Responsible Investment

The DWP has today launched the Occupational Pensions Stewardship Council (OPSC) which aims to develop a stronger overall voice of trustees within the market, especially in relation to service providers. It also enables opportunities for schemes to collaborate on stewardship activities such as shareholder resolutions, climate change, corporate governance and other topics. The SAB is an inaugural members of the Occupational Pensions Stewardship Council, which aims to promote and facilitate high standards of stewardship of pension assets.

The SAB has submitted a response to the DWP's Call for Evidence on Consideration of social risks and opportunities by occupational pension schemes following consultation with the Board's Responsible Investment Advisory Group. The response can be downloaded using the link below:

 Response to Call for Evidence PDF 7 pages 301kb

The Department for Work and Pensions (DWP) today published regulations in parliament to require schemes with £5bn or more in assets, and all authorised master trusts, to report on how they will manage their climate risk from October this year, alongside Guidance for trustees of occupational schemes. These requirements will not apply to the LGPS however MHCLG will be consulting on regulations which will require similar levels of risk assessment and reporting later this year.

The Board Chair Cllr Roger Phillips announced the launch of the A-Z of Responsible Investment at the Local Authority RI Seminar (LARIS). This online resource contains definitions and links to further information on the wide variety of the acronyms, organisations, measures and standards in this area as well as example case studies. The guide will be regularly updated to take account of this fast changing area and is part of the Board's ongoing RI project. A link to the guide can be found on the right hand side of this page.

.

The newly established Responsible Investment Advisory Group (RIAG) met for the first time on the 3rd March 2021 and discussed a wide range of responsible investment related issues, including MHCLG’s proposals for TCFD reporting within the LGPS and the response to the LGPS All Party Parliamentary Group’s inquiry into a “Just Transition”.

The group is Chaired by Sandra Stewart, Director of Pensions at the Greater Manchester Pension Fund and includes a wide range of other members who can be found on the RIAG membership page.

The main role of the group will be to advise the Board and the Investment Committee, as requested, on all matters relating to responsible investment. It will also be responsible for assisting the Board in developing and maintaining the online Responsible Investment A to Z website, which is expected to go live at the end of March 2021.The group will continue to meet on a six weekly cycle and will report directly to the Investment Committee.

Welcoming members to the first meeting Chair of SAB Councillor Roger Phillips said “The Board welcomes members of RIAG and looks forward to a close working relationship in the work being undertaken to assist fund authorities in integrating ESG policies into their investment strategies, and helping them to better measure and assess the financial and other risks associated with climate change. The group will also be reporting directly to the investment committee to assist the Board in developing recommendations to MHCLG on how TCFD reporting should be applied to the LGPS. Knowing the wide range of expertise and experience that individual members bring to the group I have every confidence in their ability to deliver what promises to be a very challenging agenda over the foreseeable future.”

In association with DG publishing the Board is running an online RI seminar for the LGPS. More information including an agenda and how to book a place can be found on the DG publishing LARIS event page.

On 3rd March the Responsible Investment Advisory Group met for the first time chaired by Sandra Stewart of the Greater Manchester Pension Fund. More information will be posted on the RIAG meetings page when available.

On 8th Feb the Board approved the membership of the Responsible Investment Advisory Group. More information can be found on the RIAG membership page

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.”

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.