24th February 2020 - Statement from the Scheme Advisory Board on Responsible Investment Guidance

The Scheme Advisory Board wishes to thank all those who responded to the request for comments on Part 1 of the Responsible Investment draft guidance. Responses have been generally positive with some very helpful drafting points that would help to improve the content and readability of the document. However, some respondents have raised concerns around the issue of fiduciary duty in the context of the LGPS and, in particular, the role and responsibilities of elected members responsible for making investment decisions.

The Board is also aware that the issue of fiduciary duty was discussed during the recent case in the Supreme Court involving the Palestine Solidarity Campaign and MHCLG that could shed some light on how the fiduciary duty test applies to investment decision makers in the LGPS. More recently, the government has introduced amendments to the Pension Schemes Bill which potentially could have a significant impact on the way in which investment strategy statements are prepared on issues like ESG and climate change.

For these reasons, the view is taken that it would be imprudent at this stage to offer any definitive advice or guidance on how the fiduciary duty test applies to investment decision makers in the LGPS. The Board has therefore decided to take stock until it has had the opportunity to evaluate the judgement handed down by the Supreme Court and when more is known about the government’s position on the proposed climate change provisions in the Pension Schemes Bill.

Notwithstanding this decision, the Board is mindful that there are matters outside of fiduciary duty where advice and information would continue to be helpful. The Board has therefore decided to restructure the proposed guidance to explain and clarify the terminology associated with responsible investment and provide investment decision makers with a range of information, case studies and tools to help them meet the challenges associated with responsible investment. The revised document will be circulated in draft to scheme stakeholders for comment in the normal way.

This change of direction will not preclude the Board from addressing the issue of fiduciary duty as a separate issue once the Supreme Court judgement in the foreign boycott case has been handed down and when there is more certainty about the government’s proposals under the Pension Schemes Bill.”

22nd November 2019 - Responsible Investment Guidance Consultation

At the meeting of the Scheme Advisory Board on the 6th November, approval was given for the first part of guidance on responsible investment to be published for consultation until the 11th January 2020. The aim of this first part of RI guidance is to assist and help investment decision makers to identify the parameters of operation within scheme regulations, statutory guidance, fiduciary duty and the general public law and the scope for integrating ESG policies as part of investment strategy statements. The Board wishes to make it clear that there is no intention to prescribe the extent to which ESG policies must be adopted as this must clearly remain a matter for local consideration and agreement in accordance with MHCLG’s statutory guidance.

The Board also agreed that work should commence on drafting part two of the guidance, the aim of which is to provide investment decision makers with a toolkit they can use to further integrate ESG policies as part of their investment strategy. As part of the consultation on part one of the guidance, consultees are therefore also invited to submit details of case studies that evidence the successful adoption of ESG policies, in particular, those focused on the risks associated with climate change. Consultees are also invited to suggest other matters that should be included in the part two guidance. The aim will be to have prepared a working draft of the part two guidance in time for it to be considered by the Board when it next meets on the 3rd February 2020.

Responsible Investment Guidance Draft Part 1 (PDF 19 pages 589KB)

Comments on the draft guidance and details of case studies should be sent to [email protected] by the 11th January 2020.

Consultees, when responding, please restrict comments to the scope and content of the part one guidance, bearing in mind that other relevant issues will feature in part two of the guidance.