|
|
RESPONSIBLE INVESTMENT
|
Statement of Investment Principles
The principles governing the investment of assets of the Northern Ireland Local Government Pension Fund are set out in the Statement of Investment Principles. The principles state that NILGOSC will take into account socially responsible investment considerations, provided that the primary financial obligation to act in the best interests of the scheme beneficiaries is not compromised.
Link to Statement
of Investment Principles
Responsible Investment
NILGOSC
believes that environmental, social and governance (ESG) issues can affect the
performance of investments. Accordingly, NILGOSC believes that these factors
should be taken into account when managing the Scheme’s assets, subject to the
overriding fiduciary duty to maximise the financial return on investments.
NILGOSC has developed a Statement of Responsible Investment to outline how such issues are incorporated into its investment practices. In addition, NILGOSC has adopted the United Nations Principles of Responsible Investment as a means of demonstrating its commitment to responsible investment. A link to both documents can be found below.
Link to Statement of Responsible Investment
Link to UN Principles of Responsible Investment
Link to PRI Reporting and Assessment Survey 2010
Stewardship Code
The Financial Reporting Council issued the UK Stewardship Code in July 2010. The Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities. The Code sets out 7 Principles which are considered to be good practice and to which investors should aspire. NILGOSC supports the Principles and seeks to promote the Code directly or indirectly through the mandates given to its investment managers.
In accordance with best practice,
NILGOSC has published a statement of its compliance with the Stewardship Code.
Link to Stewardship
Code Statement of Adherence
Climate Risk Statement
Of all the environmental, social or governance risks facing investors, climate change has arguably the greatest potential for widespread impact across individual corporations, sectors, asset classes and economies. As a long term investor, a changing climate presents significant long-term risks to the value and security of pension scheme investments and capital markets more broadly.
The changing climate presents a variety of risks and opportunities for pension fund investors. Investment practices should therefore seek to protect assets from climate risks such as weather events and regulatory change, while simultaneously seizing the new opportunities that a low-carbon economy presents.
NILGOSC has developed a Climate Risk Statement to sit alongside the Statement of Responsible Investment. The Statement acknowledges the importance of climate risk as an investment issue and sets out the steps which will be taken to address it.
Link to Climate
Risk Statement
Corporate Governance
Corporate governance is a generic term that describes the ways in which rights and responsibilities are shared between the various corporate participants, namely management and the shareholders. It is a framework which ensures that decisions are made in the best interests of shareholders and the public at large, and covers a wide range of issues including management structure, remuneration, reporting and accountability.
NILGOSC
believes that, as a responsible investor, it has a legitimate interest in the
management of companies in which it invests. In 2005, NILGOSC developed a
Corporate Governance and Voting Policy that sets out its expectations for good
corporate governance. By exercising its right to vote at company
meetings, NILGOSC seeks to improve corporate behaviour by maintaining effective
shareholder oversight of the directors and company policies, a process on which
the current system of corporate governance depends.
NILGOSC commenced voting on its UK shareholdings in April 2006, a process which
was extended to include all global holdings in April 2007. The number and
type of resolutions put to the shareholder vote differ greatly across the
globe, with few countries allowing shareholders to vote on the breadth of
issues currently presented to AGM’s in the UK. Levels of disclosure also
vary widely, with certain markets providing insufficient information to allow
an informed voting decision to be made.
NILGOSC accepts that corporate governance practices and best practice
guidelines vary throughout the world. This makes it difficult to establish a
single set of voting guidelines which can be applied to all markets.
Instead, NILGOSC has developed three individual Voting Policy documents,
setting out NILGOSC’s policy on its expectations for good Corporate Governance
in the companies in which it invests. They further set out how NILGOSC
will vote in order to promote good Corporate Governance in the UK, North
American and other International markets.
The Voting Policies provide a basis for communicating with investee companies
and holding directors accountable for their stewardship of the company.
Proxy voting is a means of maintaining effective shareholder oversight of
directors and company policies. The policies represent NILGOSC’s view on
what it believes are important elements of good corporate governance and
identify its voting guidelines on specific issues.
Link to North American Voting Policy
Link to International Voting Policy
Voting
NILGOSC has appointed a specialist corporate governance partner, RiskMetrics Group, to coordinate its corporate governance and voting activities. NILGOSC avails of RiskMetrics Group’s corporate governance research service, which provides detailed information and financial analysis on which informed voting decisions can be made. RiskMetrics Group casts votes electronically on NILGOSC’s behalf, in accordance with its bespoke corporate governance and voting policy.
NILGOSC supports the use of voting rights as a means of expressing concern over corporate governance issues. Many institutional shareholders choose to abstain from voting on a resolution rather than vote directly against it, believing that this approach will send a warning signal to a company. However, companies do not always disclose the level of abstentions, thereby portraying a higher level of support than it actually received on a particular resolution. NILGOSC believes that there should be no grey area when it comes to voting and has adopted a policy of not abstaining, except where market restrictions make it impractical to vote.
The following links provide a summary of the Fund’s voting activity for the last three years.
Link to Voting
Activity 2008 Proxy Season
Link to Shareholder
Resolution Appendix 2008
Link to Voting
Activity 2009 Proxy Season
Link to Shareholder
Resolution Appendix 2009
Link to Voting
Activity 2010 Proxy Season
Link to Shareholder Resolution Appendix 2010
Link to Voting
Activity 2011 Proxy Season
Link to Shareholder Resolution Appendix 2011
Link to Detailed Quarterly Voting Reports
Engagement
NILGOSC acknowledges that good ESG practices can have a favourable impact both on financial performance and society in general. Accordingly, NILGOSC requires its active investment managers to monitor best practice in this area and ensure that ESG considerations, where relevant, are taken into account in the investment management process. All active fund managers are instructed to engage, on NILGOSC’s behalf, with those companies where ESG policies fall short of acceptable standards and where this is likely to have a detrimental effect on the long-term value of the company.
In addition,
NILGOSC is a member of the Local Authority Pension Fund Forum (LAPFF). The
LAPFF brings together local authority pension funds across the UK and provides
a unique opportunity for discussing investment issues, promoting corporate
social responsibility and maximising the influence shareholders have in
companies in which they invest.
To contact us
about Corporate Governance or ESG issues, please email
governance@nilgosc.org.uk