On the go: The Brunel Pension Partnership has licensed a Paris-aligned index, which it will adopt for a passively managed fund that it will launch in September 2021.
The index is part of a wider climate-themed index series launched by FTSE Russell, in which the pool was consulted on the construction.
Brunel, which is composed of 10 Local Government Pension Schemes with more than £35bn in assets under management, has licensed a FTSE Paris-aligned benchmark index for a passive fund that will be launched later this year.
The index is part of a wider suite of climate-themed equity indices, launched by FTSE Russell, that are aligned to the goals of the Paris Agreement to keep global warming below 2C by 2050.
This suite, called the FTSE EU Climate Benchmarks Index Series, applies a transparent tilt exposure towards and away from index constituents, according to several exposure objectives such as fossil fuel reserves, carbon reserves and green revenues to achieve Paris alignment.
FTSE Russell also plans to launch a suite of equity indices aligned to the EU Climate Transition Benchmark criteria later in 2021.
David Cox, head of listed markets at Brunel Pension Partnership, said: “The broader Brunel Pension Partnership has set out major ambitions on climate investing, but also on encouraging wider industry change.
“This initiative with FTSE Russell enables us to do both, providing a new way to ensure our passive funds are Paris aligned.”
Brunel was consulted on the construction of these indices. This included aligning both the Paris-aligned and climate transition approaches to guidance such as the Institutional Investors Group on Climate Change’s Net Zero Investment Framework.
The IIGCC framework recommends that investors limit exposure to thermal coal and oil sands. These indices go further by applying index exclusions to companies that generate more than 50 per cent of their revenues from these activities.
Additionally, the indices limit the active weight of banking sector constituents to reflect the sector’s funding role for large carbon emitters as a contributory factor to climate change, an impact not currently factored into current climate assessments.
Faith Ward, chief responsible investment officer at Brunel Pension Partnership, commented: “Having Paris-aligned indices to support product design, risk tools and benchmarks was central to Brunel’s climate policy.”
She added: “Our work with the IIGCC to help launch the Net Zero Investment Framework and consulting FTSE Russell for its new Paris-aligned index series have been priority projects for Brunel. We hope these projects provide practical investor tools to reduce climate-related financial risk and support the climate transition.”
This article originally appeared on MandateWire.com
