Impact Investing Adopters Forum - Impact Investing Principles for Pensions - Principle 3 - Use your voice to make change - Charlotte O'Leary

Discussion topics from Pensions for Purpose’s third Impact Investing Adopter Forum (IIAF) event, run in partnership with the Impact Investing Institute, hosted by The Investor Forum and featuring LGPS Central.

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Click here for an overview of the four Impact Investing Principles for Pensions

Introduction 

Who knew that using your engagement and stewardship activities could be so powerful in getting companies to change practices and thereby avoid risks and seek opportunities? To ensure that your impact objectives are progressed it is important for pension funds to set stewardship guidelines and ensure your investment managers are representing your views. But more than this – by working collectively with other pension funds and institutional investors, you can have even more impact. In this session, The Investor Forum and LGPS Central provided a case study on how they achieved a new standard in plastic pellet pollution by acting collectively and creating the change that they wanted to see.

 

So, who is The Investor Forum?

Click here to read 'The Investor Forum: Overview' slide. 

The Investor Forum helps create collective member level engagement by determining the level of interest in a particular action or engagement activity, whether a constructive solution is possible and what the long-term goal is. When they’ve decided to initiate an activity they develop a strategy, target constructive outcomes and engage with the company to achieve these. They will then evaluate the outcomes and lessons learned.


For this particular case study, The Investor Forum was focused on plastic pellet pollution – why and what was the outcome?

Click here to read the 'S-360 - Case Study: Marine Plastic Pollution' slide. 

Click here to read the 'S-360 - Case Study: Marine Plastic Pollution PAS 510: 2021 - Outcome' slide.

Click here to read the 'S-360 - Case Study: Marine Plastic Pollution PAS [email protected] 2021 - How the voice of the investor has made change' slide. 


Q&A discussion with attendees

Should stewardship be divided up between engagement with the individual companies and then government or wider standard setting, or is this a false way of looking at this issue?
The power of bringing in a new standard that companies need to comply with and that sets minimum thresholds is that it applies to all companies. It creates a new regime for an entire industry and means that investors are helping to shape the market and not just the behaviour of one company. By being part of that process, we are in the privileged position of seeing how companies behave in relation to the standard setting, which informs our views about how they might perform.

Question to Val at LGPS Central – you helped to fund the standard and work with the organisation to get the standard setting to happen. I see that as quite a challenge for small and medium sized pension schemes. How did you get approval and a budget for that?
Often there are membership fees to join these stewardship or collective engagement groups – such as The Investor Forum – and they take on the engagement activities on behalf of their members. On this issue, we identified that this was something we wanted to engage on and took our proposals on helping to fund the work towards the standard to our executive committee. The amount we had to contribute was actually relatively small because we shared the costs among the group. There were 16 signatories to the original letter.

Question to Val at LGPS Central – I know that social issues and technology are very important to LGPS Central. Please could you tell us a bit about this?
There are a number of issues that are important to us and the social impact of technology is one of those. There are issues around founder/owner status and a lack of good governance in terms of separating out the Chairman and CEO roles. This presents particular risks in the decision making of these firms. We engage on this to ensure governance is addressed. We are also concerned about how they manage social media and the impact of negative/false news and images. Therefore we have been active in engaging on these issues and have, with time, seen some gradual change.

How do we ensure that we are having genuine social and environmental impact?
We need to understand the difference between ESG processes and social and environmental outcomes. We have to address this holistically to understand best practice as well as making sure we know what impact we are having, as these things present risks and opportunities as we transition to a sustainable economy. This is why everything from your investment objectives through to your stewardship and measurement processes need to be joined up.

Thank you to The Investor Forum and LGPS Central for this fascinating case study demonstrating the power of collaboration and engagement to affect change.

 

Next steps

We will be taking this discussion forward into our next Impact Investing Adopter Forum event in November which will focus on Principle 4 – Manage and review your impact. If you would be interested in joining or participating in the event, please contact Charlotte O’Leary.

Learn more here