Lewisham Pension Fund responsible investment survey

Overview

Please share your views about responsible investment

Dear Lewisham Pension Fund Member,

The Pensions Investment Committee wants to hear your views about the sorts of things the Lewisham Pension Fund invests in. We understand this is a complicated topic, but we know many of you have views and would like to be able to help shape some of the investment decisions made on your behalf – we’ve tried to explain as simply as possible the different risks and opportunities our investment decisions present.

We’d like to understand what’s important to you as a member of the Fund. Your feedback will help guide our priorities by showing us what matters to you most.

About the Pension Fund

The London Borough of Lewisham Pension Fund exists to provide retirement benefits to members. The Fund has a pool of assets that has been built up over
many years from contributions made by members and employers. This pool of assets is invested in things like company shares, bonds and property. The Fund intentionally invests in a wide range of countries, sectors and products. This diversity ensures that the Fund can manage risks over the long term because short term decreases in performance in any one sector might be offset by gains in another.

These investments provide income that allow pensions to be paid each month, whilst aiming to grow the value of the assets to counter the effects of inflation.
As this is a defined benefit scheme, the responsibility for ensuring that there are sufficient funds to meet the pension costs falls to the employer and not the
employee, meaning that any risk to funding is met by increased employer contributions.

The Pensions Investment Committee (“Committee”) is the primary investment decision-making body for the Fund. The Committee is made up of elected  councillors, who are responsible for ensuring that the assets are invested in a way that allows all benefits to be paid, taking account of relevant legal and regulatory issues.

Responsible Investment

When deciding how to invest the assets, the Committee considers a range of issues, such as how much risk it wants to take to generate returns and
ensuring that there is sufficient cash coming into the Fund to pay pensions each month. It also considers factors such as climate change, which creates risks to investment returns; working practices within companies that it invests in; and how organisations are run. You may have seen these factors referenced as  Environmental, Social and Governance issues, or ESG for short, but we call this ‘responsible investment’. 

Responsible investment matters to us because these factors can create risks to the returns that we might earn from our assets and we want to ensure that we consider everything that could be relevant. However, we also recognise that we can invest some of the Fund in assets that have a clear positive impact, as well as generating the returns that we need.

As part of our ongoing commitment, the Committee has already put in place a series of policies that set out the Committee’s core principles and views on
responsible investment. The key policy documents agreed by the Committee can be accessed at lewishampensions.org. They are:

1. Investment Strategy Statement including the Responsible Investment Beliefs Statement
2. Climate Transition & Net Zero Policy
3. Engagement Policy

We’d like to understand what’s important to you as a member of the Fund. Your feedback will help guide our priorities by showing us what matters to you most.

If you have any questions, please email LGPS_pension_survey@lewisham.gov.uk

To help you understand all the terms used in the survey, please refer to the glossary below: 

Glossary

Assets or Assets Under Management (AUM): pension fund investments managed by the fund.

Asset Pooling: refers to the process of combining assets from multiple pension funds into a larger investment pool. This is done to achieve greater scale, efficiency, and cost savings, however each fund is responsible for its own funding and future pension liabilities to its members.

Climate Solutions: refers to products, services, technologies or activities that directly support the transition to a cleaner, low carbon economy which uses more sustainable alternatives.

Climate Transition: refers to the global shift from a high-carbon economy to a low-carbon or net-zero one. This transition has profound implications for investors, as it introduces both risks and opportunities across asset classes, sectors and geographies.

Defined Benefit Scheme: a type of pension plan in which an employer promises a specified pension payment,lump-sum (or combination) on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age.

Engagement: this refers to the active dialogue and interaction with companies or asset managers in which the fund invests, with the goal of influencing their behaviour, improving performance, or ensuring alignment with the Fund’s values and long-term interests.

Engagement Policy: a policy that outlines how the Pension Fund engages with investment managers to influence their investment decisions and practices.

Environmental, Social, and Governance (ESG): factors that are considered in investment decisions, including climate change, human rights, and good governance.

Fiduciary Duty: refers to the legal and ethical obligation of those managing the fund (such as councillors, investment managers or administrators) to act in the best interests of the members who will receive the pensions.

Financial/Investment returns: refers to the profit or income generated from the Fund’s investments over time. These returns are crucial because they help grow the Fund’s assets and ensure it can meet its future pension obligations for its members.

Investment Strategy Statement (ISS): is a key document that provides details on how the Fund intends to invest its assets, including its responsible investment beliefs, to achieve the financial returns to be able to pay future pensions to its members.

LGPS: Local Government Pension Scheme

Net Zero Policy: a policy aimed at reducing the Fund’s carbon emissions to net zero by a specified date.

Pension Fund Annual Report: a formal document published each year by each Local Government Pension Scheme (LGPS) fund in the UK. It provides a comprehensive overview of the fund’s operations, financial performance, governance and investment activities over the previous financial year.

Pensions Investment Committee (PIC): the primary investment decision-making body for the Fund, responsible for ensuring that the assets are invested in a way that allows all benefits to be paid.

Responsible Investment (RI): refers to an approach that integrates environmental, social and governance (ESG) factors into investment decisions, with the aim of generating sustainable long-term returns for its members.

Risk: refers to the possibility that the actual returns on the Pension Fund’s investments will differ from expected returns, potentially affecting the ability to meet future liabilities (i.e. to pay pensions).

Social Factors: refers to the elements within society that influence people’s behaviours, attitudes and opportunities. Human rights violations; Labour practices (e.g. child labour, unsafe working conditions); community relations; diversity, equity and inclusion; data privacy and security; health and safety standards; cultural sensitivity and indigenous rights.

Survey: a method of gathering information from members to understand their views and priorities regarding the Pension Fund's inverstments.