Responsible investment (RI) is the practice of incorporating Environmental, Social and Governance (ESG) issues into the investment decision making process and practicing investment stewardship, to better manage risk and generate sustainable, long-term returns. Financial and ESG analysis together identify broader risks leading to better informed investment decisions and can improve performance as well as risk-adjusted returns.
Our Responsible Investment Beliefs
South Yorkshire Pensions Authority believes that investing in well governed and sustainable assets is key to delivering the long-term investment returns required by the Pension Fund. The Authority’s goal is for carbon emissions from the totality of its investment portfolio to be zero by 2030 (the “Net Zero Goal”) and has developed a net zero action plan to chart its route to this goal. This action plan includes the incorporation of this Net Zero Goal in the Authority’s investment beliefs and investment strategy and contemplates frequent review of the performance of its investments within the context of this goal, as well as monitoring of the delivery of the commitment and the transition towards it.
We believe that well governed assets will present the following characteristics:
- A recognition of the key risks to the long-term sustainability of the business, in particular climate change, and will have created action plans to address these risks over reasonable but not unduly prolonged timescales.
- Transparency in their governance, balancing the interests of shareholders, executives and other stakeholders including the workforce.
- Respect for the human rights of the communities with which they interact and their various stakeholders.
- Acknowledges the environmental impacts of their activities and takes steps to minimise and/or mitigate them.
The Authority expects those managing money on its behalf to reflect these factors in their investment process and where specific risks or concerns are identified to engage with assets in order to ensure that these characteristics are met. Engagement activity will:
- Have clear and specific objectives.
- Be time limited.
- Where unsuccessful link to clear consequences reflecting the degree to which the investment thesis for the asset has been undermined by non-compliance.
The Authority will report each year on the impact of its investment portfolio on society using the framework of the UN Sustainable Development Goals and will where possible, given the constraints of pooling, seek to prioritise investments which address the opportunities presented in relation to:
- SDG 13 – Climate Action
- SDG 6 - Clean Water and Sanitation
- SDG 7 – Affordable and Clean Energy
The Authority’s fundamental belief is that this approach is entirely consistent with securing the long term returns the Pension Fund is required to deliver, and that it is therefore in the best interests of both scheme members and employers.
In line with the net zero action plan the Authority will also report every year on the performance of its investments within the context of its Net Zero Goal, as well as on the delivery of the Net Zero Goal and the transition towards it.