By Vivienne Russell
05 June 2009
A significant proportion of local authority pension scheme investments do not meet ‘socially responsible’ risk management standards, an audit has revealed.
The Local Authority Pension Fund Forum, which represents 49 council funds, engaged consultancy Rimetrics to evaluate investments made by leading global asset management companies on behalf of councils.
Rimetrics rated ‘passive’ – or tracker – funds across the main ‘socially responsible’ investment areas and found a mixed picture. Fund managers did not consistently liaise with the companies they invested in and often failed to use their vote at annual general meetings.
Resources were also limited. Just 11 individuals were identified as responsible for environmental, social and governance policies for a total of £700bn of assets held in more than 3,000 companies across the world.
Rimetrics concluded that a significant proportion of equity holdings managed in passive funds were not subject to high levels of ESG risk management. It also noted that fund managers were willing to discuss these issues with clients but were under little pressure to do so.
David Sellors, the forum’s chief operating officer, told Public Finance: ‘We are trying to work with passive managers to encourage them to vote at annual general meetings and reduce the risk to their portfolios.’
He went on: ‘Following our meetings with the relevant passive managers, they have now received a clear message that their clients and our members do take the topic of ESG risk management very seriously.’
Forum chair Ian Greenwood said: ‘We plan to closely monitor the progress made by the respective passive managers.’
