UK public pension funds warm to responsible investment

Mandates could follow increasing number of strategic reviews on ESG issues.

UK public pension funds are ramping up their research into responsible investment suggesting that new mandate money could follow shortly.
The £4.2bn (€6bn) Merseyside Local Authority Pension Fund is recruiting a new information officer charged with looking at responsible investment in advance of a review later this month of its Statement of Investment Principles, under which it will outline any changes to its investment approach.
A spokesman at the fund said the strategic review would take into account its membership of the United Nations Principles for Responsible Investment (UNPRI), which commits the fund to consider the integration of environmental, social and governance (ESG) issues in investments.
Last week, the UK Local Authority Pension Fund Forum (LAPFF), an association of 44 public sector pension funds managing assets of £85bn, announced it had joined UNPRI and would start integrating ESG issues into allocation decisions. The LAPFF members will gather at a conference in Bournemouth later this month to hear presentations on topics including activist funds, corporate governance and responsible investment.Additionally, the £3.6bn London Pension Fund Authority (LPFA) has started to carry out annual meetings with its fund managers on ESG issues and is also considering changes to its investment strategy. In a recent report, the LPFA chairman Neil Newton, said: “We are also using our considerable influence to force the pace of change in the area of socially-responsible investments and will introduce pioneering changes in the next 12 months.”
The fund has had its investment portfolios assessed for their environmental impact by Trucost, the carbon emissions research company.
The increased activity bodes well for SRI asset managers selling funds in the UK, who are also awaiting the findings of a review by Paul Cox, a former fund manager at Kleinwort Benson and now lecturer in finance at the Xfi Centre for Finance and Investment at the University of Exeter, into costs and charges for SRI funds under the government’s planned personal pension accounts.
It is estimated the new personal pension accounts – scheduled to be fully operational by 2012 – could increase private pension savings by an estimated £4-£5bn per annum, of which a significant portion could be invested in SRI funds.