LGPS Central downgrades fixed income manager over ESG failings

LGPS Central has reported that it has engaged with 661 companies during 2024 on climate change and issued a downgrade to one manager due to ESG-related concerns.

The stewardship report, published on 4 June,  detailed LGPS Central’s manager engagement, with the pension pool marking engagement disclosure through a rating process. If the level of engagement disclosure was unsatisfactory, or where the link between an engagement and subsequent investment decision-making was unclear, fund managers were marked down through a rating review.

According to the report, in quarter two of 2024, LGPS Central took the decision to downgrade one of its fixed income managers from “yellow” to “amber”. The report cited that the downgrade reflected long-term concerns that the manager, despite being able to discuss ESG risks associated with its holdings, was not integrating these factors into its decision-making process.

“This was evidenced by the presence of several investments with high exposure to ESG risk coupled with limited efforts to mitigate that risk through stewardship,” the report said.

Net Zero Investor has approached LGPS Central to disclose the name of the manager in question but the pool declined to disclose the name of the manager in question. 

The stewardship report also highlighted  that £40bn LGPS Central’s stewardship provider EOS engaged with 687 companies globally, with 40% of issues linked to climate action and 45% of objectives completed.

The pool itself recent engaged with Barclays, following the UK bank’s commitment to stop financing new oil and gas fields and restrict lending more broadly to energy companies expanding fossil fuel production.

The pool wrote in its Stewardship report that, in quarter four of 2024, the bank provided the investor group with written reassurances that the new commitments were being followed.