UK LGPS’s investment in transparency reflects trend toward democratisation.
A London pensions body with £6.9 billion of assets has become one of the first defined-benefit local government pension scheme funds to publish a breakdown of its equity holdings on its website, by teaming up with fintech company Tumelo.
The move reflects a wider trend towards the democratisation of pension-fund investments through increased transparency and engagement with beneficiaries, with the £3.6 billion AUM Environment Agency Pension Fund having already signed up with the fintech.
Research by Aviva found that almost two-thirds of consumers who have savings, investments, a pension, or an annuity, want pension schemes to be more environmentally transparent in where they invest their pensions.
Almost one in five placed the highest importance on financial services companies ensuring their investments have a positive impact on society over the long term. But over half of those surveyed didn’t know where their money was invested.
“I’d say to my peers at other funds, it’s a no brainer,” said Peter Ballard, Funding and Risk Director at the London Pension Fund Authority (LPFA), which invests about 45% of its portfolio in equities. “It makes sense and it’s an easy and straightforward thing to do.”
Survey showed members wanted more information
Although the data now on the LPFA’s website were publicly available via its asset manager, it wasn’t straightforward for members to access them. Now they can find a quarterly-updated list of every company their future income is invested in on one web page.
A survey of the fund’s 93,000 members had highlighted that they wanted more information about how the fund is invested and how it invests responsibly. The dashboard provides a way to demonstrate how the fund is translating its policies into action, Ballard said.
Bristol, UK-based Tumelo, which will also update the pension fund’s data, aims to democratise asset management, with a focus on impact and ESG investing that takes into account issues such as climate change, gender equality and human rights.
Legal & General Investment Management, which stewards £1.2 trillion of assets, was the first corporate pension provider to begin rolling Tumelo’s software out across its pension-scheme clients, in 2020.
“It is important for pension members to know which companies their pension is being invested in as this investment will impact their social, environmental and financial outcomes at retirement,” said Georgia Stewart, Co-Founder and CEO of Tumelo.
The fintech develops software that not only displays the distribution of funds among investments but can also enable beneficiaries to make clear how they would vote at annual general meetings.
At the LPFA, members can’t use the dashboard to request to opt out of certain stocks, but Ballard hopes they will know that “their voices are genuinely heard.”
LPFA will assess feedback before deciding on next steps but one possible further action, according to Ballard, could be to provide ex-post information on voting decisions and how these align with its policies.
UK requires trustees to report on climate risks
The fund, which has 124 active employers, is also a member of Climate Action 100+, an investor-led initiative to ensure that the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
“The LPFA strives to be a responsible investor and we do play a positive role in society,” said Robert Branagh, LPFA CEO. “However, we believe that we can do more, and we hope that this dashboard will start a dialogue with our members about how the fund is invested.”
Last October, the UK became the first country to require trustees of occupational pension schemes to identify, manage, and report on the climate-related risks and opportunities within their portfolios.
In a move aligning beneficiary interests with sustainability goals, UK auto-enrolment workplace pension scheme Nest said last year it would invest up to £3 billion globally in unlisted infrastructure equity by 2030, including water and waste treatment plants and social housing.
Nest, which has more than 10 million members, consults on issues including responsible investment via its annual Voice of the Customer survey.