17-Jul-2006
- Confidence that environmentally-friendly investments
can be made whilst maintaining the best risk/reward
ratio has resulted in the Environment Agency appointing
Scottish Widows Investment Partnership to its
stable of specialist fund managers, increasing
to nine the team responsible for managing the
environment watchdog’s £1.3 billion pension
fund.
SWIP, part of the Lloyds TSB
Group, is one of Europe’s largest asset management
companies. It will manage £50 million, around
4%, of the Environment Agency’s Active Pension
Fund assets. The other fund managers are Hermes,
Standard Life Investments, European Credit Management,
Capital International, State Street Global Advisors,
Sarasin Chiswell, Morley Fund Management and Robeco.
"The Environment Agency’s
Active Pension Fund, with a market value of £1.3bn,
is the 20th largest fund, and most solvent, in
the Local Government Pension Scheme" explained
Howard Pearce, Environment Agency Head of Environmental
Finance and Pension Fund Management.
"SWIP was appointed following
a very rigorous selection process involving more
than 20 emerging markets equity managers. Our
advisors and we believe they possess the necessary
quality of staff, investment processes and track
record to deliver our demanding financial performance
targets and our responsible investment requirements."
The Environment Agency was advised
by three consultants - Mercer Investment Consulting
provided general investment advice; Rathbone Greenbank
provided specialist advice on sustainable responsible
investment; and B-finance assisted with the search
and selection for the emerging markets mandate.
The pension fund’s legal adviser is Osborne Clarke
and its consulting actuary is Hymans Robertson.
The Environment Agency Active
Pension Fund is a member of the UK Social Investment
Forum, Institutional Investors Group on Climate
Change, and Carbon Disclosure Project, and supports
the environmental reporting campaign of the Local
Authority Pension Fund Forum.
"SWIP will invest in a
relatively concentrated segregated active emerging
markets equity portfolio, and will be assisted
by Trucost and Global Ethical Standards in implementing
the Fund's Environmental Overlay and Corporate
Governance strategies," continued Howard.
"The new mandate will be
funded from the Active Fund's cash in-flow. The
award of the new mandate will not impact on any
of the existing eight fund managers. SWIP has
been awarded a three-year investment management
agreement, which is extendable subject to satisfactory
performance. It has been set a +3% out-performance
target, and performance-related fees will only
be payable if financial targets are met."
SWIP's performance will also
be evaluated in relation to their delivery of
the Active Pension Fund environmental overlay
strategy. This includes their integration of environmental
considerations into risk management, stock selection,
company engagement, and proxy voting, and referral
of any environmental resolutions to the Environment
Agency.
Their relative performance will
also be benchmarked using corporate governance
and socially responsible investment indices and
environmental reporting tools. Under the Local
Government Pension Scheme investment regulations,
the contract can be terminated if performance
is below that needed.
The Environment Agency aims
to be the public sector leader in financially
robust and environmentally responsible investment
and pension fund management by 2007. Its commitment
to environmentally-friendly investment, whilst
maintaining the best risk/reward ratio, has already
gained it the recognition of its peers and several
national and international awards, including the
2006 City of London Corporation and UK Social
Investment Forum Liveable City Award and the 2006
Global Money Management Public Pension Fund of
the Year Award.
"Our investor involvement
goes beyond pension fund management and asset
allocation. All our private equity fund managers
have signed up to Responsible Entrepreneurial
Guidelines, environmental questionnaires are used
across our entire property portfolio, we carry
out research on corporate reporting, carbon management
and green funds, and we aim to vote directly on
all environmental resolutions, mostly in the US.
We also plan to sign up to the UN Principles of
Responsible Investment," concluded Howard.
Head Office Press Office
