large over
investors grappled with a resumption of over the remainder of the year. less overcrowded than the more the “impact investing” badge. Across and ensuing sanctions: growth
the year and, whilst the main actors
economic activity, buoyed further by traditional renewables projects. The our private markets portfolios, we are certainly looks to have peaked and
Politics again encroached on were governments, the policies and
the significant amounts of dry powder latter have suffered compressed returns finding the best investments away interest rate rises are forecasted to
markets in 2021; China was a agreements clearly have a bearing
built up by corporates and consumers. due to demand, while rising merchant from primary renewable projects and come through quicker than was the
weak spot against a backdrop of on the investment opportunities that
All of this, against the backdrop of increasing government intervention present themselves both directly in pricing risk is ultimately changing the in distribution and storage and other case even six months ago, as transitory
hugely supportive monetary policy, and the potential issue of systemic risk our private market franchise and, profile of certain projects. parts of the supply network – these will inflation pressures linger and perhaps
with rates near zero and the world as it related to the Chinese property indirectly, though the listed companies be essential if we are to decarbonise become embedded in expectations.
In the listed markets space, we
awash with excess cash looking for a market. The intervention arguably we own. Whilst the collective outcome the real economy.
launched Paris-aligned indices with Certainly, wages look set to rise. This
home, meant that Inflation became started with regulators halting the wasn’t the game-changing immediate FTSE for use where clients wanted For example, our Renewable raises the spectre of a policy mistake
the word du jour and continues $37bn IPO of Ant Group, Alibaba’s course correction that is arguably to continue to be passive, but also Infrastructure Cycle II is entirely from central governments arguably at
to be the issue that investors and fintech arm, but persisted with warranted, I do believe that we have meet their Net Zero pledges. The invested in renewable energy time when valuations a finely poised
policymakers are grappling with other changes and probes aimed good momentum which will be built in methodologies and research behind infrastructure – generation, and perspective returns already lower.
today. Indeed, at time of writing, at monopolistic behaviour, data in COP 27 and have moved past the these indices will form the foundations transmission, distribution, storage We could therefore see a return of
inflation in the US was reported to be privacy issues and wealth distribution tipping point. for our continued discussions around and energy efficiency. General volatility both at the headline level
7% over 2021. under the banner of the common our own climate change policy. We Infrastructure cycle III will allocate and under the surface as sectors
What does this mean for
prosperity drive. will be undertaking a climate stocktake 30-60% of AUM to low carbon, energy- begin to price in the probability of a
I wrote extensively about inflation the investment landscape?
in last year’s report as I felt that Many sectors were snared under this Fundamentally, it provides for further this year in order to measure what we transition, renewable energy and new inflationary paradigm.
the disinflationary trends we had change of tack, including hitherto structure and conviction around have been able to achieve against the renewable-enabling technologies –
witnessed for decades were on the national champions like Tencent our approach. The world needs to very ambitious goals we set ourselves and 40-70% to climate solutions and
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 16 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 17
Marking progress
Launched risk
Founding of Brunel management framework
Pension Partnership Published Climate
Became member of IIGCC Position Statement
Signed up to Taskforce for Reached 50% mark for
transition of client assets Committed to Net Zero
Financial-Related Disclosures
Launched Low Volatility, Emerging Completed launch of 17 listed portfolios
Markets & High Alpha portfolios with Global Core Equities, Sterling Corporate
Joined Investor Advisory Group
Bond, Multi Asset Credit, 2 x Passive Gilts 2030 target
of the Sustainability Accounting Won multiple awards across investment, 50% reduction in carbon intensity
Standards Board innovation, portfolios, climate risk
management (IPE, Environmental
Launched UK and global
Finance, Pensions for Purpose)
property portfolios
Co-launched FTSE Paris-aligned
benchmarks with £3bn transition
Co-launched Asset Owner Diversity Charter
2018 2019 Represented views at COP 26
2017 2020
2021
2022
Published Climate Change Policy 2030 2050
Launched Diversifying Returns, Small
Cap, Sustainable Equities portfolios
Received FCA approval
and risk management framework
First LGPS pool to sign UNPRI
Launched PM cycle 2 across private
Launched RI Policy and RI-focused debt, private equity, infrastructure,
Asset Management Accord secured income
Launched first 5 listed market Backed Barclays AGM climate
portfolios resolutions
Launched private markets (PM) Won European ESG and Climate Risk
cycle 1 across private equity, Mgmt. awards (IPE) and Pension Fund
Climate Stocktake 2050 target
infrastructure, secured income of 2020 (Environmental Finance) COP 27 Egypt Net Zero investment Portfolios
Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 18 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 19
Biodiversity
We seek to promote action to limit the loss of biodiversity and
increase rejuvenation to deliver a net-positive impact on
biodiversity in the opportunities in which we invest.
Biodiversity and ecosystem services amongst other commitments, more the same sector – depending on Bath University MSC Project
provide an essential life support countries, including Brazil and China, their specific products and services,
system to people and economies will join the 70 that have already and where in the world they source Last year, Brunel was invited to What are the first steps pension funds
worldwide, but they are being pledged to designate and protect supplies and operate. Brunel’s work with the University of Bath should take?
destroyed at an alarming rate. A 30 per cent of land and oceans as stewardship activities on nature and by providing a research topic for
• Which sectors should be prioritised?
global assessment of biodiversity and protected areas by 2030. This pledge biodiversity have sat under the Supply their MSC students’ postgraduate
consultancy project. The project • What challenges remain?
ecosystems provides insights into the builds on the 2020 pledge to protect Chain theme and have included work
stark reality of the impact from human 17 per cent of land and 10 per cent on deforestation, palm oil, plastics provides an opportunity for students reporting, making it challenging for a
• What are the key questions
actions. It estimates that around of the oceans.5 and water consumption. Case to increase their experience working meaningful assessment to be carried
which we should be posing to
a million species are at risk from studies have featured nature-positive with UK businesses on real world out at present. It was recommended
companies?
A study and benchmark produced problems. Given the interest from the that Brunel monitor developing
extinction in the coming decades opportunities when investing in real
by SwissRe helps to provide an Board, clients and internally, the focus There were two groups of students frameworks and initiatives; the two
and that, without action, extinctions assets (infrastructure, real estate, etc).
investment perspective, calculating area chosen was biodiversity. who undertook research which main areas being monitored are
will accelerate.4 However, given both the growing
that a fifth of countries are at risk of resulted in different perspectives being the Task Force on Nature-related
awareness of investment materiality In 2019, HM Treasury commissioned
Global policymakers and, indeed, their ecosystems collapsing and that presented. Students had six weeks to Financial Disclosures framework and
and a clear mandate from clients the Dasgupta Review, an
investors, have been slow to act. 55% of global GDP is dependent on research the topic before presenting engagement initiative NA100+7. In the
and beneficiaries to expand our work independent, global review on
The Covid pandemic, whilst acting high-functioning biodiversity and their high-level findings. A variety meantime, it was suggested Brunel
in this area, Brunel has decided to the economics of biodiversity led
as stimulus, has also aggravated ecosystem services.6 of staff, as well as all clients, were should make biodiversity a separate RI
make it a priority theme in its own by Professor Sir Partha Dasgupta,
policymakers’ capacity to negotiate invited to the presentations, providing priority, engage with asset managers
Although the problem is clear, working right. Our strategy, based on our RI Frank Ramsey, Professor Emeritus of
progress, leading to several a useful opportunity for staff across on their approach, and engage with
out where to start from an investment approach to integrate, collaborate Economics, University of Cambridge.
postponements of the UN Convention different functions to learn about companies for increased disclosure
perspective is very complex, as the and be transparent, is set out on Findings were published in February
on Biological Diversity (CBD COP15), biodiversity and the potential risks and and transparency. Brunel has
causes, impacts and risks are different page 20. 2021. They called for changes in how
which will hopefully conclude in the opportunities. The reports presented proceeded with making biodiversity a
for different companies, even within we think, act and measure economic
late summer of 2022. It is hoped that, are available on our website. separate RI priority, and our strategy
success to protect and enhance
is outlined on the following page. We
4
Global Assessment Report on Biodiversity and Ecosystem Services, Summary for Policy Makers, our prosperity and the natural world. Both groups identified that, as with
continue to engage with companies
Biodiversity is a material IPBES (2019) Grounded in a deep understanding climate change, companies are
5
UN Convention of Biological Diversity www.cbd.int/convention/ for improved disclosure.
of ecosystem processes and how exposed to physical, transition and
investment risk 6
SwissRe - Biodiversity and Ecosystems Services Index: measuring the value of nature https://
litigation risks which can cascade
www.swissre.com/institute/research/topics-and-risk-dialogues/climate-and-natural- they are affected by economic As well as providing a useful
Biodiversity is the variety of living catastrophe-risk/expertise-publication-biodiversity-and-ecosystems-services.html#/ activity, the new framework set out to institutional investors in the form kickstarter for discussions at Brunel, the
components that make up how we should account for nature of financial risks. They concluded project provided insight to students on
natural capital. It has a role in in economics and decision-making. that investors should assess their the impact the investments industry
ensuring the resilience of natural The report and other resources were exposure to, and dependency on, can have, and ignited interest in
capital assets and securing them shared with the students who were biodiversity. But they also highlighted responsible investment and accounts,
for the future. asked to explore how the findings that multiple challenges exist, such which we hope students will carry
of the report can be translated into as a lack of data and metrics, forward in their future careers. We
Its loss reduces the quantity,
investment decisions with a series inadequate biodiversity disclosure, look forward to participating in next
quality and resilience of
of questions: and geographical differences in year’s research projects.
ecosystem services and can
present risks to investors across
many sectors.
Source: UNPRI, 2021
Nature Action 100 will be a platform for investor dialogue and action on biodiversity
7Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 20 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 21
Life on Land
Banks, through their financing • Publish sectoral expectations on on biodiversity throughout their
decisions and client selection, play the management of biodiversity- operations and supply chains.
an essential role in incentivising related risks and impacts for Throughout 2021, EOS Federated
the protection and restoration of clients in high-impact sectors. Hermes (EOS) advocated for better
biodiversity, as well as mitigating and Strengthen biodiversity and public policy frameworks through their
Brunel’s Biodiversity Strategy preventing the major drivers of nature human rights safeguards in work with the Finance for Biodiversity
loss. Our engagement with banks, sectoral policies for high-impact Foundation and other collaborative
We expect our asset We expect high risk led by ShareAction, was broadened industries, including proper due initiatives. They have engaged with a
We will:
managers to: companies to: to include biodiversity. In an Investor diligence impact assessments range of companies on plastic waste,
letter to global banks ahead of for each sector. This should deforestation, and sustainable food –
To integrate Proactively identify nature- and Assess exposure to risk and Commit to having a net- COP26, 115 investors representing include a clear commitment to a few examples are outlined below.
climate-positive investment opportunities arising from positive impact on biodiversity
$4.2tn wrote to 63 banks encouraging respect Indigenous rights and Additional details on EOS’s approach
solutions biodiversity – starting with throughout their operations
them to commit to the following environmental defenders. to fast fashion can be found on
deforestation and supply chains by 2030 at
ahead of the Kunming Conference page 70. In 2022, EOS will continue
the latest • Commit to engage in the process
(CBD COP15): engagement with companies,
to develop a Taskforce on Nature-
Proactively ask managers to Identify opportunities for direct Establish governance and especially those that are involved in
• Develop and disclose a strategy Related Financial Disclosures
evidence their approach engagement with higher risk processes in place to manage the production and sale of food, on
to address the systemic risk (TNFD) and, once the new
holdings, including exposure in nature-related impacts and risk halting and reversing biodiversity loss.
posed by biodiversity loss, the disclosure framework is launched
supply chains, operations and/ Depending on the specific company
tackling of which will be critical in 2023, draw on the TNFD to
or financing context, engagement will cover
to effective climate action, a refine biodiversity strategies,
various issues, including deforestation,
just transition, and sustainable approaches, and disclosures.
Develop mechanisms to Support industry in developing Identify the potential effect regenerative agriculture, sustainable
evidence impact and report capabilities to measure, of the organisation’s impact economic wellbeing. This should
Further details on our engagement proteins, and chemical run-off
case studies and outcomes manage and report and dependencies on nature include making a commitment
with banks can be found on page 37. management.
and consequential risk and to identifying and disclosing
opportunities on the business impacts and dependencies on At the beginning of 2021, EOS
strategy and financial planning biodiversity, setting nature targets published a white paper on
that are science-based by 2024 biodiversity: Our Commitment
To collaborate Support developing industry Engage on policy to support Support capacity building at the latest, ideally as part of the to Nature. The paper outlined
thought leadership and an enabling environment for across supply chains to avoid Finance for Biodiversity Pledge expectations of sectors with
take part in collaborative businesses to avoid biodiversity negative biodiversity risks and initiative, taking the conclusions high biodiversity impacts and
engagement with risks and impacts impacts and support nature- dependencies, and an objective to
of the CBD COP process into
policymakers, companies and positive outcomes
Collaborative engagement account, and publicly reporting encourage companies to commit
businesses
with companies and businesses on progress on an annual basis. to having a net-positive impact
To be transparent Support the development and Provide case studies but Start reporting on impacts and
report against the guidance prepare for increased build capacity to increase
Pe ns ion Pa rt ne rs hi p
of the Taskforce for Nature- transparency, in line with latest transparency, in line with latest Case Study: Primark Case Study: Novartis
related Financial Disclosures best practice guidelines, such best practice guidelines, such
(TNFD) as those of the TNFD as those of the TNFD
EOS Hermes, our voting and engagement Novartis, a pharmaceutical company, are
provider, asked Primark if it had mapped its current highly dependent on nature. At their 2021
impact on biodiversity so that progress can be shareholder meeting, EOS asked the board
tracked. In 2020 Primark, Cotton Connect and the for an assessment of the company’s impacts
Cambridge Institute for Sustainability Leadership and dependencies on nature, and for a
collaborated to develop indicators to measure the commitment to having a net-positive impact
environmental impact of the Primark Sustainable on biodiversity across the full value chain.
Cotton Programme (PSCP). These metrics assess
the practices employed by PSCP farmers that
have been proven to benefit biodiversity, soil,
and water.Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 23
Deforestation
At COP 26, 141 countries committed to working • Public access to data on deforestation, forest cover,
collectively to halt and reverse forest loss and land tenure and traceability of commodity supply chains.
degradation by 2030, while delivering sustainable
Engagements were held throughout 2020 and a follow-
development and promoting an inclusive rural
up meeting was held on Friday 29 January 2021 with the
transformation. They affirmed their respective
vice president of Brazil to discuss the issue of deforestation Life on Water
commitments to sustainable land use, and to the
in the Amazon. The IPDD welcomed President Bolsonaro’s Marine ecosystems play a crucial
conservation, protection, sustainable management and
restatement of Brazil’s existing commitment to eliminate role in regulating our climate and
restoration of forests, and other terrestrial ecosystems.
illegal deforestation in the Amazon by 2030 and a providing key services, such as the
Included in the list of countries were Brazil and
reconfirmation of their commitment at COP 26. We production of oxygen and carbon
Indonesia, which are focuses for the Investor Policy
recognise that the public health emergency caused sequestration. Many sectors, such
Dialogue on Deforestation, an initiative supported by
by Covid has exacerbated the challenges facing Brazil as shipping and tourism, are highly
a membership of 51 financial institutions, including
on many fronts and put particular pressure on public reliant on the oceans. It is estimated
Brunel, with approximately US$7 trillion in assets under
finances. However it is still significant that, according to that over three billion people
management. The Brazil workstream was initiated in
data released by Brazil’s space research agency (INPE), depend on the oceans for their
June 2020 with a letter to the Brazilian government
deforestation increased in the Amazon by 22% during livelihoods and that the natural
seeking five outcomes:
the 2020-21 period, hitting its highest level in over 15 capital of our oceans is US$24tn.
• A significant reduction in deforestation rates, i.e. showing years. During the year, IPDD has scheduled a number of
credible efforts to comply with the commitment set educational calls for investors, and interest in the initiative Oceans are thought to be the
down in Brazil’s Climate Law, Article 19. has grown, with additional signatories coming on board. most biodiverse areas on earth,
Engagement in this area continues, and earlier this year estimated to contain 50-80% of the
• Enforcement of Brazil’s Forest Code. total biodiversity on the planet.
the IPDD secretariat sought proposals to support delivery
• Enhancement of the ability of Brazil’s agencies of a report which will summarise IPDD’s key objectives, However, climate change, pollution
tasked with enforcing environmental and human engagements, and activity to date. and overfishing are threatening
rights legislation to carry out their mandates habitats and species, in some cases
Deforestation is an increased area of focus for EOS in before they have been discovered.
effectively, and the withdrawal of any new laws or
engagements and voting for 2022. By 2025, the aim is to The Living Planet Index shows an
articles that may negatively impact forest protection.
publicly report credible progress on eliminating forest- average 68% fall in the population
• Prevention of fires in or near forest areas, in order to risk and agricultural commodity-driven deforestation sizes of mammals, birds, amphibians,
avoid a repetition of the 2019 fire season. impacts in investments via successful engagement. reptiles, and fish between 1970 and
2016. Protecting and conserving
the marine environment is crucial
for human life and protecting the
We voted against directors at Li Ning and WH Group for failing to address deforestation risks economy. Awareness is growing
and supported a shareholder proposal seeking a report on the soy supply chain at Bunge amongst investors, as well as
regulators. If companies fail to
address their impact, they risk
reputational damage and litigation.
Case Study: Aberdeen Standard Secured Income Portfolios Plastics pollution
With most plastic
While delivering many benefits to binding obligations, and those best
packaging used only
We hold the Aberdeen Standard Long-Lease Property There are a number of projects with tenants at various society, the plastic economy has addressed through national action
fund in the Secured Income Portfolios (both cycle 1 stages aimed at improving the energy efficiency of once, 95% of its potential many drawbacks. Tackling plastics plans or voluntary measures). However,
and 2). The manager has been working intensely on assets and the sustainability credentials of buildings. economic value (US$80 pollution will take a global approach once adopted, the resulting
delivering a real estate investment portfolio that can These range from installing solar panels to providing billion – US$120 billion) is at the UN Environment Assembly obligations will likely inform national
reach the ambitions of Net Zero Carbon status whilst electric car charging and replacing heating systems (UNEA-5) a landmark resolution was environmental laws and policies
lost annually
promoting biodiversity. with renewable energy systems. adopted to end plastic pollution and governing plastic production, use and
create an international legally-binding recycling worldwide.
The manager has engaged external consultants to Forestry has been considered as a means to offset
agreement by 2024. Endorsed by 175
help with an asset level audit and develop a detailed carbon where it is not possible to eliminate emissions. To play our role in managing the
nations, it marks one of the most
model - mapping out carbon generation at a Fund The team is very much in the exploratory fact-finding complex and widespread risks and
significant multilateral environmental
level, as well as giving advice how this can be reduced stage and is considering the use of restoring peat bogs opportunities associated with plastics
deals since the Paris Accords. The
over time. The manager has also been working with as a means to capture carbon. The manager also works pollution, we continue our active
resolution addresses the full lifecycle of
tenants by installing new software that can capture with tenants on smaller biodiversity initiatives such as membership of the Principles of
plastic, including its production and
and monitor more accurate energy usage data. having managed areas for wildlife on larger sites and Responsible Investment (PRI) Plastic
design. An intergovernmental
installing beehives where possible. Working Group. This working group
negotiating committee will begin work
consists of 29 global investors
on the draft (including any legallyBrunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 24 Brunel Pension Partnership Limited Responsible Investment and Stewardship Outcomes 25
representing US$5.9 trillion in assets.
The group has supported the 80% of tourism occurs in Case Study: Plastic Pellets
development of the plastics coastal areas
landscape series and four guides to
support investor engagement on Plastic waste is damaging to Plastic pellets are the raw materials used in a wide Loss Steering Group. The UK’s trade association for
plastic packaging with relevant wildlife and tourism. Helen Price, variety of plastic products. Pellets can be lost to the plastics companies, the British Plastics Federation
sectors. In August 2021, four Head of Stewardship, witnessed environment at every stage of the supply chain, (BPF) was also heavily involved. The investor group,
engagement guides were published including road transport, shipping, and storage. Once including Ownership Capital and the Environment
this in person when visiting Godfrey
covering petrochemicals, containers in the environment, pellets, along with other types Agency Pension Fund, funded conservation charity
Bay this summer. The image of microplastics, are known to be eaten by a range Fauna & Flora International (FFI) to act as the steering
and packaging, fast-moving consumer
goods and waste management. The captured shows a seal with a of animals including fish and seabirds, and to cause group expert on their behalf. FFI is one of the core
group will continue to enhance plastic ligature around its neck. harm. McInroy & Wood identified the lack of pellet NGO partners of the Commonwealth Clean Oceans
investor understanding of how to Sadly, the Seal Life Trust confirmed management standards and in 2018 18 investors Alliance formed to address Sustainable Development
address plastic waste and pollution that the ligature was first reported from the investor forum signed a letter calling for new Goal 14 – “Life below water”. In July 2021 the new
and support a circular economy for standards to codify best practice for plastic pellet standard – PAS 510: 2021 – was launched. For the
in 2017, four years prior! The seal
plastics by deepening the insights management. The British standards Institution agreed first time, companies can take a fully auditable and
likely did not have long left and that a standard was required and suggested that a verifiable risk-based approach to eliminating pellet loss
within the engagement guides and
exploring key areas in more detail. was unfortunately beyond help. ‘Publicly Available Specification’ (PAS) be sponsored and demonstrate compliance with best practice. The
to enable a fast-track delivery. This resulted in investors PAS is freely available and internationally applicable,
Brunel, alongside 26 international
for the first time forming a co-sponsor group to deliver making it an attractive tool for procurement teams. The
investors, joined a collaborative
the new standard, providing financial backing co-sponsors of the PAS plan to engage with portfolios
engagement led by First Sentier
to advance the development. The standard was companies to encourage adoption of the codified PAS
Investment, with support from the
developed by the BSI and Marine Scotland, acting 510 and partner only with suppliers who have made
Marine Conservation Society. Using
on behalf of the Scottish Government’s Plastic Pellet similar commitments.
our collective influence, the aim
was to engage with 18 of the largest
manufacturers of washing machines
around the world to understand what
they’re doing about microplastics
through washing machine use and to
champion technological advances
to tackle this issue. Engagement
continued in 2021 in partnership
with the UK’s Marine Conservation
Society. Some progress has been Next steps
achieved, with the first commercially- • Support developing industry
available products fitted with filtration
thought leadership on
technology now available in the UK,
with promising plans to introduce biodiversity and take part in
additional products in 2022. First collaborative engagement with
Sentier also released a report – policymakers, companies and
Microfibres: the invisible pollution businesses
from textiles – to synthesise existing
knowledge about the sources and • Continue to raise awareness
implications of microfibre pollution, and engage with companies
and to summarise possible areas of and fund managers around
action for policymakers, companies biodiversity risks
and investors to reduce microfibre
pollution. The report will be used to • Continue to engage companies
support ongoing engagement. and our fund managers around
the importance of managing
plastics pollution risks and
opportunitiesYou can also read
