Pension funds are making good progress with ESG, says Brunel CEO

The Local Government Pension Scheme has been a key proponent of environmental, social and governance issues.

In 2016, new regulations affecting the management and investment of LGPS funds in England and Wales came into force, giving administering authorities until April 2017 to publish their first investment strategy statement in accordance with the new rules.

How pooling drives responsible investment

As LGPS pooling progresses, the Brunel Pension Partnership – which includes 10 LGPS funds, including the Environment Agency Pension Fund – has been one of the strongest advocates of responsible investing.

In a recent Pensions Expert podcast, Turner said while ESG is unfortunately still often seen as a nice-to-have for institutional investors, “there has been significant change in the last 
two years”.

She said: “If you look across the UK, there has been movement and an understanding that ESG and RI is something that trustees need to be taking into account.”

Turner drew attention to the role of advisers, highlighting efforts by the Association of Member Nominated Trustees and the UK Sustainable Investment and Finance Association to persuade investment consultants to back the Pensions Regulator’s ESG guidance.

“That is important because, in the UK, there are a lot of small funds and they do rely heavily on the advice from consultants,” said Turner, adding that unless those consultants educate trustees about the financial risks associated with ESG, then it is hard for schemes to actually take action.

In terms of LGPS pooling, announced as part of the government’s summer Budget in 2015, Turner said local authorities increasingly recognise the benefits of coming together, and the boost it gives to their stewardship abilities.

Collaboration and transparency

Brunel published its responsible investment policy earlier this month. For the pool, “responsible investment is something that is integrated across everything that we do,” Turner noted.

The pool values collaboration, partnerships and affiliations with other groups, and is a signatory to the United Nations-backed Principles for Responsible Investment.

Transparency is also a crucial element of Brunel’s policy. This “builds trust by... being seen to do what we expect of others”, Turner said. For example, the pool is going to be following the disclosure recommendations from the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.

That element of openness and transparency is crucial, Turner said. “It’s about enabling conversations with everyone [who is] a part of the investment supply chain.”