Board statement on the latest correspondence over investment in conflict areas

The Board is aware that LGPS administering authorities (AAs) are receiving further correspondence from the Palestine Solidarity Campaign (PSC) following the response to a letter from the previous Minister on the question of LGPS legal duties and international human rights law. That letter was in response to an invitation by the Board’s Chair, Cllr Roger Phillips OBE, to address the legal arguments being put forward by the PSC. 

The Board has also received correspondence from the UK Lawyers for Israel setting out an alternative legal view.  

The issue raised is one that AAs must consider carefully. The Board is in no doubt that AAs are endeavouring to follow the law, their responsible investment beliefs and their fiduciary duty. However, the Board is concerned that individual funds may be expected to shoulder significant legal, financial and reputational risk arising from uncertainty over the legal position.  It is unreasonable to expect individual AAs to navigate a novel and contested legal question without greater certainty as to the basis on which those judgments are expected to be made.  

While investment decisions are implemented through LGPS pools, it is the responsibility of administering authorities to set their investment strategy, including their responsible investment policy and they remain accountable for ensuring those policies are carried out in accordance with the law and their fiduciary duties.   

The earlier reply from the previous Minister simply did not address the key point about whether the government accepts the legal arguments about the AA function being sufficiently connected to the state to require it to have regard to international human rights law duties engaged by the ongoing conflict in Gaza. The Board does not want the UK Government to try and set responsible investment policy. Rather, the Board believes that AAs are entitled to understand the Government’s position on this specific legal question, so that they can take their own decisions with a clearer understanding of the legal context in which those decisions are being made. 

The Board has today written to the new Local Government Minister, Jim McMahon OBE MP, to seek an urgent meeting on this question.  

Legal advice remains one of the options under consideration by the Board, as well as by individual funds or pools. However, advice may differ between sources and no individual KC’s opinion is likely on its own to resolve the matter conclusively. 

In the meantime, the Board’s advice to AAs is to consider the issues raised carefully and ensure they are clear about the rationale for their decisions. Authorities should continue to set and follow their responsible investment policies in line with their understanding of the fiduciary duty and should not feel pressured into changing course solely because legal action is being contemplated or threatened. 

AAs may also wish to note that the Board is also in the process of drawing up some new guidance on setting a fund RI policy.  

Cllr Roger Phillips OBE, Chair of the Board and George Georgiou, GMB National Pensions Organiser and Vice-Chair of the Board.