Responsible investment is the broad term used to describe an approach to investment activity that explicitly acknowledges the relevance to the investor of ethical, environmental, social and governance factors, and of the long term health and stability of the market as a whole. It recognises that long term sustainable returns are dependent on stable, well-functioning and well-governed economic systems.

GMPF’s approach to responsible investment has been informed by a number of important initiatives. GMPF fully supports the aims and objectives of the Stewardship Code and we are signatories of the Code. We are also signatories of the Principles for Responsible Investment (PRI) and as such we aspire to harmonise the six responsible investment principles with how we implement our investment beliefs.

We publish a Responsible Investment Policy detailing our approach to responsible investment.

Environmental, Social and Governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to understand their environmental, social and governance facets. GMPF’s Investment Monitoring, and Environmental, Social and Governance Working Group monitors the ESG issues of GMPF’s investments.

GMPF requires investment managers to report on their ESG concerns, and we engage a number of advisors such as PIRC and Trucost to provide their expertise on ESG matters.

We are a long term investor. Our members are paying contributions now in return for a pension that we might not pay for another thirty or forty years. Therefore, we must make investment decisions with this in mind.

We are committed to reducing the environmental impact that our investments have. We aim for all our investments to have net zero carbon emissions by 2050 at the latest, in line with the Paris agreement on climate change.

We are also committed to ensuring that, wherever possible, our investments have a positive benefit for our members and wider society.

So, when thinking about investing, we consider as a minimum:

• the likely financial returns
• the risks attached to an investment and how we can manage them
• the balance between the different types of investment we hold
• the environmental and social impact that the investment might have
• whether those running the company we are investing in are doing a good job.

We are a member of the Local Authority Pension Fund Forum (LAPFF). LAPFF is the UK’s leading collaborative shareholder engagement group with combined assets of over £250 billion. LAPFF enables local authority pension funds to work together to achieve the best outcomes for their members, local communities, council tax payers and the wider economy.

We participate in, are a member of, or have signed up to the following initiatives:

• Local Authority Pension Fund Forum
• The Stewardship Code
• The Principles for Responsible Investment
• The Institutional Investor Group on Climate Change
• The Carbon Disclosure Project
• The Transition Pathway Initiative
• Investing in a Just Transition
• The 2018 Global Investor Statement to Governments on Climate Change
• Climate Action 100+
• Workforce Disclosure Initiative
• Pensions for Purpose

We are concentrating our work on the following:

• Moving money from some of our existing investments into low carbon or carbon neutral investments.
• Increasing the amount of money we have invested in renewable energy initiatives and those that focus on ways of generating green energy.
• Using our influence as a shareholder to vote through changes that will support a company to become carbon neutral.

We believe that we have a responsibility to those that would be affected if we were to disinvest suddenly. We believe we should move to a carbon neutral position responsibly. The industry refers to this as carrying out a just transition.

People’s livelihoods could be affected if we were to withdraw our investment in a company suddenly. It could affect those workers directly employed by that company and could also affect their local community or people working for other companies who rely on them.

If new investors were to take our place, there is no guarantee they would place the same amount of importance on climate change matters as we do. Therefore, we prefer to use our influence as a shareholder where we believe this will deliver results, rather than completely withdrawing our investment.

We have signed up to the investing in a just transition initiative. This initiative, by the London School of Economics and Political Science, is to support investors like us to make decisions and take actions that will be in the best interests of workers and communities while achieving carbon reduction targets.

As a minimum, we expect to see that:

• there is a clear division of responsibilities across company board members
• the company board can demonstrate they can make independent decisions
• the chair of the board and the chief executive have distinct roles and duties
• the board is diverse and can demonstrate a commitment to diversity and equality at all levels throughout the company.

As a shareholder in a company, we will use our voting rights to achieve outcomes that match our approach to responsible investing. We have voting guidelines that inform how we cast our votes and we keep a record of these.

Local authority funds can exert a significant amount of influence on companies with whom they invest, particularly when acting together. We do this to benefit our members, local communities, council tax payers, the wider economy and all members of society.