Responsible investment policy
At Lothian Pension Fund, our policy on responsible investment is informed by our fiduciary duty owed to members and employers, which is set out in law, to invest for the best returns to ensure pension benefits are able to be paid when they fall due. The Fund aims to fulfil this by balancing the cost strain of contributions paid by scheme employers and employees with its ability to generate long-term, stable returns from a diversified range of assets.
The Fund is often challenged about its approach to responsible investment. The issues involved have been considered in considerable detail and including requests to promote a policy of divesting from companies involved in the extraction of fossil fuels. The Fund doesn't disinvest from or ‘blacklist’ companies for purely non-financial reasons, not least because this could lead to legal challenge.
The Fund does, however, believe that environmental, social and governance issues can affect the financial performance of the companies in which it invests. Consequently, it takes these issues seriously and integrates them into the decision-making processes. It has a policy of engagement with companies and policymakers rather than a policy of exclusion or divestment. By engaging with the companies in which it owns shares, it strives to improve the sustainability of corporate strategy to the benefit of shareholders, and to the benefit of wider society. In contrast, a policy of disinvestment merely passes shares to less responsible share owners, who are less likely to hold management to account. This achieves nothing in terms of sustainability. There is information on how the Internal investment team integrate environmental, social and governance into its decision-making to ensure that both the financial and non-financial factors are taken into account.
The Pensions Committee regularly reviews the implementation of these obligations and you can view these reports within the Committee papers. The reports cover the work undertaken in the area of environmental, social and governance and outline the work the being carried out to meet the nine commitments we have made as signatories of the Principles for Responsible Investment. The Principles for Responsible Investments (PRI) is an independent not-for-profit organisation supported by the United Nations and carries out an annual assessment of the Fund as one of its signatories.
In June 2020, we implemented our Statement of Responsible Investment Principles which sets out our approach to investing responsibly in all our asset classes, and position on climate change and the carbon transition.
The second issue of ENGAGE, our Environmental, Social and Governance ezine was also published recently. This issue covers our recently published Statement of Responsible Investment Principles; how LPF’s in-house equity managers engage with the companies in their portfolios; and how LPF are supporting our tenants who have been adversely impacted by the COVID-19 crisis. You will also find more information on how the Fund invests.