Today Brunel opened the London Stock Exchange to mark its transition of more than £3 billion to the new FTSE Russell Paris-aligned benchmark series that we developed in coordination with FTSE Russell, the index, data and analytics provider.
Five client members of the Brunel Pension Partnership took the decision to switch passive fund allocations to the new series of FTSE benchmarks, which harness data across a range of climate factors to provide a climate-linked tilt exposure – and achieve Paris alignment. The five client pension funds are:
- Wiltshire Pension Fund
- Oxfordshire Pension Fund
- Environment Agency Pension Fund
- Devon Pension Fund
- Avon Pension Fund
The benchmarks form a core element of our partnership’s collective commitment and journey to Net Zero. Legal & General Investment Management manages the Brunel passive equity funds now adopting the new benchmarks; the Brunel transition is one of the largest passive fund launches (by AUM) in LGIM history.
FTSE Russell’s Paris-aligned benchmark series not only meets the minimum requirements of the EU’s Paris-aligned benchmark criteria by achieving a 50% reduction in carbon emissions over a ten-year period, but go a step further by integrating forward-looking metrics and governance protections from the Transition Pathway Initiative. TPI provides assessments of how the world’s largest and most carbon-exposed companies are managing the climate transition.
Exposure to any given index constituent rises or falls according to several exposure objectives, covering fossil fuel reserves, carbon reserves and green revenues, as well as forward-looking alignment with Paris goals. The indices also set a limit on the active weighting of banking sector constituents, given that finance’s funding of large carbon emitters is a significant factor in climate change – but is poorly reported.
Crucially, the indices are also designed flexibly, in order to enable them to evolve as data improves, in line with research developments.
Designing benchmarks that enable passive funds to target Net Zero has been one of the major challenges facing the financial sector. Brunel worked closely with FTSE Russell to support the launch of the Paris-aligned benchmark series earlier this year.
Brunel believes asset owners and asset managers need to act with added urgency to ensure finance can be part of the solution to climate change. A major element of the action needed is transitioning passive funds to Paris-aligned benchmarks. Globally, passive investments globally rose above $15 trillion in 2020.
David Cox, Head of Listed Markets, Brunel Pension Partnership, said:
“We’re delighted that our clients share the urgency of needing new climate solutions in
passive funds – and have moved so quickly to adopt the new benchmarks. Asset owners and
asset managers need to show the same ambition and urgency in harnessing the new
benchmarks to put them on the path to Net Zero.”
Faith Ward, Chief Responsible Investment Officer, Brunel Pension Partnership, said:
“The transition of £3 billion to the new Paris-aligned benchmarks is an indication of how
indices can be a major part of the solution to climate change. Crucially, these indices
harness the data we already have, including forward-looking metric, not least TPI metrics. But
they are also flexible enough to change in the future, as the data continues to improve.”
Aled Jones, Head of Sustainable Investment, EMEA, FTSE Russell, said:
“Climate benchmarks are enabling investors to efficiently allocate capital at scale to
companies that are managing the climate transition. Brunel’s decision to move £3 billion to
funds tracking FTSE Russell’s Paris aligned benchmarks sends a powerful signal to the market
that major asset owners are taking action to decarbonize portfolios. Investors are increasingly
recognising that innovative passive strategies represent an effective way to mitigate climate
risk, while also capitalising on the investment opportunities offered by the growing green
economy.”
James Sparshott, Head of Local Authorities Distribution, Legal & General Investment
Management (LGIM), said:
“We are delighted to be partnering with Brunel and FTSE Russell on the launch of their new
suite of climate benchmarks. With COP26 underway, the need to address climate change is
more prominent than ever before, and there is increasing pressure on pension schemes to
address climate risks in their investments. At LGIM, we are committed to helping our clients
with their decarbonisation goals, in line with global efforts to reach net zero by 2050. As longterm
investors we play a pivotal role, not only in decarbonising investment products on behalf
of our clients, but also in shaping the real economy transition by engaging with and holding
businesses accountable on their net zero transition plans.”
Councillor Richard Britton, Chair of the Wiltshire Pension Fund Committee, said:
“We are very aware that responding to climate change is important to our scheme
members, and we are fully committed to taking action against this risk in order to safeguard
the Fund’s investments. Working collaboratively with our partner funds and the Brunel pool,
we are proud to have helped develop a forward-thinking, cost-effective strategy to help us
meet our carbon reduction goals.”
Councillor Bob Johnston, Pension Fund Committee Chairman, Oxfordshire County Council,
said:
“The Oxfordshire Pension Fund is delighted to be part of the launch of these new
groundbreaking Paris-aligned benchmarks, which allows us to meet out climate change
commitments across the whole of our passive equity allocation. We particularly welcome the
inclusion of forward-looking factors as well as the flexibility for the index to move in line with
the latest scientific evidence and availability of new data.”
Robert Gould, Chair of Pensions Committee, Environment Agency Pension Fund, said:
“When the Environment Agency Pension Fund set its net zero target of 2045, we made Paris
aligned benchmarks a central part of that. The days of investors blindly following the market
are gone. We are delighted that Brunel has delivered our needs into such a sophisticated
index, factoring in climate solutions, year on year carbon reductions and using TPI data to
align to a low carbon economy. This index will revolutionise passive investing and we are
delighted to be part of a partnership driving such positive change in the market.”
Councillor James Morrish, Chairman of the Investment and Pensions Fund Committee, Devon Pension Fund, said:
“The Devon Fund – which provides pensions to tens of thousands individuals and their families
across the public sector – will now be tracking companies that share our ambitions to
achieve net zero carbon, as quickly as possible. It will significantly reduce the Fund’s
exposure to fossil fuel companies, such as Shell and BP, and will also support companies
transitioning their businesses in line with the objectives of the Paris Agreement on Climate
Change.”
Paul Crossley, Committee Chair Councillor, and Shaun Stephenson-McGall, Investment Panel Chair, Avon Pension Fund, said:
“Avon has made significant progress in managing the risks and opportunities presented by
climate change so far and see the new Paris-aligned benchmarks developed by the
Partnership as an essential tool in helping us to maintain momentum and continue to
demonstrate leadership at this critical time. For Avon, these strategies mark a turning point in
our approach to climate change as we move towards solutions that offer credible pathways
to net zero. It shows a clear demonstration that we take our member’s priorities seriously and
are acting accordingly to meet them.”