Responsible Investment

Approach to Responsible Investment

The Pension Fund believes that Responsible investment is supportive of risk-adjusted returns over the long term. As a long-term investor, the Fund seeks to invest in assets with sustainable business models across all asset classes.

Investee companies and asset managers with robust governance structures should be better positioned to handle the effects of shocks and stresses of future events. Responsible investment is integrated into the investment processes of the Fund, the Pool, and underlying investment managers. Social, environmental and corporate governance considerations are taken into account in the selection, non-selection, retention and realisation of investments. Non-financial factors may only be considered to the extent that they are not significantly detrimental to the investment return and the Committee is satisfied that members share their concerns. The Fund believes that a strategy of engagement rather than exclusion is more compatible with fiduciary duty and is more supportive of responsible investment.

It is recognised that Environmental, Social, and Governance (“ESG”) factors are important to long term investment performance and the ability to achieve long term sustainable returns. The Pension Fund Committee considers the Fund’s approach to ESG in three key areas:

• Selection – considering the financial impact of ESG factors on its investments.
• Stewardship – acting as responsible and active owners, through considered voting of shares and engaging with investee company management as part of the investment process. The Committee supports the Stewardship.
• Transparency & Disclosure – commitment to reporting the outcomes of the Fund’s stewardship activities.

In combination these three matters are often referred to as “Responsible Investment” or “RI” and this is the preferred terminology of the fund. Effective management of financially material ESG risks should support the requirement to protect investment returns over the long term.

Our pool company, LGPS Central Ltd has a fully developed set of RI policies, which are in line with the Committee’s own investment beliefs. This includes a Responsible Investment & Engagement Framework, a Statement of Compliance with the UK Stewardship Code, and Voting Principles. The Fund, through the Pool’s Practitioners Advisory Forum, contributes to the development of these policies. As the Fund transfers assets to it, LGPS Central Ltd will take responsibility for ensuring that underlying managers meet with the requirements of this policy. LGPS Central Ltd will also engage directly with investee companies to promote sustainable business practices that reward long-term investors. Voting rights associated with assets invested through LGPS Central Ltd sub funds will be instructed according to the Pool’s agreed Voting Principles. LGPS Central Ltd reports its RI policy and activity on a regular basis in order to demonstrate the implementation of the agreed RI policies.

Voting and Engagement

The Nottinghamshire Pension Fund aims to secure the long-term prospects of the companies it invests in by actively voting at shareholder meetings.

The fund supports the UK Stewardship Code and uses a proxy voting service, currently provided by Federated Hermes EOS, to vote on its behalf in line with principles laid down by our pool LGPS Central [PDF].

The most recent quarterly Voting Reports are available here.

Membership of the Local Authority Pension Fund Forum (LAPFF) helps Nottinghamshire Pension Fund to engage with companies to understand issues and to promote best practice. LAPFF was set up in 1990 and is a voluntary association of the majority of Local Authority pension funds based in the UK with combined assets of over £200bn. It exists to protect the long term investment interest of local authority pension funds, and to maximise their influence as shareholders by promoting the highest standards of corporate governance and corporate responsibility amongst investee companies.

News and Engagement