Priority 3: Engage on nature, climate change adaptation and sustainable use of resources
Being part of Brunel partnership means that we can pool resources and engage on a wider range of issues with a greater number of stakeholders.
We want to focus our resources at EAPF on engaging on tackling nature risk, adapting to climate change and the sustainable use of resources.
Over half the world’s total GDP is moderately or highly dependent on nature5. Arguably, all business relies on nature to some extent, be that water for employees consumption to agriculture where it is estimated 70 percent of freshwater withdrawals are used6. Nature can also be part of the solution, with natural climate solutions offering the ability to provide more than a third of the emission reductions needed by 20307. We need to understand these dependences and impacts using frameworks such as the TNFD to allow us to focus engagement where it can have the biggest impact.
Adaptation is a priority because by 2050, it is projected8 that 800 million people living in 570 cities around the world could be exposed to rising sea levels and coastal flooding due to climate change. But even now, we can see the impacts of a changing climate being felt. By now, resilience should be a standard consideration. Pension funds should always be asking asset managers about risks and opportunities when considering investments and engagement.
Sustainable use of resources includes action to find suitable alternative to PFAS chemicals, which are commonly used in microchips. These chemicals may impact the environment and human health so we wish to raise awareness of the issue within the finance sector.
5World Economic Forum (weforum.org)
6Water Use and Stress - Our World in Data
7Natural climate solutions | PNAS
8https://www.weforum.org/agenda/2019/01/the-world-s-coastal-cities-are-going-under-here-is-how-some-are-fighting-back/
Many green portfolios include a heavy focus on healthcare. Healthcare holdings typically score well on a risk score due to the social aspect. However we do not want the environment aspect to be forgotten about and want to challenge our managers as we would in other industries.
We think the healthcare industry needs to consider sustainability more, and we would welcome advances in considerations of climate and nature risks. On nature risks, we see biodiversity risks present within healthcare supply chains, which some key Big Pharma players are starting to take action on9.
There is also the growing threat of antimicrobial resistance. According to the UN World Health Organisation, in 2019 over 1.2 million deaths were directly attributed to drug-resistant infections globally, and this is projected to rise to 10 million annual deaths by 2050. If left unchecked antimicrobial resistance could shave $3.4 trillion off GDP annually and push 24 million more people into extreme poverty within the next decade10.
9AstraZeneca Biodiversity Statement: AZ-Biodiversity-Statement.pdf (astrazeneca.com)10UN Environment Programme, World Health Organisation, Antimicrobial resistance: a global threat: Antimicrobial resistance: a global threat | UNEP - UN Environment Programme
We need to understand the interaction between antimicrobial resistance and health issues more broadly with climate change and biodiversity loss11. Frameworks such as TNFD can help us understand these impacts and allow us to focus our engagement more effectively.
Brunel employ engagement specialists to engage with individual companies on partnership priorities, covering a broad range of social, environmental and governance issues. We will promote our respective priorities for the engagement provider to raise with companies.
Brunel also talk direct with, and co-file shareholder resolutions at, a small handful of companies. Brunel has to lead this for legal reasons but increasingly individual funds are helping support this work, which we welcome and support. Our focus will be on managing the physical risks from climate change and raising issues, we will start with the Top 10 companies which present us with nature and climate change risks.
We would like to understand more about the effectiveness of our votes and are raising this through a number of routes to see if we can analyse the impact we are having.
11Wellcome Trust, Will climate change lead to more antimicrobial resistance?, Climate change and antimicrobial resistance | News | Wellcome
We will also undertake an exercise in-house to monitor particular companies we hold shares in, to see what changes they may be making and if there is any evidence of the impact of voting and/or engagement.
EAPF also gets involved in a small number of additional initiatives, which target a particular issue or company, including for example TPI, LAPFF, TNFD, IIGCC, CDP or Ceres. Nature Action 100 is a current priority area for potential engagement. You can visit their websites using the links below.
https://www.transitionpathwayinitiative.org/
https://lapfforum.org/
https://www.iigcc.org/
https://www.cdp.net/en
https://www.ceres.org/
https://www.natureaction100.org/
Our commitment to our members
The Fund’s investment strategy is agreed by the Pensions Committee but our members’ views inform this approach.
We know our members want to see the evidence that our investment approach is making a real world difference.
We will provide more information for members on this.
We will try to ensure that the language is direct, in plain English and presented in an engaging style.
And we will be honest when things do not go according to plan.
