Brunel Pension Partnership is undertaking an engagement programme with food and beverage producers and manufacturers and supermarkets in a bid to tackle climate physical risk.
Brunel highlighted that while climate impacts present risks in relation to productivity and disruption to supply chains among others, only 23% of companies in consumer staples, such as food and hygiene products, have adaptation plans to address climate physical risks.
For these companies, Brunel said, climate risks, arising from extreme weather, water scarcity, soil degradation, and increased pest activities, extend beyond direct operations to locations throughout their value chain threatening financial value.
In order to tackle this issue, the investment pool is undertaking an engagement programme with 20 consumer staples companies including food and beverage producers and manufacturers and supermarkets.
It added that a number of its partner funds – the pension funds for Avon, Cornwall, the Environment Agency, Oxfordshire and Wiltshire – have been actively participating in the engagement by inputting in the company selection process and joining the company dialogues.
It said the engagement aims to help companies assess and manage climate physical risks, adapt to climate change, and understand how biodiversity is used to increase resilience, whilst building investor capacity for effective stewardship on these issues.
Chronos Sustainability, Brunel’s engagement programme facilitator, designed a methodology to assess companies on their approach to climate physical risks based on literature from Taskforce on Nature-related Financial Disclosures (TCFD), The Institutional Investors Group on Climate Change (IIGCC), and the United Nations Environment Programme (UNEP).
It assesses companies across the four key areas: governance; strategy; risk and impact management; and metrics and targets.
Brunel sent an initial engagement letter to its 20 focus companies in March 2024. As of September 2024, 13 companies responded to the letter, with 10 agreeing to meetings, two declining, and one informing the pool of new disclosures to be considered.
Based on engagement with 10 companies to date, Brunel made several “key observations”.
These include the fact that scope and quality of climate risk assessments vary significantly between companies, and company framings around adaptation are disjointed.
It also noted that biodiversity and nature are nascent topics and, as reflective of the broader trends within the industry, company engagements indicated regenerative agriculture lacks clear definitions, comprehensive measurement, and integrated approaches.
In addition, Brunel said there is a shortage of case studies demonstrating the benefits of regenerative agriculture for farmer resilience. However, it said that companies using regenerative agriculture are working with farmers on gradual improvements.
Brunel also noted that the Corporate Sustainability Reporting Directive (CSRD) is the immediate priority for companies, with the TCFD being “practically challenging” and “poorly understood”.
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