Merseyside £4.7bn fund to favour hiring asset managers signed to UK Stewardship Code and UNPRI

UK fund says it will recall all lent stock for votes at contentious AGMs in new Statement of Investment Principles.

The £4.7bn (€5.5bn) Merseyside Pension Fund (MPF) has declared that it will give preference to asset managers that are signatories to the new UK Stewardship Code and the United Nations Principles for Responsible Investment in its investment hires.

In a revised and extended Statement of Investment Principles, the fund said: “MPF wishes to see the consideration of ESG factors, and the fulfilment of a duty of stewardship, become part of the mainstream of investment management practice.”

The fund, among the UK’s largest local authority schemes, said it would also start publishing an annual Responsible Investment Review, including its voting record and showing its external managers’ approach to responsible investment.

“It is a core belief within the investment philosophy of Merseyside Pension Fund that environmental, social and governance (ESG) factors can affect investment performance and, therefore, should be a feature of investment analysis and management,” the Liverpool-based fund says in its new SIP said it believed engagement with companies was the best approach to both meeting its responsible investment objectives and fulfilling its fiduciary duty to stakeholders, as opposed to screening, which it sees as “effectively negating the value of responsible ownership”.

The new SIP also tackles the issue of stock lending – something which is not currently covered by the UK’s voluntary Stewardship Code.
The fund says it will recall any loaned stock to exercise its vote if there’s a contentious issue. Merseyside is active within the active within the corporate governance group at the International Securities Lending Association.

UK local government pension funds are required to keep an up-to-date SIP and Merseyside’s new document replaces its 2007 SIP. The document has grown from eight to 26 pages.