Call for climate change considerations to play greater part in Lancashire pension fund investments

Where should Lancashire's councils be putting their pension fund money?
Where should Lancashire's councils be putting their pension fund money?
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The local authority pension fund in Lancashire should be doing more to ensure that its money is invested with climate change in mind, a group of councillors has heard.

Several members of the Lancashire pension fund committee expressed their disappointment that progress on so-called “responsible investment” appeared to have slowed.

But the scheme’s officers insisted that environmental considerations were influencing investment decisions – including a move earlier this year to divest from oil giant Exxon Mobil.

The Lancashire County Pension Fund (LCPF) agreed to jointly manage its investments with the London Pensions Fund Authority (LPFA) in 2016 – via a new organisation called the Local Pensions Partnership (LPP).

The LPP has a responsible investment policy in place, but the Lancashire county and district councillors overseeing the local fund told a committee meeting that the two constituent LPP groups had previously been intending to work jointly on ways of going further.

“It’s disappointing that the London group has moved slower than we hoped,” County Coun Kevin Ellard said.

“Maybe that’s because they’re going to produce something significant and I hope they do – but we should be working on this together.”

Green Party county councillor Gina Dowding also criticised the slowdown in co-operation over the past 18 months, which had put a halt to plans to invest in social housing.

“We are in a state of crisis and need urgent action. It’s like we’re in our own separate paradigm – we recognise that the pensions sector has an enormous role to play and yet we just trundle on and nothing is changing,” she said.

But the LPP’s chief investment officer Chris Rule said that the existing arrangements meant that the funds already had “very low exposure” to the fossil fuel sector and “significant “ investments in renewable energy.

“Earlier this year, we took the view that Exxon Mobil was no longer consistent with our policy, so we have divested from the company, which was the largest holding we had remaining in brown energy,” Mr Rule said.

"We have made investments in green energy and social housing and we have been reducing our exposure to the more polluting sectors."

The committee also heard that investments are influenced by the Paris Accords on climate change – and that a climate risk score for the combined fund put it “significantly below” a 1.75 degree global temperature rise.

The Local Democracy Reporting Service attempted to contact the LPFA for comment.

In a statement after the meeting, an LCPF spokesperson said: “We are committed to working with our colleagues from the London Pension Fund Authority (LPFA), through the Local Pensions Partnership (LPP), to ensure that our members’ money is invested responsibly and sustainably.

“We work collaboratively to ensure any investment decisions consider the responsible investment policy and are consistent with the Investment Strategy Statement, while generating the return required to pay promised pension obligations.”

“LPFA’s approach to responsible investing is addressed by its ‘Responsible Investing’ approach, which combines environmental, social, and governance factors into all LPP Investments’ investment decisions to generate sustainable, long-term returns for our members.

“LPP is responsible for the day-to-day asset selection and portfolio management for both funds, working within an agreed framework.

“LPFA reviewed its ISS at June 2018 and this is available on its website.”

SHOULD LANCASHIRE'S COUNCILS TAKE A TOUGHER LINE ON TOBACCO?

Members of the Lancashire pension fund committee heard that 2.5 percent of the LPP "equity portfolio" lies with British American Tobacco.

"That is a bit of a problem in terms of responsible investment," County Cllr Kevin Ellard said.

But chief investment officer Chris Rule told the committee that the LPP's responsible investment policy "doesn’t discuss tobacco".