The London Pension Fund Authority (LPFA) will not actively divest from fossil fuels despite pressure from the government of the UK capital.
A report from the London Assembly last month urged the LPFA to consider “managed divestment” from fossil fuels in an effort to reduce the city’s environmental impact.
“We do not expect fund managers to specifically invest or divest in certain sectors, but they are expected to take a responsible investment approach instead.”However, in a letter to members, the £4 billion ($6.2 billion) pension said its existing environmental, social, and governance (ESG) and responsible investment policies were sufficient to “result in long-term benefits”.
“Consequently, we do not expect fund managers to specifically invest or divest in certain sectors, but they are expected to take a responsible investment approach instead,” the newsletter stated.
The LPFA has less than 1% invested in fossil fuels, the letter said.
“It is important to note that, over time, this figure will change as we invest and divest,” it added. “However, our key aim must be to ensure we can continue to pay your pensions as they fall due.”
The pension also explained that its responsible investment stewardship group, led by CIO Chris Rule, regularly reviewed and reported on voting policies and communications with fund managers over ESG issues.
“As a pension fund we have a fiduciary duty to make investments where we see the best return for our employers and members,” the LPFA said.
The LPFA’s stance reflects that of California’s two leading public pensions, which last year were told to divest from coal producing companies by Senator Kevin de León. The California Public Employees’ Retirement System said it preferred to engage with companies rather than sell indiscriminately, while the California State Teachers’ Retirement System has been increasing its investments in clean technology.
Related:The Capitalists’ Guide to ESG & London Pension Urged to Divest from Fossil Fuels