As a Fund we recognise both our responsibility to be a trusted investor and the range of potential long-term risks associated with climate change that the Fund, as a long-term investor, faces.

 

As such we are prioritising these important considerations in regard to the Fund’s Investment Strategy.

 

The Investment Steering Committee (ISC) has appointed specialist external managers to a range of investment mandates. The financial impact of issues, including climate change, forms one part of the process that determines the investments made on the Fund’s behalf.

 

The Fund over the last few years has undertaken a robust process in regard to reviewing its Investment Strategy Statement (ISS) which included engaging with various stakeholders. This process resulted in a full stakeholder consultation last summer. 

 

The outcome of this consultation was the formulation of a new Responsible Investment (RI) Policy based on a set of RI Investment Beliefs which includes climate change and forms part of the Fund’s ISS.  

 

A copy of the latest ISS can be found here.

 

The ISC sees this as the start of a journey and have agreed that further work be commissioned which will be considered at their next round of meetings with regard to reviewing the Fund’s investment managers’ Environmental, Social and Governance and voting policies and approach to investment and stock selection and how they are aligned with the Fund’s RI Policy, as well as developing an Investment Manager Engagement Policy.

 

The outcome of this work will then inform the ISC as to how the RI Policy will be implemented in terms of the assets held, monitored and measured going forward.

 

This Review has commenced with some initial discussions around the Fund’s passively managed assets.

 

The ISC recognises both the long-term risks associated with climate change and the importance of engaging with companies it is invested in and is keen to work collaboratively with others.

 

The Fund has recently joined the Local Authority Pension Fund Forum, a voluntary shareholder engagement group for local government pension funds and as part of its commitment to Pooling is working with the ACCESS Pool and its local authorities in this regard too. It has also given the commitment to working towards becoming a signatory to the FRC UK Stewardship Code by March 2022.

 

The Fund’s direct investment in fossil fuels has been steadily decreasing; as at 30 September 2020 it was 0.04% of the Fund compared to 0.22% as at 30 September 2015.

 

Similarly, the Fund’s investments in sustainable timber and renewable energy increased from 4.1% as at 30 June 2019 to 5.1% as at 31 March 2020. 

 

The ISC has, as part of its Investment Strategy review, also recently agreed an increase in the Fund’s strategic allocation to infrastructure and timber of an additional 4% and 2% taking the total allocation to 10% and 4% respectively.

 

It is expected as commitment is drawn down over the next few years the Fund’s exposure to sustainable timber and renewable energy will continue to rise.