LGPS pool puts investment system fix at heart of new climate policy - IPE.com | Canada News Media
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LGPS pool puts investment system fix at heart of new climate policy – IPE.com

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Brunel Pension Partnership is embarking on a new climate policy aimed at systemic change in the investment industry, as part of which it will consider whether to ditch asset managers and companies if they have not lived up to expectations.

The new policy is the result of in-depth consultation with Brunel’s founding 10 local authority pension fund clients, who have £30bn (€35bn) in assets between them.

Faith Ward, chief responsible investment officer at Brunel, said its clients had large and ever-increasing demands with respect to climate change but that Brunel had found “the financial system isn’t going to be able to deliver what we want in its current form”.

According to the pool, the financial system is not “fit for purpose” for keeping the global average temperature increase to well below 2°C compared with pre-industrial levels.

Its new policy consists of a plan built on five principal areas where Brunel considers “there is a critical need for action and where we believe we can make a significant difference”: policy advocacy, product governance, portfolio management, positive impact, and persuasion.

The policy will guide Brunel’s work on climate change over the next three years. In late 2022, to tie in with the 10 client pension funds’ upcoming triennial valuation and investment reviews, it will review the policy.

“We’ll be taking stock of the whole policy,” said Ward. “What’s worked, what hasn’t, how have asset managers, service providers and companies responded to the challenge.”

It is at this stage that Brunel could decide to scrap asset managers and/or exclude companies.

For now, because its goal is to drive change in the way asset managers work, the asset pooling company has decided not to issue exclusion criteria for companies.

Ward said exclusions “make life really easy for the asset manager”.

“It doesn’t actually make them change their analytics, their investment process, how they think,” she told IPE.

As part of stress-testing its portfolios under a range of climate scenarios Brunel challenge its investment managers to demonstrate reduced exposure to climate risk as well as effective corporate engagement that puts companies on a trajectory to align with warming of at most 2°C.

Managers that fail to do so risk having their mandates removed. Brunel has  said that where it has found asset managers’ engagement with companies to be ineffective, it would also consider whether it should introduce specific exclusion criteria for companies instead of sacking managers.

2°C-alignment projects

The product-focussed prong of the pool’s new climate policy relates to its view that there is “a general absence of investable investment products that make a substantive contribution to climate change mitigation or adaptation”.

Under the new policy, the pool will be looking to extend the range and quality of products available to its clients, for example in fixed income, and invest in the development of more innovative products.

A specific aim is to seek a decarbonisation of at least 7% year-on-year in its listed equity portfolios, a target that it will also review as part of the 2022 stocktake.

Brunel has pledged that by 2022 it will have assessed the degree to which its main listed equity portfolios, and possibly other portfolios, were at least 2°C-aligned.

Acknowledging that the methodologies and frameworks to carry out this type of assessment were under development, Brunel said it would therefore prioritise supporting efforts, for example by piloting methodologies, that enabled it to assess and report on its portfolio performance.

“Benchmarks are fundamentally flawed when it comes to climate”

Faith Ward, chief responsible investment officer at Brunel

Brunel also has improvements to benchmarks in its sight, with Ward describing these as “fundamentally flawed when it comes to climate”.

According to its climate policy document, the pooling vehicle will explore the role that investment benchmarks play in driving investment decisions and “in constraining our ability to invest in areas that make a meaningful contribution to climate change mitigation and adaptation”.

“We will press the industry to make the core benchmarks more compatible with a 2°C-aligned world,” it said.

Earlier this month Brunel announced that around 50% of its clients’ assets had been transitioned to the pooling vehicle.

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Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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