LAPFF engagement spans a wide range of issues encompassing the following themes:
Climate change is significant and urgent investment risk. Academics and investment experts put the price of inaction in the trillions of dollars. To safeguard the investments of our members and the pensions of their beneficiaries, LAPFF’s main engagement objectives are for companies to align their business models with a 1.5 degrees scenario and to push for an orderly net-zero carbon transition. For our members to make informed investment decisions and understand the climate value at risk of investing in individual companies they and their investment managers require companies to disclose data on emissions and set carbon targets. LAPFF therefore also considers that companies should report on their emissions and approach to carbon management as part of their business strategy.
LAPFF believes that social risk is every bit as important as environment and governance risk when it comes to long-term shareholder returns. The nature of the risk tends to differ from the other two in that its assessment is highly reliant on qualitative, rather than quantitative, indicators. Therefore, the Forum engages in an innovative process of speaking directly to affected workers and communities to identify and address social risk. Identifying these risks in the context of Covid is a new dimension to the Forum’s work on social risks. The Forum’s view is that this approach leaves it well-placed to deal with risk in a comprehensive way as the just transition agenda gains traction.
The Forum’s view is that without effective corporate governance, companies can neither mitigate risk nor maximize opportunities to create shareholder value. Therefore, good governance is a sign of good business. It also facilitates the effective implementation of good social and environmental practices so mitigates risk on all fronts. As a result, many of LAPFF’s engagements, both at the corporate and policy levels, focus on corporate governance.
Reliable Accounting Risk
As problems with accounts and auditing escalate, LAPFF continues to focus on problems with the product of what is audited by virtue of a defective accounting standards framework. Some financial analysts are backing the defective system, and this group is giving positive feedback to the standards setters in a symbiotic way, having been coached by the standard setter’s outreach activities and supportive Big 4 accounting firms. The standard setters are following a complicated model that fails to address basic and linked issues of fraud, capital maintenance, funding and going concern.
LGPS & Stewardship
LAPFF has a central role in the LGPS landscape liaising with members and others on responsible investment and shareholder activism. The Forum has been prominent in unifying local authority pension scheme concerns across three areas.
All Party Parliamentary Group
The All Party Parliamentary Group (APPG) on Local Authority Pension Funds - set up by LAPFF includes leading parliamentarians in discussions about local authority pension issues and the Forum’s work
LAPFF remains in touch with pool companies ensuring clear sight of work programmes and activities of both parties to align mutual interests.
LAPFF fully supports the position set out in the Regulations and Guidance that active stewardship by pension funds leads to long-term success of the companies in which they invest.