Responsible Investment in the LGPS: why does it matter?
01 Mar 2018 - Estimated reading time: 60 seconds
Responsible investment is a topic which has been high on the agenda of many within the LGPS over the last 12 months and is likely to remain so over the coming year. But given a range of demands on officer and committee time, why does responsible investment matter?
- It matters because regulation requires that funds consider their approach to responsible investment. Your Investment Strategy Statement needs to demonstrate how you consider issues of long-term sustainability and stewardship.
- It matters because members are interested in the investments backing their pensions. Funds need to be able to articulate their investment approach to all stakeholders.
- It matters because funds are coming under increasing scrutiny from third parties as to how their funds are invested. Lobby groups are highlighting the various risks for funds from climate change and campaigning for divestment
But most importantly, it matters because environmental, social and governance (ESG) issues can present a material financial risk to financial outcomes. Fiduciary duty obliges decision makers to take account of all financially material risks.
We’ve worked with a number of our clients to help them understand why responsible investment matters to them, providing training, developing investment beliefs and evaluating risks. You can read more about the work we carried out last year as well as our plans for 2018 in our Responsible Investment Review.