2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...

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2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...
2021
           Climate Change
          Action Plan Report

                Based on the recommendations of the

Full Report and updated disclosures made to supplement Brunel’s Annual
Report and Financial Statements, for the year ended 30 September 2020.
2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...
Delivering stronger investment returns over the
long term, protecting our Clients’ interests through
contributing to a more sustainable and resilient
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
circa £30 billion investments of 10 likeminded pension funds: Avon,
Buckinghamshire, Cornwall, Devon, Dorset, Environment Agency,
Gloucestershire, Oxfordshire, Somerset, and Wiltshire.

We would like to acknowledge the significant support and contribution of our
clients to our work on Climate Change, Responsible Investment and Stewardship
underpinning our mutual commitment to investing for a world worth living in.

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

In collaboration with all our stakeholders
we are forging better futures by
investing for a world worth living in

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.
2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                   3

Climate change presents an immediate, systemic
and material risk to the ecological, societal and
financial stability of every economy and country
on the planet. It has direct implications for our
Clients and their beneficiaries. It is therefore a
strategic investment priority for us.

Scientific evidence suggests                          The signatories agreed to adopt and     What is the role of
                                                      implement nationally determined         investors?
that our climate is changing
                                                      contributions (NDCs) that set out the
faster than at almost any                             actions they would take to reduce       Investors are exposed to the risks and
point in history.                                     greenhouse gas emissions. They also     opportunities presented by climate
                                                      committed to strengthen these efforts   change adaptation and mitigation.
The global temperature has
                                                      in the years ahead. Despite some        They have a critical role to play if we
already risen by approximately
                                                      progress, we are currently heading      are to successfully transition to the
1°C above pre-industrial levels. The
                                                      towards a world of 4°C of warming       low carbon economy and to ensure
rise is causing more frequent and
                                                      compared to pre-industrial levels.      that we adapt effectively to the
more extreme weather events and
                                                      This has potentially catastrophic       physical impacts of climate change.
significantly affecting rainfall and sea
                                                      implications for society and the        We are a key source of the capital
levels. It is impacting agriculture and
                                                      environment.                            required for mitigation and for
food supply, infrastructure, flooding
                                                                                              adaptation. We can ensure that the
and water supply. Those shifts are                    Governments and all sectors of          companies we invest in are resilient
leading, in their turn, to increased                  society (including individuals,         to regulatory and other changes that
migration from climate-affected                       companies, investors and public         will result from climate change. We
regions and greater conflict over                     bodies), will need to do much more      can support policy makers in taking
natural resources, such as water and                  if the global temperature rise this     action to enable the low carbon
agricultural land.                                    century is to be kept to well below     transition and effective adaptation.
                                                      2°C. The transition to the low carbon
World governments have started
                                                      economy calls for significant change
to respond. The signatories to the
                                                      in the shape and structure of our
2015 Paris Agreement committed
                                                      economy. It requires us to eliminate
to keeping the global temperature
                                                      most or all fossil fuel use, and to
rise this century to well below 2°C
                                                      achieve a net zero carbon economy
compared to pre-industrial levels,
                                                      by 2050.
and to actually aiming for just 1.5°C.
2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                  4

                                                                                          Brunel and TCFD
Task Force on Climate-related Financial                                                   Brunel committed to reporting
Disclosures (TCFD)                                                                        to the TCFD in November 2017
In April 2015, the G20 commissioned                 The TCFD recommendations are split    and has provided a summary in
the Financial Stability Board                       into 4 sections;                      each subsequent Annual Report
(FSB) to look into how public and                                                         and Financial Statements. The
                                                    Governance: how is the                TCFD recommends inclusion in an
private participants take account
                                                    organisation’s board and              organisation’s main financial filings.
of climate-related issues. The
                                                    management assessing, managing
outcome of the review was the                                                             Brunel’s year-end is 30 September,
                                                    and providing oversight of climate-
establishment of the Taskforce on                                                         but our climate metrics and
                                                    related risks and opportunities?
Climate-related Financial Disclosure                                                      targets are set and reviewed each
(TCFD). Following a consultation, the               Strategy: how do these risks impact   calendar year. Therefore, Brunel
TCFD issued recommendations for                     on the organisation’s business        has committed to supplementing
reporting to assist stakeholders in                 model?                                the summary report with this more
financial markets understand their                                                        comprehensive report in the first
                                                    Risk: what and how have risks been
climate-related financial risks and                                                       quarter of the year, in order to
                                                    identified and managed?
opportunities.                                                                            capture the most up-to-date progress
                                                    Metrics and targets: how are the
                                                                                          on each of the metrics and targets.
                                                    risks being monitored and have the
                                                    appropriate metrics and targets       Brunel is a strong advocate for
                                                    been selected?                        global mandatory disclosure to
                                                                                          TCFD. Brunel has supported the work
                                                                                          of the UK government in improving
                                                                                          climate risk disclosures, culminating
                                                                                          in the commitment to making TCFD
                                                                                          mandatory across the economy
                                   Governance                                             by 2025.

                                       Strategy

                                     Risk
                                  Management

                                         Metrics
                                           and
                                         targets
2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                         5

Governance                                                                                          Brunel Board undertook a
                                                                                                    dedicated half-day Systemic
                                                                                                    and Climate Risk Workshop in
                                                                                                    November 2020.

The Brunel Board approves and                           portfolio construction, implementation    Brunel is focused on client outcomes.
is collectively accountable for                         and overall investment decision-          The governance diagram below
Brunel’s Climate Change Strategy                        making. All members of the investment     illustrates the frequency of client
and Policy. Day-to-day operational                      team have explicit responsibility for     interactions, all of which can include
accountability sits with the Chief                      the implementation of responsible         matters relating to climate change.
Responsible Investment Officer, with                    investment (RI) principles, including     The Client RI Subgroup, which meets
oversight from the Brunel Investment                    but not limited to climate risk, within   monthly, provides an in-depth
Committee and Brunel’s Board.                           their respective roles. As such, any      opportunity for input on client needs
                                                        training needs are identified through     and expectations.
Climate risk has been identified as a
                                                        our standard appraisal and personal
principal (level 1) strategic risk to Brunel.                                                     Brunel has a dedicated Responsible
                                                        objective setting processes.
As such, the risk is owned by the Chief                                                           Investment team of three investment
Executive Officer, with oversight from                  Indeed, everyone at Brunel is             professionals who support the
Brunel’s Audit, Risk and Compliance                     responsible for addressing climate        Brunel Investment Team and lead
Committee forming part of Brunel’s                      change risks and opportunities within     on engagement and stewardship
overall strategic risk framework.                       their own work, since it is embedded      activities. For further detail of our
                                                        in our governance, operations and         Responsible Investment Strategy,
The Chief Investment Officer
                                                        investment approach, as well as in        see our annual Responsible
is responsible for ensuring the
                                                        our outreach to other investors and       Investment and Stewardship and
integration of climate change into
                                                        the local community.                      Outcomes Report.

Brunel Governance and Oversight

    Board and Sub-committees                                                                                Shareholder Group

                                                                                                                  Brunel Oversight
                                                        Board
                                                                                                                       Board
                                                                                                    5                                4+

                                                                    Audit, Risk & Compliance
        Remuneration Committee
                                                                           Committee
                                                    2                                               4

                                         Executive Committee                                                       Client Group

                                                                                                    8                                12

                                                                                                                    Responsible
           Operations                      Risk & Compliance                        Investment
                                                                                                                    Investment
           Committee                           Committee                            Committee
                                                                                                                    Sub-Group
                                   6                                     5                         12                                12

    Operational
                                                                                                              x    Numbers of
    Committees                                           Investment Risk Committee                                 meetings a year

                                                                                                    4
2021 Climate Change Action Plan Report - Based on the recommendations of the - Brunel Pension ...
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                    6

Climate Change Policy
                                                         We believe that:
Our Climate Change Policy, drafted
in collaboration with our clients,                       •	Climate change presents a systemic and material risk to the
sets out an ambitious plan to                               ecological, societal and financial stability of every economy and
address climate change across our                           country on the planet, and therefore will impact our Clients, their
investments and the wider investment                        beneficiaries and all portfolios.
industry.
                                                         •	Investing to support the Paris goals that deliver a below 2oC
Our Climate Change                                          temperature increase is entirely consistent with securing long-term
investment beliefs                                          financial returns and is aligned with the best long-term interests of
                                                            our Clients.
We believe it is our fiduciary duty
to manage climate change and                             •	For society to achieve a net zero carbon future by 2050 (or
associated risks and opportunities                          before) requires systemic change in the investment industry, and
within our investment portfolios.                           equipping and empowering our Clients (and other investors) is
As investment markets are not                               central to this change.
properly pricing in climate-related
                                                         Given our strengths and our position in the market, we therefore
risks. Climate-related risks impact all
                                                         believe that the key objective of our climate policy is to systematically
investment strategies and mandates,
                                                         change the investment industry so that it is fit for purpose for a world
whether active or passive, and across
                                                         where temperature rise needs to be kept to well below 2°C compared
both long- and short-time horizons.
                                                         to pre-industrial levels.
Our holistic approach to managing
this risk is outlined in our Climate
Change Policy but is summarised in
the following sections.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                       7

Strategy and Risk Management

We published our ambitious Climate Change Policy in January 2020 in collaboration with
clients and after extensive industry engagement. The policy sets out a five-point plan to build
a financial system which is fit for a low carbon future. The policy sets out the strategy and
plan of action, detailing objectives with key performance indicators. Where appropriate, it
includes targets.
Brunel’s experience and expertise in                  In addition to acknowledging the                          •	Failure to provide portfolios that
managing climate change-related                       catastrophic impact of governments                           effectively respond to climate
risks and opportunities, our scale,                   and society not acting on their                              risk in the context of client
our influence, and the strength and                   awareness of climate risk, we have                           investment objectives, potentially
support of our clients provide us with                identified the principal sources of                          undermining the objectives
a unique position in the investment                   strategic risk that are within Brunel’s                      of pooling
industry. If we do not have a financial               direct sphere of influence;
                                                                                                                •	Failure to ensure operational
system that is fit for purpose, we will
                                                      •	Failure to manage climate risk                            resilience.
not be able to respond effectively to
                                                         through poor awareness and
climate change. We can take some                                                                                •	Failure to retain clients, attract
                                                         responsiveness over how climate
specific actions, mitigating risk at the                                                                           talent and positively impact
                                                         risks will impact on markets,
margin, but the impact will be limited                                                                             industry behaviour, due to
                                                         our operations, managers and
without wider change.                                                                                              mismanagement of all the
                                                         portfolios and by extension our
                                                                                                                   above risks.
Our priority to catalyse change in the                   clients (see diagram on page 8)
financial system at scale therefore                                                                             For each of the strategic risks, the
                                                      •	Failure to anticipate and effectively
looks not only to our own efforts, but                                                                          Executive Committee has identified
                                                         manage changes in the market in
to partnership with others, and to                                                                              key performance indicators which
                                                         terms of regulation, disruption, best
enabling our clients to be agents of                                                                            are tracked and reported regularly.
                                                         practice, innovation and demand -
change too.
                                                         both top-down in terms of product
We have committed to working across                      governance and bottom-up in
five key areas (see right), which guide                  terms of the impact on individual
our work on climate change. We                           asset managers and investments
report on the progress of this work and
associated targets in our Stewardship
and Outcomes report, available on                                                                                           Designing
                                                                            Making
our website.                                                                                                                 climate
                                                                            markets
                                                                             work                                           transition
                                                                                                                            solutions
                                                                                                                 Pro
                                                                                                    licy            du
                                                                                                   o
                                                                                                          ATE CHA
                                                                                             P

                                                                                                                 N
                                                                                                                         ct

                                                                                                       LIM
                                                                                                                           s
                                                                                                                    G
                                                                                                   C

                                                                                                       Systemic
                                                                                                                     E

                                                                                                     change in the
                                                                                    P e rs u a s

                                                                                                      investment
                                                                                                                            li o s

                                                           Convincing                                   industry                      Investing
                                                                                                                          rtf o

                                                            others to                                                                  where it
                                                                                                                         Po
                                                                                        ion

                                                            change                                                                     matters
                                                                                                    Po
                                                                                                         sitive Impact

                                                                                                       Delivering &
                                                                                                       evidencing
                                                                                                        progress
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                      8

Climate - Related Risk, Opportunities and Financial Impact

 Transition Risks                                                                                            Opportunites
                                                       Risks                        Opportunities
    Policy and legal                                                                                           Resource Efficiency

    Technology                                                                                                 Energy Source

    Market                                                        Strategic Planning                           Products/Services
                                                                  Risk Management
    Reputation                                                                                                 Markets
 Physical Risks                                                                                                Resiliance
    Acute                                                          Financial Impact

    Chronic

    Revenues                                                                                                   Assets & Liabilities
                                            Income                      Cash Flow           Balance
    Expenditures                           Statement                    Statement            Sheet             Capital & Financing

Source: Recommendations of the Task Force on Climate-related Financial Disclosures, TCFD

Portfolio climate-related risks
The greatest impact to Brunel from                    Responsible Investment team. Reports      to be able to justify any climate-
climate risks is to our investment                    are submitted in rotation to the Brunel   controversial holding. If investment
portfolios. The performance of our                    Investment Committee, which meets         managers are not able to robustly
portfolios is directly linked to the value            at least monthly. In addition, the        and credibly explain their investment
of the underlying assets, which are                   Brunel Investment Risk Committee          strategies and how they have
increasingly impacted by climate-                     conducts a quarterly review of the        integrated climate risk, we will look
related risks and opportunities.                      carbon metrics, as well as exposure       to replace them with investment
                                                      to other environmental, social and        managers that do. We also consider
Managing climate-related risks
                                                      governance risks.                         the risk that our investment managers’
and opportunities and aligning our
                                                                                                engagement with companies is
investment management to Brunel’s                     We ensure that our portfolios are well-
                                                                                                ineffective i.e. their efforts do not
climate change ambitions, are key                     diversified, and that our managers
                                                                                                lead corporate strategies to realign
considerations when appointing                        have a deep understanding of both
                                                                                                themselves with the transition to
third party managers. They are                        the companies or assets in which
                                                                                                a 2°C or below economy. Where
embedded into the selection and                       they invest and the risks to which they
                                                                                                this is indeed a problem, we will
review processes for every manager                    are exposed.
                                                                                                consider whether we should remove
and the associated due diligence.
                                                      While we do not instruct managers         certain investment managers and/or
Managers are formally reviewed on
                                                      to exclude certain stocks, we expect      introduce specific exclusion criteria to
an annual basis. Quarterly monitoring
                                                      their portfolios to display low climate   be applied to companies.
is undertaken by Brunel’s portfolio
                                                      exposures, and for the managers
managers, with support from the
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                                                                                                                                                                                                                               9

Case Study: Portfolio Management

Engaging with fund managers on portfolio construction
In 2019, we were searching for investment managers                                                                                                                                       When we analysed the prospective manager’s
for a Global High Alpha strategy. Essentially this                                                                                                                                       holdings, we found that 70% of the carbon intensity
involved finding a blend of asset managers allowing                                                                                                                                      was attributable to a single holding – LafargeHolcim,
us to balance risk through using a mix of style biases.                                                                                                                                  one of the world’s largest cement producers. We
The selection of managers is shown in the figure below,                                                                                                                                  used TPI data as part of this analysis and found
and the managers chosen are circled.                                                                                                                                                     that LafargeHolcim was a Level 4 performer on
                                                                                                                                                                                         management quality.
As can be seen, the carbon footprint of most was
significantly below the reference benchmark.                                                                                                                                             While the company was not 2°C aligned, it had
The exception was in value; this is a particularly                                                                                                                                       a strategy that would see it aligned with 2°C. We
challenging category from a climate change                                                                                                                                               discussed this holding with the manager and were
perspective. Most carbon intensive sectors often                                                                                                                                         reassured that it was both aware of the climate-
trigger the features sought by value managers and                                                                                                                                        related risks associated with LafargeHolcim and
they currently tend to have a higher than standard                                                                                                                                       the cement sector and was also aware of Lafarge’s
market benchmark carbon intensity.                                                                                                                                                       strategy for managing these risks. It is also relevant
                                                                                                                                                                                         to note that LafargeHolcim subsequently had some
                                                                                                                                                                                         slippage in its performance and in its targets, and both
                                                                                                                                                                                         we and our investment manager are engaging with
                                                                                                                                                                                         them on this issue.

           450

           400

           350

           300
tCO2e/£m

           250

           200

           150

           100

            50
                             1
             0
                 Benchmark

                                 (Selected)

                                              Growth 2

                                                         (Selected)

                                                                            Cyclical 1

                                                                                               Cyclical 2

                                                                                                                  Cyclical 3

                                                                                                                                     Cyclical 4

                                                                                                                                                       (Selected)

                                                                                                                                                                       Defensive 2

                                                                                                                                                                                        Defensive 3

                                                                                                                                                                                                      Defensive 1

                                                                                                                                                                                                                    Defensive 2

                                                                                                                                                                                                                                  Value Quality 1

                                                                                                                                                                                                                                                    Value Quality 2

                                                                                                                                                                                                                                                                          (Selected)

                                                                                                                                                                                                                                                                                       Value Deep 2

                                                                                                                                                                                                                                                                                                      Momentum 1

                                                                                                                                                                                                                                                                                                                   Momentum 2

                                                                                                                                                                                                                                                                                                                                Style Blend 1

                                                                                                                                                                                                                                                                                                                                                   (Selected)
                                  Growth 1

                                                          Growth 3

                                                                      Quality Growth

                                                                                         Quality Growth

                                                                                                            Quality Growth

                                                                                                                               Quality Growth

                                                                                                                                                  Quality Growth
                                                                                                                                                    Defensive 1

                                                                                                                                                                    Quality Growth

                                                                                                                                                                                     Quality Growth

                                                                                                                                                                                                         Quality

                                                                                                                                                                                                                       Quality

                                                                                                                                                                                                                                                                      Value Deep 1

                                                                                                                                                                                                                                                                                                                                                Style Blend 2

                             1
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                      10

We have, however, been clear that, as                 All of our active portfolios are less       Whilst wind, solar and biomass
part of our climate stocktake in 2022,                carbon intensive than their respective      generation are very much part of the
we will review the responsiveness                     benchmarks (see our Carbon Metrics          solution to tackle climate change
of companies to managing climate                      Report for more detail). We have            and move to a low carbon future,
risk and will consider exclusions                     launched a specific Passive Low             these investments are not without
where a company poses a long-term                     Carbon Equities Portfolio for clients       issues. Like any other real assets,
financial risk.                                       wishing to have passive exposure to         they are at risk during the transition
                                                      global equities but with a significantly    phase. Our due diligence extends
We provide a quarterly report to
                                                      lower exposure to carbon emissions          to the full life cycle of these assets,
clients and the general public that
                                                      and fossil fuel reserves. We also           including which Original Equipment
covers stewardship actions and
                                                      launched an active Sustainable              Manufacturers (OEM) they use.
carbon metrics, including emissions
                                                      Equities Portfolio that uses strategy
intensity and fossil fuel exposure.                                                               Renewable energy investments are
                                                      considerations of environmental
allow the regular review of climate-                                                              a core component in our private
                                                      and social sustainability in order
related financial risks. We provide an                                                            market investments, representing
                                                      to identify investment themes that
overview of all portfolios to the Board                                                           in excess of 35% of cycle 1
                                                      contribute to society’s sustainable
and Brunel Oversight Board (clients                                                               commitments and at least 50% of
                                                      development.
and stakeholders). We also deliver                                                                cycle 2 commitments within our
detailed public carbon metrics                        In addition to our listed portfolios, we    infrastructure portfolios.
reports for each client and each                      also provide private market portfolios,
                                                                                                  Kern County, California: Springbok is
Brunel portfolio - much of these is also              including an infrastructure portfolio
                                                                                                  a 448 Megawatt solar development
contained in this report.                             with a skew towards renewable
                                                                                                  in Kern County California, one of the
                                                      technologies and sustainable
Portfolios: Climate-related                                                                       largest solar developments in the
                                                      infrastructure. Climate risk, in terms
opportunities                                                                                     world. The fund is invested, through
                                                      of both transition and physical risks, is
                                                                                                  Cycle 1, in the development through
There are significant opportunities for               fully embedded into the approach of
                                                                                                  the Capital Dynamics Clean Energy
investing in companies and assets                     our private markets team. The risks are
                                                                                                  Infrastructure VII-A fund)
that may benefit as we transition to a                managed to maximise effectiveness
low carbon future.                                    in each of the strategies but are also
                                                      appropriate for the level of control
We work with clients to construct
                                                      we can exercise in different vehicles.
portfolios that meet their specific
                                                      The private market portfolios are also
goals around investing in lower-
                                                      the area where Brunel has identified
carbon products and climate
                                                      significant potential for investing in
change opportunities.
                                                      climate solutions.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                         11

Physical and adaptation risk                          Scenario Analysis
and opportunity                                       We recognise that scenario analysis          against three Bank of England
During 2020, we have been exploring                   is an important tool in assessing            climate scenarios, using a free, open
data and analytical provider                          what impact climate change may               source PACTA tool. This stress testing is
options to assist in our oversight of                 have on our investment portfolios.           an initial step in the development of
physical and adaptation risks. Whilst                 We compare the equity portfolios             our climate scenario analysis work.
the solutions were excellent, they
were designed for those directly
managing assets and were, as                              Scenario A - Temperatures are below 2°C by 2100
a result, quite expensive; but we                         There is a sudden disorderly transition.
are seeking to evaluate a broad
range of assets. Although we do                           Scenario B - Temperatures are well below 2°C by 2100
not have carbon footprinting-style                        Long-term orderly transition that is broadly in line with the Paris
data, we have nonetheless been
                                                          Agreement.
challenging managers on physical
and adaptation risks across our
                                                          Scenario C – Temperatures exceed 4°C by 2100
portfolios. The level of integration into
due diligence is highest in our private                   A continuation of current trends with no transition.
market portfolios, where there
                                                          For more information on the assumptions underlying each of the
are also investment opportunities.
                                                          scenarios please see the Bank of England’s General Stress Test
We will continue to persevere to
                                                          Methodology document.
find a solution to provide a more
quantitative evaluation of risk
during 2021.                                          Since May 2019, we have been on              Framework methodology. We will be
                                                      the steering committee of the IIGCC’s        actively involved in the next phase
                                                      Paris Aligned Initiative (PAII) looking to   of this initiative, which will expand to
                                                      establish the pathways, methods and          other asset classes.
                                                      approaches to creating Paris-aligned
                                                                                                   We are aware that data and
                                                      portfolios. As part of this project, we
                                                                                                   methodologies around climate
                                                      submitted subsets of portfolio data
                                                                                                   scenario analysis are expanding
                                                      to be run through a financial climate
                                                                                                   rapidly. As a next step to enhancing
                                                      model to establish some of the
                                                                                                   our climate scenario analysis work, we
                                                      possible financial implications under
                                                                                                   are in discussions with different service
                                                      different climate change scenarios.
                                                                                                   providers to consider undertaking
                                                      We submitted a passive benchmark
                                                                                                   scenario analysis of both our listed
                                                      portfolio, a ‘current’ portfolio and a
                                                                                                   market and private market portfolios.
                                                      ‘hypothetical Paris aligned’ portfolio.
                                                                                                   In addition to the work we carry
                                                      This scenario analysis looked
                                                                                                   out on our own portfolios, we ask
                                                      specifically at asset-side changes,
                                                                                                   our asset managers to provide any
                                                      including earnings impairments as
                                                                                                   climate scenario work undertaken,
                                                      a result of transition policies and
                                                                                                   as well as carbon footprint data. We
                                                      demand changes. Whilst modelling
                                                                                                   use this in conjunction with our own
                                                      outputs can be uncertain, this work
                                                                                                   internal analysis to assess the strategy
                                                      helped us deepen our understanding
                                                                                                   and any given manager’s approach
                                                      and shape the Net Zero Investment
                                                                                                   to climate risk.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                         12

Using climate scenarios to                            Benchmarking is sector-specific and          Despite industry progress, much more
evaluate company level                                based on emissions intensity (e.g. for       is needed before we can consider
transition risk                                       electricity utilities, it is tonnes of CO2   there to be a comprehensive climate
                                                      per MWh electricity generated).              change policy framework in place. In
The Transition Pathway Initiative                                                                  the short to medium term, we believe
(TPI) is discussed in more depth                      Further details on sectoral
                                                                                                   that there are three priority areas for
below, linked to some of the                          methodologies can be found on
                                                                                                   action:
metrics and targets. The initiative                   the publications section of the TPI
assesses companies’ preparedness                      website.                                     •   A meaningful price on carbon
for the transition to a low carbon                    Stewardship and our approach                 •	Mandatory climate change
economy. The TPI tools allows us to                   to public policy                                reporting
evaluate how companies’ carbon
performance compares – both now                       Engagement with companies,                   •	Addressing regulatory barriers to
and in the future - to the international              fund managers and policy makers                 progress
targets and national pledges made                     forms a key part of our approach             Our approach to policy and our
as part of the Paris Agreement.                       to managing climate change risks.            policy advocacy objectives can be
                                                      Engagement implementation is                 found in our Climate Change Policy.
Companies’ carbon performance                         undertaken by our fund managers,
is assessed using the modelling                       our dedicated engagement provider            For further details of our approach
conducted by the International Energy                 EOS at Federated Hermes, and via             to stewardship, see our Responsible
Agency (IEA) for its biennial Energy                  collaborative forums such as the             Stewardship Policy Statement.
Technology Perspectives report. This                  UN PRI, IIGCC and Climate Action
modelling is used to translate emissions              100+. We actively participate
targets made at the international level               and, where appropriate, provide
into sectoral benchmarks, enabling                    leadership for investor collaboration
comparison with the performance                       initiatives, in particular the Transition
of individual companies. This                         Pathway Initiative (TPI), Institutional
framework is known as the Sectoral                    Investors Group on Climate Change
Decarbonization Approach.                             (IIGCC), the Principles for Responsible
TPI uses three benchmark scenarios,                   Investment (PRI).
which in most sectors are:                            We seek to undertake direct
•	Paris Pledges, consistent with                     engagements where we feel this will
   emissions reductions pledged                       add value. For example, we co-filed
   by countries as part of the Paris                  a shareholder resolution at Barclays
   Agreement (i.e. NDCs)                              on the bank’s approach to fossil fuel
                                                      lending. We report on the outcomes
•	2ºC, consistent with the overall
                                                      of our engagement to clients
   aim of the Paris Agreement, albeit
                                                      each quarter, and annually within
   at the low end of the range of
                                                      our Responsible Investment and
   ambition
                                                      Stewardship Outcomes Report.
•	Below 2ºC, consistent with a more
   ambitious interpretation of the
   Paris Agreement’s overall aim
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                     13

Case Study: Portfolio Management

Engaging with fund managers on carbon intensive holdings
As part of our review of the holdings in one of                             Our review of the companies’ reporting confirmed
our global equity portfolios, we noted that the                             these differences. Company 1 reported all of its Scope
portfolio had holdings in two companies exposed to                          1, 2 and 3 emissions and had set targets on reductions.
extractive revenues.                                                        It was assessed as Level 4 by TPI. While Company
                                                                            2 acknowledged climate change as a risk to the
Our analysis suggested that the companies were
                                                                            business and had a climate change policy, it had yet
quite different in their strategic approaches to climate
                                                                            to report on its Scope 2 greenhouse gas emissions. It
change. Over half of Company 1’s revenues were from
                                                                            was only assessed as Level 2 by TPI.
oil products and a quarter from renewable sources
(its diesel product which could be made from raw                            Using the insights from our analysis and from TPI,
materials such as rapeseed oil, rape oil or soybean).                       we engaged with the investment manager who
Company 1’s aspiration was to grow the renewables                           concluded that Company 2 no longer fell within
part of the business to 50% of the company’s revenues                       their investment thesis (where exposed to extractive
in 2020. In contrast, Company 2’s business was almost                       revenues, companies should evidence of strong
exclusively based on fossil fuels and its strategic                         transition objectives) and therefore should no longer
response seemed primarily focused on improving                              be held within the proposed portfolio.
operational energy efficiency and reducing methane
leakage from its operations.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                             14

Metrics and targets

We use a number of different                          We monitor the carbon footprint                  We use data, such as that provided
complimentary ESG and carbon-                         (Scope 1, Scope 2 and first tier Scope           by the Transition Pathway Initiative
specific datasets in order to monitor                 3) and fossil fuel revenues and reserves         (TPI), to help us understand the
and report, both internally and                       exposure (proxy for downstream                   exposure to any carbon-intensive
externally, on the risks within our                   scope 3) of each of our listed equity            companies and to assess their
investment portfolios. We have                        portfolios. This enables us to as assess         preparedness for the transition to a
undertaken a considerable amount                      the exposure to high carbon industries.          low carbon economy.
of work in 2020 to integrate climate-
related data and ESG risk metrics
into our portfolio monitoring and
management tool.

                                                    CO2 SF4         CH4       N2O     HFCs PFCs

                                    Employee
                                  Business Travel
                                                                                    Company
                                                                                     Owned
                                                                                     Vehicles
                 Purchased
                                         Product
                Electricity for            Use
                  Own Use

                                         Waste                                         Fuel
                                        Disposal                                    Combustion                          Production
                                                                                                                       of Purchased
                                                                                                                         Materials

                                                          Outsourced                Contractor Owned   Investments
                                                           Activities                    Vehicles

                       SCOPE 2                                           SCOPE 1                                     SCOPE 3
                       INDIRECT                                           DIRECT                                     INDIRECT

          Scope 2 emissions are indirect                    Scope 1 emissions account                  Scope 3 emissions are all other
          emissions from electricity                        for all direct greenhouse gas              indirect emissions with the
          purchased and used by the                         emissions from the activities of           exclusion of scope 2 (see left).
          organisation. These emissions are                 an organisation. This includes             These emissions occur from
          created during the production of                  activities on site such as the             activities or sources that the
          the energy.                                       use of gas boilers for heating             organisation do not directly own
                                                            buildings, emissions from                  or control. These include activities
                                                            company vehicles, leaks from air-          such as business travel, employee
                                                            conditioning units and emissions           commuting, waste and water
                                                            from any onsite processes such as          services and investments.
                                                            cement manufacturing.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                         15

We have set a number of metrics
and targets for our listed equity
portfolios, which are outlined in our
                                                            Carbon metric reporting overview
Climate Change Policy.                                      As well as our internal monitoring, we empower Clients to understand
                                                            the climate change risk exposure within their portfolios by providing
•	Portfolio decarbonisation of our
                                                            carbon footprinting, fossil fuel exposure and revenues and the
   listed equity portfolios by no less
                                                            disclosure rates of portfolio constituents for all listed market portfolios
   than 7% per year from a fixed
                                                            vs their relevant benchmarks.
   baseline of each respective
   portfolio benchmark emission                             On a quarterly basis we provide Clients with a Responsible Investment
   intensity as at 31/12/2019 –                             and ESG dashboard for each portfolio that includes ESG scores,
   in cases where the market                                carbon metrics and key stewardship activities. The carbon metrics we
   benchmark decarbonised                                   report each quarter include:
   more rapidly, parity may be an
                                                            •	The Weighted Average Carbon Intensity (WACI) of the Portfolio
   acceptable minimum
                                                               and its benchmark for both the current and previous quarter
•	Fossil fuel revenues and exposure
                                                            •	Extractives revenues exposure (as a % of the portfolio) for both the
   no greater than that of each
                                                               Portfolio and its benchmark
   respective benchmark
                                                            •	The value of holdings for companies who derive revenues from
•	Climate governance using
                                                               extractives for both the Portfolio and its benchmark
   TPI, targeting all our material
   holdings1 to be at TPI level 4 or                        On an annual basis we produce a Carbon Metrics Report where
   above by 2022                                            we detail the following for each Brunel Portfolio against its relevant
                                                            benchmark:
•	Engagement with our material
   holdings to persuade them to                             •	The Weighted Average Carbon Intensity (WACI) of the Portfolio
   advance at least one level (up                              and its benchmark for both the current and previous quarter
   to 4*) per year against the TPI
                                                            •	Exposure to fossil fuel in terms of the proportion of the
   Management quality framework
                                                               Portfolio that derives revenues from fossil fuel extraction and
                                                               energy activities.

                                                            •	The proportion of the Portfolio that has fossil fuel reserves exposure

                                                            •	The disclosure rates of companies within the Portfolio (both for a
                                                               greenhouse gas and value of holdings basis)

1
    As assessed in 2019 by TPI - new entrants are also monitored and targets sets to improve climate governance.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                                                                                    16

   Portfolio decarbonisation
   The Brunel Aggregate Portfolio                                                        and weighting it based on its holding                           We recognise that climate-related
   is made up of the Brunel’s listed                                                     size within the portfolio. The WACI is                          risks can be managed in different
   equity portfolios weighted by value                                                   one of the measures recommended                                 ways in active and passive mandates
   of investments as of 31 December                                                      by the Task Force on Climate-related                            as well as for different asset classes.
   2020. A custom strategic benchmark                                                    Financial Disclosures (TCFD).                                   We have developed a Passive Low
   has been used so that the Brunel                                                                                                                      Carbon Equities Portfolio, to provide
                                                                                         Because carbon-intensive companies
   Aggregate Portfolio can be                                                                                                                            equity returns with considerably
                                                                                         are more likely to be exposed to
   measured against a meaningful                                                                                                                         lower exposure to carbon emissions
                                                                                         potential carbon regulations and
   comparator. This is made up of                                                                                                                        and fossil fuel reserves relative to
                                                                                         carbon pricing, this is a useful
   the individual benchmarks from                                                                                                                        the MSCI World Index. We see the
                                                                                         indicator of potential exposure
   the Brunel portfolios and weighted                                                                                                                    traditional benchmarks and indices
                                                                                         to transition risks, such as policy
   accordingly, as of 31 December 2020.                                                                                                                  as a block to decarbonisation across
                                                                                         intervention and changing consumer
                                                                                                                                                         the industry and are actively seeking
   We give asset allocation details for                                                  behaviour.
                                                                                                                                                         and encouraging the development
   both the Brunel Aggregate Portfolio
                                                                                         We outline the Weighted Average                                 of lower-carbon index solutions.
   and custom benchmark in the
                                                                                         Carbon Intensity (WACI) of the Brunel
   Appendix.                                                                                                                                             As of 31 December 2020, the
                                                                                         Aggregate Portfolio and Brunel
                                                                                                                                                         Brunel Aggregate Portfolio had an
   Weighted Average Carbon                                                               Portfolios below. Each of the Active
                                                                                                                                                         efficiency of 22% versus the custom
   Intensity (WACI)                                                                      Brunel Portfolios has a lower WACI
                                                                                                                                                         benchmark, compared to 15.4% on
                                                                                         than their respective benchmarks.
   The WACI shows a portfolio’s exposure                                                                                                                 31 December 2019.
                                                                                         The Brunel Passive Portfolios (Passive
   to carbon-intensive companies. This
                                                                                         Smart Beta, Passive UK and Passive
   measure is determined by taking the
                                                                                         World Developed) track their
   carbon intensity of each company
                                                                                         respective benchmarks.

                                                                                                                                                                                              Portfolio      Benchmark
                                500

                                                                                           458
Carbon Intensity (tCO2e/mGBP)

                                400                                                                                                  419     419
                                                                                   402

                                300
                                            286           278                                                                                         278     278
                                                                                                           273                                                                                 273                269
                                                                          244                                              244                                         246    246
                                200   224
                                                   199                                             194
                                                                                                                                                                                        174                179
                                                                   143                                              145
                                100

                                  0
                                        Brunel    Brunel Active   Brunel Active   Brunel Active   Brunel Active    Brunel Passive   Brunel Passive   Brunel Passive   Brunel Passive   Brunel Global      Brunel Global
                                      Aggregate        UK            Global         Emerging      Low Volatility    Low Carbon       Smart Beta           UK              World         Sustainable          Smaller
                                                                   High Alpha        Markets                                                                           Developed           Equity          Companies
                                                                                                                                                                                          Portfolio          Portfolio
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                                  17

We worked extensively on improving the carbon footprint of our Portfolios alongside our external fund managers.
We have included some highlights below.

Brunel UK Active                                                                                   Relative Efficiency (%)

•	The Brunel UK Active portfolio                           -15%         -10%         -5%        0%         5%           10%          15%     20%          25%   30%

   saw a decline in carbon intensity,                                                                                                                     362
                                                        Mar
   from 259 tCO2e/mGBP as of                           2019                                                                                 316
   December 2019 to 199 tCO2e/
   mGBP in December 2020 –                             Dec                                                                     259
   a 23.2% reduction                                   2019
                                                                                                                                      282
•	This improvement is in addition to
                                                                                                             199
   the extensive work undertaken                       Dec
   in 2019 which saw this portfolio’s                  2020                                                                          278
   carbon intensity fall by 28.5% from                        0               50        100           150          200          250         300           350    400
   March 2019 to December 2019                                                                 Carbon Intensity (tCO2e/mGBP)

•	As of December 2020, the Brunel                                Portfolio        Benchmark       Relative Efficiency
   UK Active Portfolio had a relative
   efficiency of 28.4% versus its
   benchmark, the FTSE All Share Ex-
   IT. This marked an improvement                        Brunel UK Active Portfolio - 45% emissions intensity reduction
   on December 2019, when the                            March 2019 to December 2020
   relative efficiency was 8.8%

Brunel Emerging Markets Equity                        Brunel Active Low Volatility Global Equity
•	The Brunel Emerging Markets                        •	The Brunel Low Volatility portfolio     •	As of December 2020, the Brunel
   Equity portfolio saw a decline in                     saw a decline in carbon intensity,         Low Volatility portfolio had a
   carbon intensity, from 522 tCO2e/                     from 259 tCO2e/mGBP as of                  relative efficiency versus its
   mGBP as of December 2019 to                           December 2019 to 194 tCO2e/                benchmark, the MSCI ACWI of
   402 tCO2e/mGBP in December                            mGBP in December 2020 –                    28.9%. This is an improvement on
   2020 – a 22.9% reduction                              a 25.1% reduction.                         December 2019, when the relative
                                                                                                    efficiency was 22.4%.
•	As of December 2020,the Brunel
   Emerging Markets Equity portfolio
   had a relative efficiency of                                                                                                Carbon intensity 2020 vs December
                                                       Portfolio
                                                                                                                               2019 Benchmark Baseline
   12.2% versus its benchmark, the
   MSCI Emerging Markets. This is                      Brunel Aggregate Portfolio                                                             -33.1%
   an improvement on December                          Brunel UK Active Portfolio                                                             -29.6%
   2019, when the relative efficiency                  Brunel Global High Alpha Portfolio                                                     -52.4%
   was 8.4%
                                                       Brunel Emerging Market Equity Portfolio                                                -29.4%
                                                       Brunel Active Low Volatility Portfolio                                                 -41.9%
                                                       Brunel Passive Low Carbon Portfolio                                                    -51.9%
                                                       Brunel Passive Smart Beta Portfolio                                                    -24.5%
                                                       Brunel Passive UK Portfolio                                                                -1.2%
                                                       Brunel Passive World Developed Portfolio                                               -18.7%
                                                       Brunel Global Sustainable Equity Portfolio*                                                n/a
                                                       Brunel Global Smaller Companies Portfolio*                                                 n/a

                                                          Meeting target               Action underway

                                                      *Portfolios launched in 2020. We are in the process of establishing an appropriate benchmark date
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                                                                                              18

  Fossil fuel-related activities
  It is important to identify exposure to                                                                companies that have disclosed                                  •	decarbonisation of the Brunel
  business activities in extractive industries                                                           both proven and probable fossil                                   portfolios (as discussed above)
  in order to assess the potential risk of                                                               fuel reserves in the portfolio. The
                                                                                                                                                                        •	asset allocation changes
  ‘stranded assets’. Stranded assets are                                                                 definitions of ‘extraction-related
                                                                                                                                                                           between portfolios due to asset
  assets that may suffer premature write-                                                                activities’ and ‘fossil fuel reserves’
                                                                                                                                                                           allocation investment decisions
  downs and even become obsolete                                                                         can be found in the Appendix.
                                                                                                                                                                           made by clients
  due to changes in policy or consumer
                                                                                                         The Brunel Aggregate Portfolio
  behaviour.                                                                                                                                                            •	additional Brunel sub-portfolios
                                                                                                         is less exposed to both fossil fuel
                                                                                                                                                                           launched in 2020 (Brunel
  We can identify the exposure to                                                                        revenues (1.4% vs 2.2% for its custom
                                                                                                                                                                           Sustainable Equities and Brunel
  extraction-related activities for each                                                                 benchmark) and future emissions
                                                                                                                                                                           Smaller Companies)
  portfolio by analysing the revenue                                                                     from reserves (24.8 MtCO2 vs 46.2
  exposure and potential emissions                                                                       MtCO2). The future emissions from
  from reserves for fossil fuel-related                                                                  reserves within the Brunel Aggregate
  activities. These metrics highlight                                                                    Portfolio has declined from 2019 levels,
  companies with business activities                                                                     dropping from 34.7 MtCO2 vs 24.8
  in extractive industries, as well as                                                                   MtCO2 in 2020. This decline is due to:

  Brunel Aggregate
  Industry Breakdown of Fossil Fuel Related Activities
                                                                                                                                                                                                     Portfolio       Benchmark
                                      0.8%

                                                                                                                                                                          0.70%

                                      0.6%
Revenue exposure

                                                      0.46%
                                      0.4%
                                                                                                                                                                                  0.34%

                                                               0.26%                          0.25%
                                      0.2%                                                                                                                                                                       0.20%
                                                                                                                        0.16%                                                                                            0.18%
                                                                                                       0.12%                      0.12%
                                                                                                               0.11%
                                                                          0.01%    0.01%                                                   0.07%      0.01%   0.01%                       0.07%   0.06%
                                      0.0%
                                                      Natural Gas         Petroleum            Coal Power        Support          Natural gas        Drilling oil and        Crude        Tar sands              Bituminous
                                                        Power               Power              Generation      activities for       liquid              gas wells        petroleum and    extraction             coal mining
                                                      Generation          Generation                           oil and gas        extraction                              natural gas
                                                                                                               operations                                                  extraction

                                                                            Energy                                                                               Extractives

Future Emissions from Reserves
                                                                                                                           Coal   Oil      Gas     Oil and/or Gas
                                             60,000
     Future emissions from reserves(MtCO2)

                                             50,000

                                             40,000

                                             30,000

                                             20,000

                                             10,000

                                                 0
                                                              Portfolio                    Benchmark              Portfolio                   Benchmark
                                                                            2019                                                    2020
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                                                                                   19

                                                                               Extraction-related                                                     Fossil fuel reserves:
The definition of                                                              activities:                                                            •	Coal (metallurgical, thermal
extractive-related                                                                                                                                       or other)
                                                                               •	Crude petroleum and natural
industries and fossil                                                             gas extraction                                                      •	Oil (conventional or
fuel reserves for the                                                          •     Tar sands extraction                                                unconventional)
purpose of this report:                                                        •     Natural gas liquid extraction                                    •	Gas (natural and shale)

                                                                               •	Bituminous coal underground                                         •	Oil and/or gas (where no
                                                                                  mining                                                                 further information)

                                                                               •	Bituminous coal and lignite
                                                                                  surface mining
                                                                               •     Drilling oil and gas wells
                                                                               •	Support activities for oil and
                                                                                  gas operations

Disclosure Rates                                                                                                                                      Full disclosure         Partial Disclosure         Modelled
                                                                                                  2%                                                                    2%
                                                                  100%
We report on the level of company                                                      18%                  18%
                                                                                                                                  12%         14%          14%                      13%
                                                                                                                      29%                                               32%                        31%
disclosures for the Brunel Aggregate                                       80%                   38%                              21%
                                                                                                                                              23%          24%                      23%
                                                                                                            21%
Portfolio and each Brunel portfolio.                                                   26%                                                                                                                   66%
                                                      Disclosure rate by VOH

                                                                           60%                                                                                                                     20%
The definitions of these are below:                                                                                   40%

                                                                           40%
Full Disclosure - Companies reporting                                                            60%        61%                   67%         63%          62%          66%         63%
                                                                                       56%
                                                                                                                                                                                                   48%
their own carbon data (e.g. in                                             20%
                                                                                                                                                                                                             20%

                                                                                                                      31%
financial reports, CDP disclosures etc)                                                                                                                                                                      14%
                                                                               0%
                                                                                      Brunel    Brunel     Brunel    Brunel     Brunel      Brunel       Brunel     Brunel         Brunel   Brunel    Brunel
Partial Disclosure - The data disclosed                                             Aggregate   Active     Active    Active     Active      Passive      Passive    Passive       Passive   Global    Global
                                                                                                  UK       Global   Emerging     Low         Low          Smart       UK           World Sustainable Smaller
by companies has been adjusted to                                                                        High Alpha Markets    Volatility   Carbon         Beta                  Developed Equity Companies
                                                                                                                                                                                           Portfolio Portfolio
match the reporting scope required
by the research process. This may                     We provide detailed breakdowns                                                           Beyond climate reporting
include data from previous years’                     of fossil fuel-related activities;
                                                                                                                                               We have started the process of
disclosures, as well as changes in                    future emissions from reserves; and
                                                                                                                                               developing ‘positive contribution’
business activities.                                  disclosure rates for all Brunel portfolios
                                                                                                                                               reporting for our listed equity
                                                      in our Carbon Metrics Report, which is
Modelled - In the absence of usable                                                                                                            portfolios, including against the
                                                      available on our website.
or up-to-date disclosures, the data                                                                                                            Sustainable Development Goals
has been estimated by employing                       Each of our clients receives a Carbon                                                    (SDGs) and look forward to rolling this
Trucost models.                                       Metrics Report annually, with the                                                        out in 2021.
                                                      above information reported for
For companies in the Brunel                           the underlying portfolios they are
Aggregate Portfolio, the rates for full               invested in, as well as their own
disclosure of carbon data were 61%                    ‘Aggregate Portfolio’.
(carbon-weighted measure) and
56% (investment weighted measure).
These scores indicate scope for
improved reporting among investee
companies, which is a core aim of
our engagement strategy.
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                   20

Climate Governance
We use the TPI management quality                     •	A general trend across the TPI         The TPI Tool
scores to assess the transparency of                     universe of falling management
                                                                                                The Transition Pathway Initiative
companies’ management of their                           quality scores. Companies are
                                                                                                (TPI) is a global, asset-owner
greenhouse gas emissions and of risks                    struggling to maintain their
                                                                                                led initiative which assesses
and opportunities related to the low-                    performance, particularly when
                                                                                                companies’ preparedness for
carbon transition.                                       it comes to providing support for
                                                                                                the transition to a low carbon
                                                         climate policies and disclosing
As of December 2020, within Brunel’s                                                            economy. The TPI tool uses
                                                         trade association climate
active equity portfolios there were                                                             publicly available company
                                                         lobbying2
74 companies covered by the TPI                                                                 information to assess:
tool. Of these, 30 holdings (41% by                   •	New entrants due to two new
                                                                                                Management quality
investment value) are categorised as                     new portfolios.
Level 4 or above.                                                                               The quality of companies’
                                                      •	11 holdings within our active
                                                                                                management of their greenhouse
From December 2019 to December                           equity portfolios are new to
                                                                                                gas emissions and of risks and
2020, 15 of the holdings not achieving                   the TPI index – two of these
                                                                                                opportunities related to the low-
at least the level 4 target, were                        companies are already meeting
                                                                                                carbon transition
downgraded a TPI level. The fall                         the Level 4 target
in the proportion and number of                                                                 Carbon performance
companies ranked as level 4 and
                                                                                                How companies’ carbon
4+ from 2019 to 2020 is due to
                                                                                                performance now and in the
the following:
                                                                                                future might compare to the
                                                                                                international targets and national
   Of those companies assessed as                        The average Management                 pledges made as part of the Paris
   Level 3 or below, we are:                             Quality level of all companies in      Agreement.
                                                         the Brunel Active Portfolios is 3.2.   Companies management quality
   •	engaging with all that have
                                                         This is ahead of the average of        is assessed annually across 17
      either fallen or have not
                                                         the TPI database which is 2.6.         indicators.
      improved their TPI Level year-
      on-year
                                                                                                Companies are placed on one of
   •	considering voting against                                                                five levels:
      company management that
                                                                                                Level 0 - Unaware of, or not
      have not improved at least
                                                                                                acknowledging climate change
      a TPI Level over the course of
                                                                                                as a business issue
      a year
                                                                                                Level 1 – Acknowledging climate
                                                                                                change as a business issue

                                                                                                Level 2 – Building capacity

                                                                                                Level 3 – Integrated into
                                                                                                operational decision-making

                                                                                                Level 4 – Strategic assessment

                                                                                                For more information see
                                                                                                www.transitionpathwayinitiative.org
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                21

Aggregate Active Equities

TPI Management Quality Brunel Active Equity Count
                                                                                          2019         2020
50

40
                                                                                     40

30                                                                              32
                                                                                                 30

20

10                                                                 13
                                               8           7
           1           1    6
                                        4
    0
           Unaware          Awareness            Building       Integrating into      Strategic               At the lower end of Management
                                                Capacity          operational        Assessment
                                                                decision making                               Quality, 16% of companies in the
          Level 0            Level 1            Level 2             Level 3          Level 4/4+               active equity holdings by count are
                                                                                                              on Levels 0 to 2. This compares to 38%
                                                                                                              of companies across the TPI universe.
TPI Management Quality Brunel Active Equity by Equity Market Value                                            The remaining 84% of companies
                                                                                                              (or 82% by equity market value) are
                                                                remove active             2019         2020   Level 3 and 4, compared to 62%
80%
                                                                                                              across the TPI universe.
70%
                                                                                     70%
60%

50%

40%                                                                          41%                 41%
30%

20%
                                                                   16%
10%                                            4%
                       3%    9%         9%
           0%                                              6%
    0%
               Unaware       Awareness              Building     Integrating into     Strategic
                                                   Capacity        operational       Assessment
                                                                 decision making
           Level 0              Level 1            Level 2              Level 3      Level 4/4+

TPI Management Quality Score Changes Year on Year by Equity
Market Value
50%
                                                                                     70%

40%
                 41%

30%
                                                                          30%

20%

                                                     17%
10%
                                                                                           9%
                                   4%
    0%
            Target                 Up          Unchanged                 Down              New
           achieved

2
    For more information see TPI State of Transition Report 2021
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                                                                22

Operational risks

Brunel has committed to be                            We have this year undertaken analysis                 Business travel - distance
Net zero in its operational                           of our staff business travel. Whilst it is            travelled in miles
                                                      not always logistically possible, we
(scope 1 and 2) emissions                             encourage staff to travel by public                   6%
and made considerable                                 transport as much as possible. Over                   2,874
progress in measuring                                 the 12-month period to 30 September                                                        28%
and reducing its Scope 3                              2020, 66% of our business travel
                                                      (by mileage) was undertaken by                                                           13,369
emissions by 2030.                                    train just, 28% by car and 6% by air
Turning to our own operations,                        (economy class). The proportion of
exposure to physical climate risks                    car journeys this year is likely to have
such as flooding and extreme                          been higher due to COVID.                             66%
weather are mitigated through a
                                                      We have used the mileage data                         31,651
highly agile workforce. All staff are
                                                      for business travel to estimate
provided with the technology to
                                                      our carbon footprint from these                         Car
work remotely.
                                                      activities, using a tool published
                                                                                                              Train
Our office electricity supply is sourced              by the Greenhouse Gas Protocol
entirely from renewable energy -                      (GHG Protocol). Whilst car journeys                     Air - short haul economy class
the supplier was chosen because it                    make up only 28% of business
provides REGOs (renewable energy                      travel, they accounted for 54.5% of                   Emissions by mode of transport
guarantees of origin) for all the                     emissions in the 12 months to the
electricity that it sells.                            end of September 2020. Where                          5.1%
                                                      public transport is not an option,
Our office also has facilities such as
                                                      we encourage staff to car share
bike storage, showers and changing                                                                                                             54.5%
                                                      where appropriate.
rooms, as well as proximity to public
transport networks. We continue to                    Whilst the largest impact to our
look for ways to reduce the carbon                    Scope 3 emissions comes from our
footprint within our operations and                   financed emission in our investment
are actively investigating options for                portfolios, we are assessing different
carbon offsetting where appropriate.                  methodologies so we can look to                       40.4%
                                                      further our own Scope 3 footprinting
                                                      (including staff commuting) in
                                                      our reporting.
                                                                                                              Car
 Calculation Method                                Greenhouse gas       Fossil Fuel Emissions                 Train
                                                                        Scope 3                               Air - short haul economy class
                                                                        (metric tonnes) in CO2 equivalent

 Distance travelled by staff for car, rail                CO2                       7.6812
 and plane. Emissions estimated using                     CH4                       0.0001
 GHG Protocol Model – source below.                       N2O                       0.0005
 Total (metric tonnes CO2e)                                                         7.8336

Emissions estimated using GHG Protocol Model: World Resources Institute (2015). GHG Protocol
tool for mobile combustion. Version 2.6
Brunel Pension Partnership Ltd Climate Change Action Plan and Metrics Report 2021                23

Appendix

Below details how the Brunel Aggregate portfolio and benchmark were generated.

Brunel Aggregate Portfolio for Carbon Reporting
 Brunel portfolios                                                                  Percentage

Brunel UK Active Portfolio                                                          8.8%
Brunel Global High Alpha                                                            21.9%
Brunel Emerging Market Equity                                                       9.3%
Brunel Active Low Volatility                                                        5.0%
Brunel Passive Low Carbon                                                           10.9%
Brunel Passive Smart Beta                                                           6.3%
Brunel Passive UK                                                                   5.1%
Brunel Passive World Developed                                                      19.3%
Brunel Global Sustainable Equity Portfolio                                          10.0%
Brunel Global Smaller Companies Portfolio                                           3.5%

Brunel Custom Benchmark for Carbon Reporting
 Brunel portfolios                                                                  Percentage

FTSE Allshare ex-IT                                                                 8.8%
MSCI World                                                                          32.8%
MSCI Emerging Markets                                                               9.3%
MSCI ACWI                                                                           14.9%
Brunel Passive Smart Beta                                                           6.3%
Brunel Passive UK                                                                   5.1%
Brunel Passive World Developed                                                      19.3%
MSCI World Small Cap                                                                3.5%
Getting in touch
If you have any questions or comments about TCFD report
please email Faith Ward, at RI.Brunel@brunelpp.org.

Please visit our website to read our latest reports, news and
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