What this consultation is about
Stakeholders in Derbyshire Pension Fund are being asked for their comments on the fund’s proposed:
- Investment Strategy Statement
- Responsible Investment Framework
- Climate Strategy
Derbyshire Pension Fund is part of the national Local Government Pension Scheme (LGPS) which provides retirement and death benefits for local government employees, and those employed in similar or related bodies, across the whole of the UK. Derbyshire Pension Fund currently has over 330 participating scheme employers and around 104,000 members. The primary duty of the pension fund is to pay members’ pension benefits.
In the LGPS, members’ benefits are set out in government regulations with the level of pension paid primarily based on length of service and salary. Contributions collected from employees and employers are invested across a range of asset classes, including:
These assets generate long term income and capital returns to support the payment of pensions.
Employers meet the balance of the cost of providing benefits over the longer term, and a return seeking investment strategy aims to reduce employer costs. The risk associated with a return seeking strategy is carried by employers and ultimately in most cases, by local taxpayers. The fund currently has assets of approximately £5.2bn.
Investment Strategy Statement
The Investment Strategy Statement (ISS) sets out the long-term investment strategy of the pension fund and includes:
- the fund’s investment objectives
- the strategic asset allocation benchmark
- descriptions of the asset classes that the fund invests in
- the fund’s approach to managing risk
- the approach to pooling the management of investments with other LGPS funds
A revised ISS has been developed to reflect a new proposed strategic asset allocation benchmark, an extension of the fund’s hedging policy (protecting asset values against movements in exchange rates), the development of a standalone Responsible Investment Framework and a standalone Climate Strategy.
Responsible Investment Framework
Responsible investment is an approach to investment that aims to take into account environmental, social and governance (ESG) considerations when making investment decisions to better manage risk and generate sustainable long-term returns. A Responsible Investment Framework has been developed for the fund and includes examples of ESG factors that are considered as part of the investment process.
Responsible investment is relevant both before and after an initial investment decision, including considered voting on shareholder resolutions and engagement with investee companies. It is distinct from ethical investment which is an approach to selecting investments based on ethical beliefs (beliefs about what is morally right and wrong).
In recognition of the potential material effect of climate change, and the response to climate change, on the assets and liabilities of the fund, a separate Climate Strategy has been developed for the pension fund. The fund supports the ambitions of the Paris Agreement and aims to achieve a portfolio of assets with net zero carbon emissions by 2050.
The Climate Strategy sets out the fund’s approach to addressing the risks and opportunities related to climate change. It includes the introduction of targets to reduce the carbon emissions of the fund’s investment portfolio and to increase investment in low carbon and sustainable investments.
The proposed Investment Strategy Statement, Responsible Investment Framework and Climate Strategy were presented to the Pensions and Investments Committee on 9 September 2020 and approved for consultation with the fund’s stakeholders. To view the agenda, previous minutes, reports and related documents you can visit the Derbyshire democracy website.
The Consultation FAQs (Frequently asked questions) document attached to this page provides additional information which respondents may find helpful.
Stakeholders are now invited to provide written comments on each of these documents which are attached to this page.
Details of how to respond, including contact details, follow later on this page.
Please let us know in any comments if you are a fund employer, member of the pension fund, and / or a local taxpayer.
The closing date for this consultation has been extended from the 14 October to 21 October 2020.