The Kent Pension Fund

Responsible investment (RI) update 2021

The Kent Pension Fund has over 140,000 members. It makes investments so that it can pay pensions to these members when they reach retirement age. Some members will already be retired and receiving their pensions, whereas others will just be starting out in their careers. The Pension Fund employs a specialist (known as an actuary) to work out how much money will be needed to pay these pensions. This indicates what investment returns are likely to be needed each year. The Pension Fund Committee consisting of county councillors, representatives of other Kent councils, trade unions, employees and pensioners, sets an investment strategy with the aim of achieving these investment returns. The Pension Fund is currently valued at about £7.5 billion and is one of the largest LGPS funds in the country.

The Kent Pension Fund:

• has an responsible investment policy, which is part of its investment strategy which explains how Environmental, Social and Governance (ESG) factors will be considered when making investment decisions and how the Pension Fund expects its investment managers to engage with companies about ESG issues and take part in shareholder voting
• has set up an RI working group to focus on responsible investment. The group is made up of members of the Pension Fund Committee and makes recommendations to the committee
• is a signatory to the Principles of Responsible Investment (PRI) which sets out 6 principles for responsible investors to follow
• expects its investment managers to be signatories to the UK Stewardship Code 2020 which is about how investors should act when making and owning investments
• provides training for the Pension Fund Committee.

Addressing climate change concerns

The Kent Pension Fund:

• recognises it is consistent with its fiduciary duty to manage environmental issues including climate change that may be financially material and expects those responsible for managing its investments to comply with the Fund’s policy
• does not believe it should divest from companies involved in fossil fuels as that action of itself will not reduce the impact on the climate. The Fund believes that its policy of engagement with companies to encourage responsible investment behaviour will be more effective in terms of achieving change
• is actively monitoring and supporting the development of companies’ management of environmental issues including those companies traditionally associated with fossil fuels. It is seeking out sustainable investment opportunities and for example holds units in a fund that invests in companies developing alternative sources of energy and cleaner uses of water and waste
• is a member of The Institutional Investors Group on Climate Change (IIGCC). The Fund monitors developments on climate change and uses the research undertaken to monitor and challenge our investment managers.

Developing the Fund’s approach to ESG issues

The RI working group will:

• consider and progress the further development of the Fund’s RI policy and its implementation taking account of recent ESG initiatives
• work with investment managers to enhance their reporting on ESG issues including regular updates on their engagement with companies on governance matters, and their voting activity.

The Kent Pension Fund:

• is committed to improving its approach to and the processes associated with the implementation of its responsible investment policy and to ensure that these changes are consistent with the Fund’s fiduciary duty to its members and local taxpayers
• will seek to align itself with the recommendations of the Task Force on Climate-Related Financial Disclosures.