Sustainability key to groundbreaking joint mandate tender by £9.9bn UK local authority group

Sustainability questionnaire part of advisor selection as seven regional funds work together to save money.

Sustainability criteria are to play an important role in a groundbreaking step by a group of seven UK local government pension schemes – with combined assets of £9.9bn (€11.3bn) – to pool their actuarial and consultancy providers to save costs.

The group, comprising prominent RI advocate, the Environment Agency Pension Fund, and the schemes of UK local authorities in Bath and North East Somerset, Cornwall, Dorset, Gloucester, Somerset and Wiltshire, has issued a combined request for proposal (RFP) for investment and actuarial advice as well as benefits services.

Potential providers will have to respond to a detailed set of eight questions relating to sustainability, alongside more standard financial questions, in a pre-qualification questionnaire to go through to the selection round.

The questions elicit information on sustainability leadership, policy and impact. They also ask for formal reporting against sustainability targets, the existence of an environmental management system, and whether service providers have systems to monitor compliance with sustainability legislation.
The new seven-year advisory contracts are worth up to a combined £11.5m in business over the duration.The pension funds, all based in the South West of England, have agreed to pool resources as part of a cost-saving exercise following similar collaborations by a group of London-based local authority funds, and closer ties between Scottish and Welsh local authority funds.
The funds have a combined membership in excess of 354,000, with the tender being run by the Bristol-based Environment Agency scheme.
The tender is in three lots. The first deals with actuarial services (worth up to £7m), the second with benefits (up to £1.5m) and the third with fund management services. The latter includes advice on matters such as environmental, social and governance (ESG) issues alongside investment strategy such as custody, stock-lending and commission recapture, in a contract that could be worth up to £3m.
The funds said sustainability factors are given a 2.5% weighting in the pre-qualification selection criteria for providers. The deadline for responding to the questionnaire is November 23, with invitations to tender set for January 3. The final date for the return of tenders is February 15. The funds’ joint framework agreement will be in place by April 2011.