Our approach to responsible investments is set out in the fund’s Responsible Investment Framework attached to this page.
We aim to incorporate environmental, social and governance (ESG) considerations into investment decisions to better manage risk and generate sustainable, long-term returns.
We use a 3 pillar approach to responsible investment, which covers:
- the selection of investments (ensure that ESG factors are taken into consideration when investments are chosen for the fund)
- stewardship activities (voting on shareholder resolutions and engaging with companies that the fund invests in)
- transparency and disclosure (keeping stakeholders informed about the fund’s responsible investment activities)
We support a strategy of engagement with companies to influence behaviour and enhance shareholder value. We aim to increase the effectiveness of engagement by working collaboratively with other investors and bodies.
Local Authority Pension Fund Forum (LAPFF)
Membership of the Local Authority Pension Fund Forum (LAPFF) helps us to engage with companies to understand relevant issues, and to promote best practice. Collective pressure from investors via organisations such as the LAPFF helps to encourage listed companies to:
- enhance their corporate governance
- improve their environmental impacts
- improve their social impacts
LGPS Central Pool
Following the launch of the LGPS Central Pool, an increasing portion of the fund’s investments will be transitioned into products managed by LGPS Central Limited. The company has developed a Responsible Investment and Engagement Framework which is attached to this page. It incorporates the responsible investment beliefs of the pension funds within the LGPS Central Pool, which will be applied to both internally and externally managed investments. LGPS Central Limited has appointed Hermes EOS to expand the scope of its engagement activities.
The UK Stewardship Code
Up until 2020, the Fund was a Tier 1 signatory to the 2012 Financial Reporting Council’s UK Stewardship Code. The UK Stewardship Code was updated in 2020, with the updated code coming into effect on 1 January 2020. The 2020 Code consists of 12 Principles for Asset Managers and Asset Owners, with a focus on the activities and outcomes of stewardship, not just on policy statements. The 2020 Code has 4 main sections:
- purpose and governance
- investment approach
- exercising rights and responsibilities
Organisations that want to become signatories to the 2020 Code are required to produce an annual Stewardship Report for consideration by the Financial Reporting Council explaining how they have applied the 2020 Code in the previous 12 months. We intend to apply to become a signatory to the 2020 Code.
We recognise the potential material effect of climate change, and the response to climate change on the assets and liabilities of the fund.
Our climate strategy sets out the fund’s approach to addressing the risks and opportunities related to climate change.
Climate-related disclosures report
We’ve published a climate-related disclosures report using a framework recommended by the Task Force on Climate-related Financial Disclosures. See our climate-related financial disclosures page for more information.
Links to useful documents