LGPS Central decreases rating for fixed income manager due to Environmental, Social, and Governance (ESG) shortcomings
LGPS Central Downgrades Fixed Income Manager Over ESG Concerns
In a move aimed at promoting responsible investment, LGPS Central, a UK-based pension pool, has downgraded one of its fixed income managers from "yellow" to "amber" due to ESG-related concerns and a lack of integration of ESG factors into their decision-making process.
The downgrade, announced in the pool's stewardship report published on June 4, 2024, reflects long-term concerns about the manager's integration of Environmental, Social, and Governance (ESG) factors into its investment strategy.
The report, which detailed LGPS Central's manager engagement and disclosure through a rating process, was critical of the downgraded manager's stewardship efforts in addressing ESG risks. The report mentioned that several investments of the downgraded manager had high exposure to ESG risk.
Despite requests, the name of the downgraded manager has not been disclosed publicly. The report, however, stated that if the level of engagement disclosure was unsatisfactory or the link between engagement and investment decision-making was unclear, fund managers were marked down through the rating review.
LGPS Central's stewardship provider EOS engaged with 687 companies globally in 2024, with 45% of objectives set by EOS being completed. The pool also engaged with 661 companies on climate change in 2024.
Recently, LGPS Central engaged with Barclays following the bank's commitment to stop financing new oil and gas fields and restrict lending to energy companies expanding fossil fuel production. Barclays provided LGPS Central with written reassurances that its new commitments were being followed in quarter four of 2024.
The downgrade is part of LGPS Central's ongoing efforts to promote responsible investment and ensure that its managers are integrating ESG factors into their decision-making processes. The pool's new stewardship strategy, which has faced some general pushback on responsible investment integration by asset owners in 2024, emphasises the importance of ESG factors in investment decisions.
As LGPS Central continues to push for greater ESG integration across its investment portfolio, the downgrade of the fixed income manager serves as a reminder of the importance of responsible investment and the need for transparency in engagement and disclosure processes.
- Environmental science and business intersect in LGPS Central's stewardship strategy, which emphasizes the importance of Environmental, Social, and Governance (ESG) factors in investment decisions.
- In the realm of finance and investing, LGPS Central downgraded a fixed income manager due to a lack of integration of ESG factors into their decision-making process, illustrating the significance of climate-change considerations in responsible investment.
- The impact of ESG factors on the environment is evident in LGPS Central's recent engagement with Barclays, where the bank's commitment to stop financing new oil and gas fields and restrict lending to energy companies expanding fossil fuel production was evaluated.
%20shortcomings){kind=link}