Agenda item

The Committee received the Responsible Investments Update report, which enabled approval of the updated 2026 Responsible Investment Policy.  Members were reminded of the previous petition and the two workshops held in January and February to develop the draft. The policy positioned the Fund for full asset pooling with the LCIV by March 2026, strengthened climate and stewardship commitments, introduced exclusions and a 5% impact?investment target, embedded four priority UN SDGs and set out an enhanced stewardship and governance framework. It was noted that the LCIV had reviewed the updated policy and that the major changes related to asset pooling, Net Zero commitments, ESG expectations and the adoption of the four priority SDGs.

Members queried whether the Fund’s current approach to responsible investment sufficiently reflected ethical considerations, particularly in relation to weapons manufacturing, and noted concerns raised by residents. Reference was made to UN Sustainable Development Goal 16, with emphasis on human rights, long?term sustainability and the ethical expectations of future pension fund members. It was also noted that some local authorities had taken steps to divest from arms?related investments.

In response, it was confirmed that all 17 UN Sustainable Development Goals were included within the appendix and would be considered alongside government guidance. Members were advised that current guidance discouraged immediate divestment and that the draft policy represented the starting point of a longer?term responsible investment approach. It was explained that most investments were held through the London CIV, with options expected to develop over time, and that any future transition would need to balance ethical considerations, costs and investment returns.

It was noted that previous discussions had indicated a preference to progress towards Pillar 2, with potential scope to consider Pillar 3 in future. Officers advised that suitable Pillar 3 options were not currently available through the London CIV and that immediate disinvestment would not be appropriate. Members’ intentions were noted, and it was confirmed that a gradual transition would be pursued when suitable products became available.

The draft Responsible Investment Policy was considered, and it was noted that some uncertainty remained around the pooling process, which could constrain progress on more impactful investments. It was further observed that, in the absence of mandatory pooling requirements, greater progress may have been achievable within the Fund’s own portfolio.

Concern was raised about the lack of a clear timeline for moving from Pillar 2 to Pillar 3, with a risk that ESG progress could be delayed. The Committee emphasised its desire to actively progress this area and requested clarity from London CIV on the availability of suitable Pillar 3 products, including an indicative timeline.

In response, it was confirmed that an update on product development would be provided at the next meeting. It was noted that short?term progress was likely to be limited due to ongoing change and consolidation, and it was agreed that progress should be reviewed on a six?monthly basis to monitor emerging opportunities.

The Committee acknowledged that the Fund was currently constrained by pooling arrangements and government guidance, and that the draft policy reflected an appropriate strategic direction at this stage. It was agreed that London CIV should continue to be actively engaged to support progress towards future Pillar 3 options and that six?monthly progress updates would be included in the work programme, with reporting arrangements strengthened to more formally capture responsible investment progress.

RESOLVED: That the Pensions Committee noted and approved the draft responsible investment policy with the slight amendment to have it included quarterly in committee agendas