Posted on 02/11/2021

Brunel Pension Partnership has migrated over £ 3 billion in assets to the new FTSE Russell Paris-aligned benchmark series that they developed in coordination with FTSE Russell, the index, data and analytics provider. Five client members of the Brunel Pension Partnership have made the decision to switch from passive fund allocations to the new FTSE benchmark series.

The five client pension funds are:

Wiltshire Pension Fund
Oxfordshire Pension Fund
Environment Agency pension fund
Devon Pension Fund
Avon pension fund

Legal & General Investment Management manages the Brunel Pension Partnership passive equity funds which now adopt the new benchmarks. The Brunel Pension Partnership transition is one of the largest passive fund launches (by AUM) in LGIM’s history.

According to the Brunel Pension Partnership press release, “FTSE Russell’s Paris-aligned benchmark series not only meets the minimum requirements of the EU’s Paris-aligned benchmarks by achieving a 50% reduction in carbon emissions on a period of ten years, but goes one step further by integrating forward-looking measures and governance protections from the Transition Pathway Initiative. TPI provides assessments of how the largest and most carbon-exposed companies are managing the climate transition.

Exposure to a given component of the index increases or decreases based on several exposure targets, covering fossil fuel reserves, carbon reserves and green revenues, as well as forward alignment with the Paris targets . The indices also set a limit on the active weighting of components of the banking sector, given that finance financing of large carbon emitters is an important driver of climate change – but is poorly reported.

Importantly, the indices are also designed flexibly, to allow them to scale as the data improves, in line with research developments.

One of the main challenges facing the financial industry has been the design of benchmarks that allow passive funds to target Net Zero. 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 must act with increased urgency to ensure finance can be part of the solution to climate change. A major element of the action needed is the transition from passive funds to benchmarks aligned with Paris. Globally, passive investments topped $ 15 trillion in 2020. “