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New pension pool Border to Coast: Putting sustainability at heart of its philosophy

Border to Coast goes live with £7bn

Another of the UK’s new pension pools, which has just gone live with £7bn (€7.8bn) in internally managed mandates, is aiming to put sustainability at the “heart of its philosophy” and build responsible investment into its investment process.

The £43bn Border to Coast Pension Partnership (BCPP), one of eight established under new government rules to ‘pool’ the assets of local authority funds, launched two equities mandates – a UK equities mandate worth £4.1bn and an overseas developed equities mandate worth £2.5bn – at the end of July.

RI was told by BCPP’s CEO Rachel Elwell that the partnership’s head of RI, Jane Firth, has “been working with the portfolio managers to help them build RI considerations into our investment process”.

Adding that that this effort has been “supported by our recently announced partnership with Robeco”. Last month, the new Leeds-based pension pool announced that it had appointed Robeco to perform its voting and engagement services.

The assets for BCPP’s new “pooled investment vehicles” were transferred from three of the partnership’s member funds: Teesside, East Riding and South Yorkshire Pensions Authority.

Portfolio managers from the East Riding and South Yorkshire Pensions Authority schemes, who recently joined BCPP, will manage the new funds, RI was told.

Elwell, who was formerly a consultant with PricewaterhouseCoopers before joining Royal London Asset Management, also told RI that in the coming months two new externally managed funds will be launched that will have ESG integrated into recruitment process.

The RFP for the first planned mandate – another UK equities fund – closed at the end of last month and is expected to launch in the autumn. The RFP for the second, a global equities fund, is expected to be issued before Christmas.

BCPP also expects to launch an internally managed emerging market equities fund in the autumn, Elwell said.

BCPP’s commitment to responsible investment is a further sign that it is increasingly becoming a focus for the £217bn local government pension scheme sector, following similar moves made by the Brunel and LGPS Central pension pools. See RI’s recent round-up of the pooled funds.“Sustainable investment is a key element of what we are building at Border to Coast to support our aim of making a difference to long-term investment outcomes for our Partner Funds,” Elwell told RI. “We have made a good start with the steps taken during the initial phases of our build and we will continue to work closely with our Partner Funds in this area including working towards becoming a UNPRI [UN-supported Principles for Responsible Investment] signatory in due course.”

Border to Coast, chaired by former RPMI Railpen CEO Chris Hitchen, also recently published a comprehensive responsible investment policy.

The policy, which refers to ESG as a “material” issue that needs to be considered “across all asset classes”, cites tax transparency as one of the many issues to be considered when making investment decisions.

It also includes a section on its “active stock lending programme” and outlines its position on engagement, stating: “The best way to influence companies is through engagement; therefore BCPP will not divest from companies principally on social, ethical or environmental reasons”.

Also, published on the fund’s website is its corporate governance and voting guidelines, which outlines the pool’s support for the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

On auditors, the guidelines states that it will not support the appointment of an auditor to a FTSE 350 companies, if it has been “in place for more than ten fiscal years”. It also includes the provision that companies must “make a full disclosure” where there is potential conflict of interest between “audit and non-audit work when conducted by the same firm for a client”.

And on the issue of “dual share structures” it states that it will not “support measures or proposals which dilute or restrict its rights”.

BCPP, which includes the public pension funds of Bedfordshire, Cumbria, Durham, East Riding, Lincolnshire, Northumberland, North Yorkshire, South Yorkshire, Surrey, Teesside, Tyne & Wear, Warwickshire, is also the third pooled fund to sign up to the Local Government Pension Schemes (LGPS) Advisory Board’s Code of Transparency.

It joins Brunel Pension Partnership and Local Pensions Partnership as signatories to the voluntary code for local authority asset managers