Responsible Investment Policy

  1. Introduction
    1. London Borough of Bexley (the "Council") in its capacity as Administering Authority has responsibility to manage the Bexley Pension Fund (the “Fund”) and has delegated to the Pensions Committee (the "Committee") all powers and duties of the Council in relation to its functions and authority. The Committee is therefore responsible for making all investment decisions regarding the Fund.
    2. The Committee’s fiduciary duty is to act in the best financial interest of members of the Fund and ensure that the Fund’s objectives, as set out in the Investment Strategy Statement, are met. The Committee therefore aims to seek the best risk adjusted investment return to meet long-term funding objectives subject to the appropriate level of risk and an optimal level of liquidity.
    3. The Committee seeks to fulfil its statutory duty which requires it to consider responsible investment in its investment strategy and in all asset classes.
    4. Responsible Investment is defined by the United Nation’s ‘Principles for Responsible Investment’ document as an approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and to generate sustainable, long-term investment returns.
    5. The Committee recognises that, as a long-term investor, it should incorporate ESG factors into its investment decision making process as the value of investments may be negatively impacted if these factors are not properly understood or evaluated. When referring to ESG factors, the Committee considers financially material considerations, including climate change.
  2. Committee decision making
    1. The Committee aims to integrate consideration of ESG factors throughout all aspects of its investment decision making process, including the setting of the investment strategy and monitoring the Fund’s investment managers. The Committee is supported in these aims through regular and ongoing input from, and engagement with, the Fund’s investment advisers and the London Collective Investment Vehicle (LCIV).
    2. The Committee does not apply personal, ethical, moral or political judgments as the primary driver when making investment decisions and instead remains focused on the main objective of acting in the best financial interests of the Fund’s members. The Committee considers the availability, suitability and depth of conviction in an idea or strategy prior to investing and will take into account the expected cost versus potential benefit from a beneficiary perspective in
      line with the Committee’s fiduciary duty.
    3. The Committee undertakes training on RI at least triennially to understand how ESG factors, including climate change, can impact the Fund’s assets and liabilities, and members’ retirement outcomes.
  3. Policy Implementation: Investment Manager Selection Process 
    1. As part of the investment manager appointment process, the Committee will assess prospective investment managers’ abilities to integrate ESG factors into their investment selection processes. This includes, but is not limited to:

      a. evidence of the existence of a manager Responsible Investment policy;
      b. evidence of ESG integration in the manager’s investment process;
      c. evidence of compliance with the Stewardship Code as published by the Financial Reporting Council (FRC);
      d. evidence of track record of actively engaging with global companies and stakeholders to influence best ESG practice;
      e. evidence of ability to appropriately disclose, measure and report on the overall impact of ESG decisions made.
       
    2. The Committee will obtain proper advice from the Fund’s internal and external advisors with the requisite knowledge and skills. The Fund’s investment advisor will assess ESG considerations as part of its due diligence process and assess investment managers against the following criteria:

      a. for active managers, the Fund’s advisor will assess how ESG factors are integrated into investment selection, divestment and retention decisions;
      b. for passive managers, the Fund’s advisor will place less focus on ESG issues in the investment selection process, and considers ESG issues in its responsible investment policy and whether or not the manager engages with global companies and stakeholders where appropriate;
      c. consideration of whether investment managers are making best effective use of voting rights and if votes are exercised in a manner consistent with ESG considerations specified by the manager;
      d. how significantly managers value ESG factors and whether any specialist teams and resources are dedicated to this area; and
      e. how ESG risk assessment is integrated into the portfolio investment selection process and the value and effectiveness of these risk assessments.
  4. Policy Implementation: Voting and Ongoing Engagement
    1. The Fund expects its investment managers to use their influence as major institutional investors to carry out the Fund’s rights and duties as a shareholder, including share voting, along with engagement with underlying investee companies.
    2. The Fund’s Investment advisors and officers will continue to engage with the investment managers on an ongoing basis to monitor overall investment performance, including ESG considerations. This can be implemented in several forms which include, but are not limited to:

      a. Regular meetings with investment managers to assess investment performance and the progress made towards achieving ESG targets;
      b. reviewing reports issued by investment managers and challenging performance where appropriate;
      c. working with investment managers to establish appropriate ESG reporting and disclosures in line with the Pension Fund’s objectives;
      d. contributing to various working groups that seek to positively influence the reporting of industry standards on ESG metrics;
      e. actively contributing to the efforts of engagement groups such as the Local Authority Pension Fund Forum (LAPFF), of which the fund is a member. Voting carried out by the London CIV (LCIV) is delegated to the external manager and monitored on a quarterly basis and expected to be in line with LAPFF directions.
      f. review the stewardship activities with input from the Fund's investment adviser and engage with investment managers as required
      g. engage with any investment manager or service provider if it does not meet any of the expectations listed in this policy. Officers will intervene with the respective stakeholder to encourage improvements in processes, transparency or activity as required.
       
    3. Fund officers and investment advisors will work closely with the LCIV pool, in developing and monitoring its internal frameworks and policies on all ESG factors which could present a material financial risk to the long-term performance of the Fund. This includes the LCIV’s ESG frameworks and policies for investment analysis, decision making and responsible investment strategy.
    4. In preparing and reviewing its Investment Strategy Statement, the Pension Fund will consult with interested stakeholders including, but not limited to:

      a. pension fund employers and beneficiaries;
      b. Bexley Local Pension Board;
      c. advisors/consultants to the fund;
      d. investment managers.
       
    5. The Fund will be fully committed to completing the Task Force on Climate Related Financial Disclosures (TCFD) if/when the relevant LGPS regulatory requirements are published.
  5. Policy Implementation: Training
    1. The Pensions Committee and the Fund officers will receive regular training on ESG issues and responsible investment. Training is intended to cover the latest updates in legislation and regulations, as well as best practice with regard to ESG integration into the Fund’s investment processes.
  6. Disclosure and reporting
    1. This policy supplements additional disclosures and information available as part of the Committee’s Investment Strategy Statement.
    2. The policy will be reviewed at least every three years as part of each formal triennial investment strategy review, or as required in response to changing regulations or broader governance issues.