Strathclyde Pension Fund joins FRC’s UK Stewardship List
The Strathclyde Pension Fund has been approved as a signatory to the Financial Reporting Council’s UK Stewardship Code.
The UK Stewardship Code is renowned globally as a best-practice benchmark in investment stewardship, and comprises a list of principles for asset managers, owners and service providers.
It was recently revised to impose tougher reporting requirements on investors.
Applicants are required to undergo a rigorous review process which includes providing evidence of their stewardship activities and showing how they are integrating environmental, social and governance (ESG) factors into their investment decisions.
Only two thirds of applicants made the list, with Strathclyde Pension Fund one of 23 asset owners which successfully became signatories to the Code. Several major asset managers failed to make the signatory list despite being included in earlier versions. Strathclyde was the only Scottish public sector asset owner listed.
With 260,000 members and valuing £27bn, Strathclyde Pension Fund is Scotland’s largest local government pension fund and one of the biggest of its kind in the UK.
It introduced its first corporate governance strategy in 1995 and its first socially responsible investment strategy in 2000.
In 2010, it created a fund to support innovative new investment ideas which led to the formation of its Direct Investment Portfolio in 2015, which seeks to invest in initiatives with a positive environmental, social or governance (ESG) impact.
Through its Direct Investment Portfolio, Strathclyde Pension Fund has dedicated more than £500m to renewable energy projects – including dozens of windfarms in Scotland – saving around 151,000 tonnes of carbon annually and generating enough power for 225,000 homes.
A further £250m is invested in other green initiatives and the fund recently invested £20m in the Clean Growth Fund, founded to invest in early-stage companies in the clean technology sector.
Richard Bell, chair of the Strathclyde Pension Fund Committee, said: “Becoming a signatory to the UK Stewardship Code is a significant endorsement of our responsible investment processes and decision-making.
“We’re extremely proud that it puts us on a level with some of the UK’s biggest pension funds. Indeed, some failed to make the strict new reporting standards. Our new environmental standards will build on our strong ESG foundations as we take further action on climate change.”
The fund is preparing to proactively introduce industry-leading environmental standards for its energy investments – with companies that fail to comply facing divestment.
Under the scheme, which is based on the internationally acclaimed Task Force on Climate-related Financial Disclosures (TCFD), the fund will assess fossil fuel companies on governance, strategy, risk management, and metrics and targets.
Investments rated as red will face disinvestment. Amber-rated investments will be retained but subject to targets and review, while green-rated investments will be retained with no action required.
The initiative is part of the fund’s drive to achieve net-zero across its portfolio by 2050. The target, confirmed this year, is in line with the Paris Agreement of 2015 and recognises the ambitions of the UN’s crucial COP26 meeting being held in the fund’s home city of Glasgow in November.
Members of the Strathclyde Pension Fund Committee will be invited to scrutinise the plans at a meeting on Wednesday 8 September.