Statement of Investment Principles

Transcription

1 London Pensions Fund Authority Statement of Investment Principles Approved by Board December 2013 Factual alterations since approval changes of words to be in line with Funding Strategy Statement January 2014 Page 3 of 19

2 Contents 1. Introduction and overview of the LPFA 2. Governance Structure of the LPFA 3. Investment Principles and Beliefs 4. Investment Objectives 5. Investment Strategy 6. Expected return on investments 7. Realisation of investments 8. Risk Management 9. Responsible investment 10. Stock lending 11. Compliance with Myners Principles Annex I Investment Committee terms of reference Annex II Risk Committee terms of reference Annex III LPFA fund managers & benchmarks Annex IV UN-back Principles for Responsible Investment Annex V Myners Compliance Statement Page 2 of 19v3.1

3 1. INTRODUCTION The Board ( the Board ) of the London Pensions Fund Authority ( the Fund ) has prepared this Statement of Investment Principles ( the Statement ) in accordance with the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 ( the Regulations ) and after taking appropriate advice. This Statement outlines the principles and policies governing investment decisions made by or on behalf of the Fund. It also reflects the Board s compliance with the Myners Principles. As set out in the Regulations, the Board will review this Statement from time to time, but at least every three years, and revise it as necessary. Also, in the event of a significant change in relation to any matter contained in this Statement, changes will be reflected within six months of the change occurring. This Statement is available to the public on the Fund s website: Overview of the LPFA and its Pension Fund The LPFA was established in 1989 as a stand-alone public body, to take over the running of the former Greater London Council (GLC) Pension Fund following the abolition of the GLC on 31 st March The LPFA is also one of the largest administering authorities of the LGPS, with agency contracts covering over 150,000 scheme members. The Fund itself is a final salary (defined benefit) pension scheme with approximately 79,000 members and assets of 4.6bn as at 31 st March Full details of our history and activities can be found in the About Us section of our website: With effect from 1st April 2013, the two LPFA Sub Funds have been amalgamated to form a unitary fund for strategic reasons. 2. GOVERNANCE OF THE LONDON PENSIONS FUND AUTHORITY The LPFA s Constitutional Document sets out the decision making process, matters reserved for Board, and the delegation to sub committee or officers. This document also sets out the procedures for managing conflicts of interest and Code of Practice for Board Members. The document can be found on our website: The key elements relevant to the management of the Scheme s investments are as follows. Board The Board is responsible for the strategic management of the Fund s assets, including setting investment objectives, establishing risk and return targets and setting the overall asset allocation and strategic benchmark (performance target) for the Fund. The Board oversees a hierarchy of delegation of power and clearly laid down procedures for the implementation of investment decisions and management of assets are strictly followed. Further, the Board ensures that suitable Compliance and Conflict of Interests policies have also been put in place, which has even greater significance given that the Fund will be adopting more innovative investment approaches and asset classes in the future. The Board of the LPFA is appointed by the Mayor of London and Board members are Page 3 of 19v3.1

4 accountable to the GLA in addition to the Mayor. Details of each Board member can be found on the Fund s website at Investment Committee The Board has established an Investment Committee to manage, consider and make recommendations on investment issues. The Investment Committee is accountable to the Board and has delegated power to determine tolerance ranges for sub-asset classes and implement the asset allocation strategy within those ranges. An Investment Sub-Committee comprising the Chief Investment Officer, the Chief Executive, the Finance Director, a member of the Investment Committee and the Investment Committee Chairman, is delegated to carry out tactical implementation of the strategy, including the appointment of managers or purchase of units in funds for mandates up to 5% of the total assets in low risk assets and 2% in higher risk assets. This would need to be compatible with the overall risk budget as agreed by Risk Committee, and should avoid investments which cause aggregation of risks. The Board recently approved the delegation of greater authority to the Investment Sub-Committee, primarily to avoid delays which may have opportunity cost and financial implications. The terms of reference for the Investment Committee are provided in Annex I. Risk Committee The Board has recently established a new Risk Committee to monitor the application of the LPFA s risk management system and to ensure that effective processes are in place to manage the most significant risks to the LPFA, most notably within the investment sphere. The Risk Committee has responsibility for oversight and advice to the Board on the current risk exposures and future risk strategy, including strategy for managing liabilities, and the embedding and maintenance of a supportive culture in relation to the management of risk throughout the Authority. Section 6 highlights the main risks that the Board considers on a regular basis. The terms of reference for the Risk Committee are provided in Annex II. Day to day fund management The day to day management of the Fund s assets, apart from cash, is delegated to external fund managers in accordance with the Regulations. The activities of each fund manager are specified in either detailed investment management agreements or subscription agreements. All fund managers are monitored regularly by the Investment Committee. The Board is satisfied that the appointed fund managers have sufficient expertise and experience to carry out their role. Custody The Board has appointed JP Morgan Europe Ltd as the Fund s custodian. The custodial services provided by JP Morgan include trade settlement and processing, portfolio reporting, cash/collateral management, proxy voting processing, stock lending and performance calculation. Page 4 of 19v3.1

5 3. INVESTMENT PRINCIPLES AND BELIEFS There have been a number of underlying investment beliefs and guiding principles which have shaped the evolution of the Fund s structure and will continue to do so in the future. The investment beliefs and principles are: Investment Principles Given the duration of our liabilities, we are responsible long term investors. We wish to encourage environmental, social and corporate governance best practice in the companies in which we invest, as we believe this will deliver the best long term returns. Main Investment Beliefs There is a link between investment risk and return. Strategic asset allocation takes account of our current and future liabilities. Asset allocation is the main driver of our fund s long term performance. Equities are expected to generate superior long term returns given their linkage to economic growth. Investment in a number of sources of return will increase the efficient return of the fund. Being a long term investor enables the fund to capture illiquidity premia. By appointing active managers in many areas we will enhance the return of the fund without unduly increasing the risk. The price of assets and timing of investments matter. Fees, transaction costs and taxes are certain, good performance is not. Following the crowd leads to diminished returns. A fund management approach that incorporates the evaluation of ESG risks and opportunities is more likely to result in long term benefits for the Fund. 4. INVESTMENT OBJECTIVES The Board s main investment objective is to ensure that over the long term the Fund will have sufficient assets to meet all pension liabilities as they fall due. In order to meet this overriding objective the Board maintains an investment policy so as to: a. Maximise the returns from investments whilst keeping risk within acceptable levels b. Contribute towards achieving and maintaining a future funding level of 100%, and c. Enable employer contribution rates to be kept as nearly constant as possible. Page 5 of 19v3.1

6 Along side this objective, the LPFA will use its influence as a large institutional investor to encourage responsible long-term behaviour. In particular it aims to support and develop best practice on ESG issues in the companies in which it invests, through the mandates given to fund managers and by collaborating with other like-minded investors. 5. INVESTMENT STRATEGY The Board sets the long term investment strategy by taking into account the nature and timing of future liabilities, the investment objectives listed above and by reference to the Fund s investment principles and beliefs. These factors drive decisions over asset allocation (i.e. the overall mix of equities, bonds etc. in the Fund) which the Board believes has a significant influence on its ability to achieve its investment objectives. The Fund s investments are highly diversified by asset class, geography, and industry. Quantitative and qualitative investment approaches are employed to capture investment opportunities and maximise returns within an accepted level of risk. Innovative investment ideas and asset classes are reviewed and assessed for their suitability and appropriateness as potential Pension Fund assets. A mixture of passive and active mandates is also used to capture the returns required to meet the Board s objectives. The table below sets out the asset allocation and the tolerance ranges for the Fund. This was approved by the Board in July Benchmark Allocation Board Asset Class % Tolerance Range % Liquids* Illiquids** Total Return Cash *Liquids: easily tradable investments such as listed equities, bonds, QIF and simple pooled fund vehicles. **Illiquids: investments which cannot be easily converted into cash within 3 years, without making LPFA a forced seller. A full list of the LPFA s fund managers and their benchmarks is included in Annex III 6. RISK MANAGEMENT There are various risks to which any pension scheme is exposed and that cannot be entirely eliminated. For that reason, the Board focuses on clearly identifying these risks and adopting mitigation strategies that minimise their impact on the Fund. To this end, the Risk Committee has been tasked with creating and enhancing the corporate risk culture and working closely with the executive officers to manage risks. The Board considers the following risks on a regular basis: Funding risk Assets may increase at a lower rate than the liabilities, resulting in a deteriorating funding position. The Board prepares a Funding Strategy Statement (FSS) every three years as part of the triennial valuation and monitors the Fund s investment strategy and performance relative to the growth in the liabilities at least annually. Page 6 of 19v3.1

7 Financial mismatch risk Assets and liabilities have different sensitivities to changes in financial factors, in particular inflation and interest rates. The Board sets an investment strategy that provides exposure to assets providing real (inflation protected) growth as well as cash flow generating assets that match the Fund s liabilities. Liquidity/Cashflow Risk A shortfall in liquid assets relative to short term liabilities (e.g. pension payments) could create the risk of selling assets at an unreasonably low price. The Board manages its cashflows to ensure that future payments can be met and that sufficient assets are held in liquid investments (realisable in three months or less). Manager Risk Fund managers could fail to achieve the investment returns specified in their mandates. This is considered by the Board when fund managers are selected and their performance is reviewed regularly by the Investment Committee as part of the manager monitoring process. Concentration Risk This refers to the risk that the performance of a single asset class or investment has a disproportionate influence on the Board s ability to meet its investment objectives. The Board mitigates this risk by establishing a well diversified strategic asset allocation, reviewing the investment strategy regularly and following a regular fund manager review process. Longevity Risk Demographic factors including the uncertainty around longevity / mortality projections (e.g. longer life expectancies) can contribute to funding risk. The Board recognises there are limited options currently available to fully mitigate or hedge this risk, but has subscribed to a specialist service (Club Vita) which provides a comprehensive analysis of the Fund s longevity data to enable them to understand and manage this issue in the most effective way. The Funding Strategy Statement, formal triennial actuarial valuations and periodic updates allow the Board to keep track of the Fund s liabilities. Counterparty Risk This describes the risk of the other party in a financial transaction (the counterparty) failing to meet its obligations to the Fund (e.g. because of a default event). The Board has set guidelines with its fund managers and its custodian to limit its exposure to default risk. It also has strict criteria within its stock lending agreements to mitigate counterparty risk in these transactions (see Section 11, below). Currency Risk A global asset allocation with sterling liabilities exposes the Fund to fluctuations in exchange rates that may affect the value of its investments. The Board has established a currency hedge covering 50% of the global equity portfolio to dampen the effect of foreign currency fluctuations against sterling. This position is reviewed regularly as part of the investment strategy review. Page 7 of 19v3.1

8 ESG Risk The Board recognises that environmental, social and corporate governance (ESG) issues can be a source of long term risk to asset values. Please Section 9 for more details. 7. EXPECTED RETURN ON INVESTMENTS The investment strategy is developed by reference initially to the valuation of liabilities measured on a risk free basis. The Board then assesses their appetite for risk, and determines the risks that they will hedge. They then determine an investment strategy to achieve the required return based on the expected return on asset classes (for equities, bonds, property etc.) within the appetite for risk as measured by the dispersion (likely range) of these returns. The Board is satisfied that the investment strategy has a sufficient probability of meeting its return targets. Over the long-term, it is expected that the Fund s investment returns will be at least in line with these assumptions. 8. LIQUIDITY OF INVESTMENTS Regular pension payments and the need to provide acceptable collateral for hedging purpose means that the Fund has to maintain an appropriate level of liquidity by keeping a portion of its assets in cash and near cash assets. This objective has to be balanced with the need to produce the required expected return in order to close the deficit gap. The maintenance of the liquidity level, part of the Investment Strategy, is delegated by the Board to the Investment Committee/Investment Sub Committee and the CIO. Assets in the Fund that are considered to be illiquid include some of the private equity, infrastructure, property and commodity investments. As a long term investor the Board considers it prudent to include illiquid assets in its strategic asset allocation in order to benefit from the additional diversification and extra return this should provide. 9. RESPONSIBLE INVESTMENT ESG Risk Management ESG is a core belief in LPFA. We have developed a level of understanding and an approach which has taken ESG as far as we believe we need to at this stage. We stop thinking about ESG as a separate strand, yet maintain the expectation that our managers understand it and apply it as part of their core approach and they should provide assurances that these issues are being taken into account on an agreed basis. Voting Rights The Board believes that exercising its rights as a shareholder through voting activities will contribute to better returns over the long term. As a result, the Board has reconsidered how the Fund may best exercise its voting rights, given its externally managed structure and current resources available to the Fund. Accordingly, the Board has decided to delegate authority to the managers to exercise voting rights on its behalf. At the present time, the Board believes this is the most efficient approach whilst ensuring the implementation of the voting policy by each manager is consistent with current best practice and there is appropriate disclosure and reporting of actions taken. The managers are expected to report, on a quarterly basis, a statement of voting instruction submitted to company meetings on behalf of the Fund and any significant company issues, if any, which arose during the quarter. Voting decisions are published on the managers websites. The Fund Page 8 of 19v3.1

9 also monitors and receives reports back on engagement activity undertaken by its asset managers. Collaborative Initiatives To supplement the above activities, the Fund seeks to work collaboratively with other institutional shareholders in order to maximise the influence that it can have on market participants such as regulatory bodies, investment managers, companies etc. The Fund seeks to achieve this through various collaborative initiatives such as membership in the Local Authority Pension Fund Forum, which engages with various stakeholders over ESG issues on behalf of its members, as well as the UN-backed Principles for Responsible Investment (refer to Appendix IV). 10. STOCK LENDING The Board reinstated its stock lending programme in April 2009 after a brief period of review in 2008 during which it decided that the benefits to the Fund outweighed any risks. The Board recognises that stock lending results in the transfer of ownership (including voting rights) to a counterparty whilst economic exposure is retained by the Fund. In order to mitigate the economic and counterparty risk implicit in this transaction, the Board no longer accepts cash as collateral, in favour of UK, Eurozone and US government bonds as well as equity from major indices. With regard to stock lending and voting rights, industry best practice has moved towards using master lending agreements that prohibit the borrowing of stock for the purpose of voting. The Board supports this move and is considering how it can continue to meet best practice as suggested by organisations such as the International Corporate Governance Network and the OECD. 11. COMPLIANCE WITH MYNERS PRINCIPLES Board Members carried out the annual self assessment against the Myners Principles in June Based on that review the Board was deemed to be in full compliance. The detailed results of the latest assessment are included in Annex V of this Statement. Much of the high level supporting information is contained in this Statement e.g. regarding the Fund governance structure, investment decision-making and responsible ownership. In preparing the Myners compliance statement the Board considered the 2009 guidance provided by CIPFA regarding the application of the Myners Principles in the LGPS. In particular, the Board recognises: 1. The importance of Board members reporting on their performance against the Myners Principles, and 2. The value of sharing best practice more widely within the LGPS The Board hopes that the detail provided in Annex V helps to support these wider objectives. Page 9 of 19v3.1

10 ANNEX I Investment Committee Terms of Reference The function of the Investment Committee is to consider the appropriate investment policy of the Authority and what steps might be taken, subject to possibly amending Regulations, to implement a matched investment strategy, and to include all aspects of investment policy and management. The specific duties of the Investment Committee are as follows: To implement, review and monitor the investment policy and strategy of the Fund To monitor the performance of the Fund and investment managers against the targets set To review the management agreements and fees charged To consider the extent to which advice is required from external advisers, the actuary appointed for the Fund and investment managers To monitor action taken on voting shares and review developing best practice To monitor the operation of the securities lending programme To consider any other matters where requested to do so by the Board To report to the Board on the discharge of the above duties. Page 10 of 19v3.1

11 ANNEX II Risk Committee Terms of Reference The function of the Risk Committee is to monitor the application of the risk management system and to ensure that effective processes are in place to manage the most significant risks to the Authority. The Risk Committee has responsibility for oversight and advice to the Board on the current risk exposures and future risk strategy, including strategy for managing liabilities, and the embedding and maintenance of a supportive culture in relation to the management of risk throughout the Authority. The specific duties of the Risk Committee are as follows: Strategic: Advise the Board on the Authority s overall risk appetite, tolerance and strategy. Oversee and advise the Board on the current risk exposures of the Authority and future risk strategy. Review the Authority s capability to identify and manage new risks and types of risk. Advise the Board on risks surrounding any strategic alliances, co-investment processes or joint working and take external advice where appropriate. Operational: Keep under review the Authority s overall risk assessment processes that inform the Board s decision making, ensuring both qualitative and quantitative metrics are used. Review reports on any material breaches of risk limits and the adequacy of the proposed action. Provide an annual report to Audit Committee and Board on activities undertaken during the year to manage the significant risks facing the Authority. This should be included in the Annual Report and Accounts. Committee Chairman shall report to the Board on its proceedings after each meeting via the minutes. The Committee will arrange periodic assessments of its own performance and review periodically its terms of reference and recommend any changes to the Board for approval. Page 11 of 19v3.1

12 London Pensions Fund Authority ANNEX III LPFA fund managers & benchmarks* Asset Class / Fund Manager Benchmark Global Active Equity - MFS Newton Satellite Fund - Sarasin & Partners Private Equity - Bankinvest Harbourvest LGT Pantheon Robeco YFM Zouk Cleantech Europe Global Passive Equity - Legal & General FTSE All World Global Property - IPD Annual Global ING Real Estate Select Property Index Diversifying Assets - Target Return - Blackrock Cash+3% Infrastructure - 3i Infrastructure 20yr Gilt +3% Fortis Clean Energy Fund 20yr Gilt +3% IIC Partnership 20yr Gilt +3% Impax New Energy Investor 20yr Gilt +3% Henderson PFI 20yr Gilt +3% HICL Infrastructure Company Limited 20yr Gilt +3% HSBC Environmental Infrastructure 20yr Gilt +3% Meridiam 20yr Gilt +3% Semperian 20yr Gilt +3% Standard Chartered Asian Infrastructure 20yr Gilt +3% Zouk Solar Opportunities 20yr Gilt +3% Commodities - Brookfield Brazil Agriland Fund Cash+3% Phaunos Timber Fund Ltd Cash+3% Schroders Commodity Fund Cash+3% Opportunity Fund - Brevan Howard Cash+3% M&G Cash+3% Liability Driven Investment Insight Cashflow matching benchmark ECM, BR and Insight Bond Plus 1 month LIBOR Legal & General/Insight Synthetic FTSE All World IC/Henderson RPI+3% * as of June 2013 Page 3 of 19

13 ANNEX IV Principles for Responsible Investment Principle 1: We will incorporate ESG issues into investment analysis and decisionmaking processes. Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices. Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest. Principle 4: We will promote acceptance and implementation of the Principles within the investment industry. Principle 5: We will work together to enhance our effectiveness in implementing the Principles. Principle 6: We will report on our activities and progress towards implementing the Principles. Page 13 of 19v3.1

14 London Pensions Fund Authority ANNEX V Myners Principles compliance statement Principle Requirement CIPFA Guidance LPFA Assessment Actions 1) Effective decision making Administering authorities should ensure that: 1) Decisions are taken by persons or organisations with the skills, knowledge, advice and resources necessary to make them effectively and monitor their implementation 2) Those persons or organisations have sufficient expertise to be able to evaluate and challenge the advice they receive, and manage conflicts of interest - Clear structure for management of pension fund - Clear roles and responsibilities - Declaration of interests before each meeting - Prepare and publish governance compliance statements - Pension fund oversight given to people with appropriate skills and experience - Clear Terms Of Reference - Clear process for decision-making and delegation - Conduct skills audits and provide regular training - Establish an investment committee; assess Terms of Reference regularly - Obtain proper advice from suitably qualified persons - Develop a clear business plan for the Fund Full compliance: LPFA s Constitutional Document sets out the decision making process, matters reserved for Board, and the delegation to sub committee or officers. This constitutional document sets out the procedures for managing conflicts of interest and Code of Practice for Board Members. The recent Board Member Performance Evaluation results highlighted that the constitution is generally fit for purpose. Results of the Board Member Self Assessment are analysed by the Chairman and a schedule of individual and collective training is implemented. A range of skills are present on all committees, to enable a range of viewpoints to be heard, rather than only having committees consisting of experts. Carry out Board Performance Evaluation in October evaluation complete Page 3 of 19

15 Principle Requirement CIPFA Guidance LPFA Assessment Actions 2) An overall investment - Overall investment objectives should Full compliance Clear objectives objective(s) should be set out for the Fund that takes account of the consider liabilities, assets and fund maturity profile - Demonstrate proper advice has been Clear objectives are in place on both the investment side and the pensions scheme s liabilities, the sought using independent advisors administration side of the authority. potential impact on tax payers, the strength of where appropriate - Consider all asset classes in light of risk Investment principles and beliefs underpin the the covenant for non-local appetite; give reasons for excluding investment strategy which takes into account authority employers, and the attitude to risk of both asset classes - Importance of diversification the scheme s liabilities and maturity. the administering - Include achievement of value for money Fund objectives are set out in the SIP and authority and scheme employers, and these and efficiency in objectives - Maintain stable employer contribution Investment Management Agreements are in place on all segregated mandates. A should be clearly rates and consider impact on long term customised benchmark has been adopted communicated to advisers and fund managers council tax rates - Consider establishing sub-funds to based on asset/liability studies undertaken by the Fund s actuary. match liability/member profiles - Ensure that transaction costs are fully On the administration side a Strategic Policy understood Statement is prepared annually which sets out the three year strategic direction and medium term financial strategy of the Authority. Page 15 of 19v3.1

16 Principle Requirement CIPFA Guidance LPFA Assessment Actions 3) In setting and reviewing - Fund investment objective accounts for Full compliance Assess results Risk & liabilities their investment strategy, administering authorities attitude to risk - Willingness to accept underperformance Following each triennial valuation Board of the Valuation 4 th should take account of the form and structure of due to market conditions - Clear benchmarks and consider scheme Members assess the structure of liabilities and amend the investment strategy if necessary. October 2013 liabilities specific benchmark - SIP to include description of risk The fund s aspiration is that active Managers Implement a liabilities These include the assessment framework used for will outperform their benchmarks over the long monitoring implications for local tax payers, the strength of investments - Risk assessment of valuation of assets term. Allowances are made for periods of underperformance in the shorter term. system the covenant for and liabilities and analysis of factors participating employers, affecting long term performance should An annual review of LPFA s internal controls is the risk of their default be included as part of the triennial conducted during preparation of the Annual and longevity risk valuation - Relevant committee should be satisfied Governance Statement which features in the Annual Report and Accounts. In addition a of internal control environment - Investment Strategy is suitable for Board driven Corporate Risk Register is reviewed quarterly. objectives - Assessment of whether cash flows Risk Committee established to improve the match liabilities and acceptable levels of management of LPFA s liabilities. returns volatility - Overall risk assessment should be summarised in annual report Page 16 of 19v3.1

17 Principle Requirement CIPFA Guidance LPFA Assessment Actions 4) Performance Assessment Arrangements should be in place for the formal measurement of performance of the investments, fund managers and advisers Administering authorities should also periodically make a formal assessment of their own effectiveness as a decision-making body and report on this to scheme members. - Are benchmarks and tracking error limits appropriate? - Consider active and passive styles for each asset class - Set appropriate controls for active mandates - Clear and detailed Investment Management Agreements - Performance targets linked to time periods - Regular monitoring of investment activity - Returns from each asset class should be measured as well as overall fund return - Fund manager effectiveness and the compatibility of the asset/liability profile should be measured over 3-7 year periods - Performance figures should come from a specialist, independent from fund managers - Data should include attributions to asset allocation, stock and sector selection and currency risk - Adviser and actuary performance should be reviewed and assessed - Process of self assessment should involve both officers and members of committees - Internal governance should be assessed and results published in Annual Report Full compliance Performance of the fund and fund managers is monitored quarterly by the Investment Committee and all major fund managers are held to account via regular meetings. Performance data is provided by an independent specialist which includes an attribution analysis. Board Members carry out an internally managed Board Performance Evaluation and a Board Member Self Assessment on an annual basis. The performance evaluation looks at the performance of the Board as a whole, while the self assessment concentrates on individual training needs. Each Board Member has an annual appraisal with the Chairman of the Board where contribution to the meetings is assessed. Page 17 of 19v3.1

18 Principle Requirement CIPFA Guidance LPFA Assessment Actions 5) Administering authorities - Responsible ownership policies should Full compliance. N/A Responsible Ownership should: Adopt, or ensure their be disclosed in the SIP and annual report - Approach to responsible ownership The annual report, SIP and website include sections on the fund s approach to responsible fund managers adopt the should include long term RI and the investment and on-going activities in this area. ISC Statement of Principles potential for ESG issues to add value - Investment committee should ensure At each quarter meeting Investment that managers have an explicit strategy Committee meeting Board members discussed Include a statement of their policy on responsible for intervention - Consultants should adopt the ISC code Responsible investment and voting and engagement issues, if required, and these ownership in the SIP - Funds should be aware of the latest issues are reported on an exception basis. iteration of the ISC Code and the UN Report periodically to scheme members on the PRI - Ensure fund manager policies do not Fund managers confirm their compliance to ISC code and UNPRI annually. discharge of such override, negate or dilute the Board s responsibilities policies - Open monitoring of actions The LPFA is a participating member of the Local Authority Pension Fund Forum (LAPFF) and receives information on environmental, social and governance issues. Page 18 of 19v3.1

19 Principle Requirement CIPFA Guidance LPFA Assessment Actions 6) Transparency & reporting Administering authorities should: 1. Act in a transparent manner, communicating with stakeholders on issues relating to their management of investment, its governance and risks, including performance against stated objectives 2. Provide regular communication to scheme members in the form they consider most appropriate - Clear and well communicated governance framework - Clear fund communication statement - Comprehensive view of who its stakeholders are and their interests in the Fund - Follow other s good practice and highlight own good practice - Regularly compare Annual Report to regulations - Publish Funding Strategy Statement, SIP and Governance Compliance Statement as core documents Full compliance Details of the Fund s Communication Policy Statement and all other reports which form the suite of annual report documentation are published on the website A summary annual report is sent hard copy to all members of the fund. LPFA also holds an annual Fund Member Forum where all members have the opportunity to hold the Executive to account. Panels have been established for both fund members and employers of the fund and all Board meetings are held in public. LPFA s SIP published by 1 st July LPFA s Annual Report and Accounts signed off by the auditor prior to 30 th September Page 19 of 19v3.1