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Cambridgeshire Pension Fund – investment strategy statement consultation

Background

The administering authority of the Cambridgeshire Pension Fund, Cambridgeshire County Council, has to prepare and maintain an Investment Strategy Statement, setting out its approach to the investment arrangements of the Fund.  It must include:

(a)       a requirement to invest in a wide variety of investments

(b)       our assessment of the suitability of different types of investments

(c)        our approach to risk, including the ways in which risks are assessed and managed

(d)       our approach to pooling investments

(e)       our policy on how social, environmental and corporate governance considerations are taken into account

(f)        our policy on the exercise of the rights (including voting rights) attaching to investments.

A focus on responsible investment

Over the last year the Pensions Committee, Local Pensions Board, Fund officers and professional advisors have worked together to carry out a review of the Fund’s existing investment strategy statement. As part of this wide-ranging review, a specific focus was placed on the topic of responsible investment (RI), including the responsible investment beliefs of the Pensions Committee and Local Pension Board Members. This review led to the development of an enhanced and expanded responsible investment policy, which has been included in the new draft investment strategy statement

Our responsible investment commitments

Whilst the Fund has long been mindful of taking environmental, social and governance (ESG) factors into account when investing members’ money, particular attention has now been paid to climate change, and the impact it will have on the Fund’s investments.

The responsible investment policy contains a statement around support for the ‘Paris Agreement’, which is a legally binding international treaty on climate change. It was adopted by 196 countries in Paris on 12 December 2015 and entered into force on 4 November 2016. Its goal is to limit global warming to well below 2, preferably to 1.5, degrees Celsius, compared to pre-industrial levels. To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate neutral world by mid-century.

The responsible investment policy also contains support for a ‘just transition’ to a net zero carbon economy, in recognition of the threats and opportunities presented by decarbonisation, as well as a significantly enhanced monitoring and reporting regime with regards to climate risk, such as through carbon emission reporting for Fund investments, and climate scenario analysis.

The Fund requires all of its investment managers to integrate both financial and non-financial factors, including ESG factors, into their decision making, and be able to report how this is being carried out in practice. This would include climate risks and, for example, the risk of fossil fuel companies being left with stranded assets.

The Fund’s position on divestment is restated in the responsible investment policy, and recognises the fiduciary responsibility of the Pensions Committee. This responsibility requires decision makers to act in the best interests of the pension scheme beneficiaries, with a duty to act prudently, conscientiously, with good faith and not to take undue risk. The revised policy is compatible with this fiduciary responsibility, emphasising engagement over divestment, and will enable the Fund to responsibly own stocks that are considered appropriate taking account of both the financial and non-financial factors mentioned above.

Have your say

The draft Investment Strategy Statement is now available for consultation with key stakeholders. The consultation period will run for 30 days [19/05/2021 – 16/06/2021], with scheme members and employers having the opportunity to review the draft, and share their views on its content and priorities. Stakeholder feedback will be submitted via an online survey, with the results considered by the Pension Fund Committee at the earliest opportunity.  A final Investment Strategy Statement will be published later in the year on the Fund’s website.

We encourage stakeholders to share their views on the Fund’s draft investment strategy statement, including the responsible investment policy. Whilst the document is slightly technical in places due to the nature of the topic being covered, we believe that it should provide the reader with a broad understanding of how the investment arrangements of the Fund are managed. We look forward to receiving your views as to whether this objective is achieved, and also to hearing your views on the RI priorities that the Fund has identified.