Responsible investment - Local Pensions Partnership

Concern for our planet, for the communities we live in and those we have an effect on, through our choices as consumers, has grown over recent years. More of us are thinking about the wider affects of our interests, activities, and expenditure and whether they are having positive or negative influences beyond those we experience directly. We are becoming more conscious of the need for sustainability and this concern includes whether the provision we are making for retirement through our pension savings is being invested responsibly.

At LPPI a concern for sustainability informs how, where and what we invest in on behalf of client pension funds and how we act as responsible stewards and an active asset owner on their behalf.

We aim to be open and transparent about our approach, actions and activities and we publish a detailed annual report in which we share insights on our stewardship.

Sustainable investment returns are achieved over the long term through an approach to stewardship which embraces responsible investment principles and practice.
Well-governed companies are best equipped to manage business risks and opportunities, and this contributes to achieving optimum risk-adjusted returns over the long term.

The consideration of Environmental, Social, and Governance (ESG) issues is embedded in our investment strategy and fully integrated into our day-to-day investment and stewardship activities. We strongly encourage good corporate governance and sustainable business practices in the assets we manage directly as well as via the actions of third-party managers we select to work with us.

We continuously hold ourselves up to scrutiny against appropriate standards of good practice.

Our responsible investment approach is designed to deliver against the commitments we have made as a signatory to the United Nations backed Principles for Responsible Investment.

Our services are fully aligned with the principles of the Financial Reporting Council's UK Stewardship Code.

As providers of capital, investors have influence.

One of our core responsible investment beliefs is that institutional investors should utilise their ownership powers to exert influence in circumstances where their intervention is warranted to protect the long-term financial interests of pension scheme beneficiaries.

We prioritise collaborative engagement, recognising that when a group of institutional investors comes together on important issues, their influence is amplified. By partnering with other investors and through organisations such as the Principles for Responsible Investment, the Institutional Investors Group on Climate Change and Climate Action 100+, we are actively engaging with influential companies, policy makers and standard setters to ensure our voice is heard.

Examples of our active stewardship are available at the link below and in our annual reporting on Responsible Investment.

Our responsible investment beliefs are a foundation for prudent investment management practices and are explained in our Responsible Investment Policy.

We aim to effectively manage risks and opportunities on a sustainable basis. Environmental, Social and Governance (ESG) factors can have a material financial impact on the value of individual investments and an influence on long-term investment performance.

Ownership powers should be exercised to exert influence in circumstances where intervention is needed to protect the long-term financial interests of client pension funds.

Responsible Investment and ESG considerations are core to our investment process when:

Selecting investments (where we directly manage assets)
Selecting third-party fund managers (where they work alongside us)
Engaging with investee companies as part of the active ownership of pension fund assets.

The way we invest determines how we have ownership influence.

Directly owned assets typically provide us with a seat at the [board] table. This level of influence means we can actively encourage sustainable business practices and behaviours.

Assets owned through funds require a more collaborative approach. We, therefore, place a strong focus on evaluating, selecting and appointing appropriate external fund managers whose approach aligns with our responsible investment requirements and meet our core standards.

We seek to engage with investee companies over issues which warrant intervention. To ensure coverage of our listed investments (which span global markets) we work with an external provider of engagement services.

We have retained the voting rights for our Global Equities Fund and our Responsible Investment team oversees shareholder voting centrally to ensure a consistent approach, aligned with our policy commitments and stewardship priorities.

At the end of May 2019 the Financial Conduct Authority (FCA) published Policy Statement 19/13 "Proposals to promote shareholder engagement: Feedback to CP19/7 and final rules' under which new requirements were confirmed for asset managers to make disclosures relating to their shareholder engagement policies. The new requirements quickly came into force (from 10 June 2019) under Shareholder Rights Directive (Asset Managers and Insurers) Instrument 2019 which implements the provisions of the revised Shareholder Rights Directive (SRD II).

LPPI has developed an Engagement Policy (Dec 2020) which outlines our approach in compliance with requirements under SRD II.

Commencing in 2021, we will publish an Annual Report on Stewardship which will simultaneously meet disclosure requirements under SRD II and the UK Stewardship Code (2020).