Has the PIP’s slow progress frustrated you?
It is not a frustration. We are more concerned with ensuring it is set up and managed properly and it is better it is done properly rather than too quickly. We are confident the recent management appointments are making good progress and delivering for us. PIP has achieved commitments of over £600m in the last 12 months, which is a fantastic start for a new venture. We believe the platform is really innovative and helping to re-align interests between good investment managers and investors. Cost savings will be substantial over the life of the funds which is beneficial to our goal of reducing investment costs.
How would you sum up the fund’s approach to ESG?
We take our stewardship responsibilities seriously so voting is important, as is engagement with companies and collaborating in appropriate initiatives in a manner consistent with our fiduciary obligations. When we look at individual investments we have an ESG overlay. We are signed up to a number of initiatives, including the Local Authority Pension Fund Forum, the UN PRI and the Institutional Investors Group on Climate Change. We feel working collaboratively with other local authority pension funds and likeminded investors is the right approach in this area. Any investments we make have to be in line with our agreed asset allocation and investment strategy, have the right risk and return characteristics as well as be properly managed, so we are very conscious of that.
Some people have described initiatives such as the UN PRI as ‘tick-box exercises’. What do you say to that?
I don’t think it is a tick-box initiative and it is not designed to be. Clearly there has to be rigorous reporting in these initiatives so they have meaning and there is always a balance to be struck, but I don’t think it would be fair to describe it as a ‘tick-box exercise’.
Are asset managers doing enough in this area?
Many of them have made headway but there is always more to be done. When we appoint any external manager, ESG is integrated into the selection process.
What is the thinking behind being involved the Investing4Growth initiative?
It is a collaborative venture between large UK local authority pension funds to make investments that achieve an appropriate investment return, but also provide some benefit to the UK economy. The rationale for doing so was to share due diligence resources so we benefit from each other’s efforts and more cost-effectively. Separately, we have made a commitment to a Finance Birmingham-managed fund which should deliver the returns we need but also help to stimulate economic activity and job creation as well as preserve jobs in the West Midlands region; so local investment selectively is of interest. As long as the risk/return characteristics are favourable, and consistent with our overall investment strategy, we are open to discussion to do more in this area.
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