Value for LAPFF Members

Some thoughts about what LAPFF is all about. 

LAPFF (Local Authority Pension Fund Forum) delivers value to members in multiple ways. Hear from LAPFF representatives on what membership offers and why it matters. Speakers: Cllr. Doug McMurdo, Chair of LAPFF, Bedfordshire Pension Fund, Cllr. Heather Johnson, LAPFF Executive Member, London Borough of Camden Pension Fund, Tom Harrington, LAPFF Executive Member, Greater Manchester Pension Fund Cllr. John Gray, Vice-Chair of LAPFF, London Borough of Newham Pension Fund.

https://youtu.be/d0POa9PwbT8?si=Uylze6u_42ZipLmn

https://lapfforum.org/?utm_source=copilot.com

Launch of Labour Rights Investor Network

 

Launch of Labour Rights Investor Network coincides with event at US Department of Labor

The Labour Rights Investor Network (LRIN) is a global initiative that brings together asset managers, asset owners and investment service providers committed to integrating labour rights into their stewardship practices. LRIN signatories include the New York City Employees’ Retirement System and Teachers’ Retirement System, Sweden’s Folksam and the UK-based Local Authority Pension Fund Forum.

The launch of the Network coincides with an event at the US Department of Labor aimed at highlighting how businesses and investors can become more resilient and competitive by harnessing the growing global movement for worker voice. The event, “New Frontiers for Empowering Workers and Business,” will feature Acting Secretary Julie Su alongside New York City Comptroller Brad Lander, representatives from Microsoft and others from the labour and business communities.

The Network’s guiding Investor Statement notes that labour rights are “fundamental pillars of human freedom,” as recognized by the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD).

Beyond the fundamental nature of the rights to freedom of association and collective bargaining, members of the Network also recognize the investor case for empowering workers. “Companies that respect labour rights reap many benefits, such as greater productivity, safer workplaces, and improved employee engagement,” according to the LRIN Investor Statement. The LRIN is housed at the Global Unions’ Committee on Workers’ Capital (CWC), a committee of the International Trade Union Confederation, the Global Union Federations and the Trade Union Advisory Committee to the OECD that advocates for the responsible investment of workers’ capital.

“With this Network, we will bring the voices of workers whose fundamental labour rights are violated to the attention of investors committed to ensuring those rights are upheld in their portfolios. This will enable those investors to improve their human rights due diligence, mitigate risks and uphold responsibilities under international norms and frameworks,” said CWC Chair Christoffer Jönsson.

Signatories to the Investor Statement request that the boards and senior management at investee companies take responsibility for labour rights oversight, ensure respect for workers’rights to freedom of association and collective bargaining, and provide disclosures on labour-related metrics.

The Labour Rights Investor Network will then provide the necessary information and tools for investor members to integrate this into their stewardship practices. 

Investor Quotes

“As financial stewards responsible for the retirement savings of thousands of unionized workers, we want to ensure that the companies in which we invest our capital are in turn investing in their workforces. Ignoring fundamental workers’ rights risks eroding long-term shareholder value. The historic movement to ensure labour rights are respected has led to measurable gains for hundreds of thousands of workers. We are proud to stand boldly with the Committee on Workers’ Capital to announce this important initiative, which centres respecting labour rights as a business imperative key to mitigating systemic risks.”
— BRAD LANDER, NEW YORK CITY COMPTROLLER

“We are delighted to be an early signatory to Labour Rights Investor Network, as we see the real value it will bring to strengthening our stewardship. We expect investee companies to respect freedom of association and collective bargaining, but know far too often this fails to happen in reality. Through gaining resources and hearing insights directly from unions, we believe that the Labour Rights Investor Network will help us address the problem.”
— EMILIE WESTHOLM, HEAD OF RESPONSIBLE INVESTMENTS AND CORPORATE GOVERNANCE, FOLKSAM

“LAPFF is very pleased to support the launch of the Labour Rights Investor Network as a signatory. Over the years, the Forum has engaged with numerous companies and unions over management of workforce issues, and these topics are being raised more frequently. We have also found on issues like climate change that collaborative networking initiatives can increase the effectiveness of investors’ stewardship activity. So, the creation of a network focused on rights at work could not come at a better time.”
— COUNCILLOR DOUG MCMURDO, LAPFF CHAIRMAN

https://www.workerscapital.org/labour-rights-investor-network/

Trustee workshop: How can pension funds advance the ‘S’ in ESG and raise labour standards?

 

This year is the 10th anniversary of the Rana Plaza factory collapse disaster. Over 1100 workers died and many more injured. Register https://www.tuc.org.uk/events/trustee-workshop-how-can-pension-funds-advance-s-esg-and-raise-labour-standards

"The TUC and the Global Unions’ Committee on Workers’ Capital (CWC) are running a workshop for trustees of UK pension schemes on the social impact of investing.

This in-person event will be taking place in Congress House on the afternoon of 8th June, and will focus on how asset owners can engage with investee companies and asset managers to promote high labour standards.

Sessions will cover:

• The CWC Baseline Expectations for Asset Managers on Fundamental Labour Rights and how asset owners can use this tool to hold asset managers to account
• Good practices to enable UK-based asset owners to uphold responsibilities under the UN Guiding Principles for Business and Human Rights
• The work of the Trade Union Share Owners organisation to develop voting and engagement guidelines for trade union funds, and run targeted campaigns on poor employment practices
• The Taskforce on Social Factors launched by the government in February this year, and how asset owners can influence policy development

Agenda

13:30 - Introducing the ‘S’ in ESG 

14:05 - What are UK unions doing help asset owners raise labour standards? 

14:45 - Break

15:00 - Using the CWC Baseline Expectations to hold asset managers accountable on fundamental labour rights

16:00 - Wrap up/next steps

16:15 - Finish

Mining and Human Rights: LAPFF Chair Returns from Brazil Tailings Dam Trip

Check out this press release by the Local Authority Pension Fund Forum (I am Joint Vice Chair) on the recent visit by our Chair to Brazil. Many thanks to Doug and our engagement partners, PIRC, for all their work during this important visit. 

Some Progress Noted but Lots of Work Still to Do

"LAPFF Chair, Cllr Doug McMurdo, returned from Brazil recently where he spent three weeks investigating the progress of reparations following tailings dam collapses in Mariana (2015) and Brumadinho (2019). This trip was part of LAPFF’s broader work on mining and human rights. The context for the trip is available in the mining and human rights report LAPFF published in April 2022.  The motivation for the trip reflects LAPFF’s view that social and environmental impacts by investee companies are financially material for investors.

During his trip, Cllr McMurdo met with communities affected by the 2015 Mariana and 2019 Brumadinho dam collapses. BHP and Vale own the Mariana Fundão dam through their joint venture operator, Samarco. Vale owns the Córrego do Feijão dam that collapsed in Brumadinho. Water quality and delays in house building in Mariana are the two major concerns cited by affected community members with whom LAPFF spoke.

After meeting with affected community members, Cllr McMurdo spent two days with the Chair of Vale and senior executives from the company. LAPFF extended an invitation to meet a BHP representative during Cllr McMurdo’s trip, but the invitation was declined by the company.

At the end of the trip, Cllr McMurdo met with a number of Brazilian investors led by ESG-focused asset manager, JGP Asset Management, with whom LAPFF has been partnering on this project for a couple of years. Collectively, the investor group worked with senior executives of Vale to set in motion a process to increase the pace and quality of reparations following the tailings dam collapses.

Quote from LAPFF Chair: “It is clear that Vale has taken steps to improve its corporate culture and its dam safety practices. LAPFF’s objective is to be a critical friend to the company in fostering better and faster delivery of required reparations and dam safety measures.”

The largest impediment to completing reparations in Mariana quickly enough and to an adequate standard appears to be the Renova Foundation. Vale, BHP, and Samarco – but no affected community members – sit on the board of this organisation which was established to provide reparations following the Mariana tailings dam collapse in November 2015. The Foundation has an overly complex structure, similar to that of a joint venture, and does not have adequate independence in its governance. Both shortcomings have led to poor and drawn-out execution of reparations.

Quote from JGP Asset Management: “Unfortunately, we cannot go back in time and avoid the two disasters that Vale was involved in. However, Vale can act today to become the reference point for an ESG standard in mining, a critical industry for the global energy transition. As investors, we keep engaged with the company on several fronts, but especially in corporate governance and relations with the communities where Vale has operations.”

Quote from Vale: “Vale is enhancing its dialogue and engagement with shareholders, communities and society, in order to act in greater alignment with their expectations. I was pleased to personally welcome LAPFF’s representatives in Brazil and to show Vale’s efforts on reparations initiatives and dam safety. I want to thank LAPFF for its feedback and I would like to renew our commitment to building a better company. It is a long way to travel and we will continue to act attentively in making Vale one of the safest and most reliable mining companies in the world.”

 

Labour standards in the rubber glove industry

Last week I chaired a virtual webinar organised by PIRC and UNISON on Labour standards in the rubber glove manufacturing industry. There were 6 panel members located in Europe and Asia and an invited audience of  some 50 industry representatives, investors, trade unionists and NGOs. 

There was some dreadful horror stories of human rights abuses in many factories that produce gloves for the NHS (and which Local Government Pension Funds may also have investments in).  Hopefully there will be a follow on event soon. 

This was my introductory blurb. "Hello everyone and welcome to today’s webinar on labour standards in the rubber gloves industry co-organised by PIRC and UNISON.

Since the start of the Covid-19 pandemic, and the greatly increased demand for personal protective equipment, there has been an increasing focus on the medical rubber glove supply chain. Forced labour, poor conditions and other labour rights concerns have received considerable media exposure.

For investors there has been a bit of a rollercoaster ride. The share prices of manufacturers initially surged on increased demand, but public policy responses brought valuations back to earth. In particular the use of Withholding Release Orders by US Customs and Border Protection to address the use of forced labour had a major impact. In the future public procurement decisions by national and regional public sector buyers may become increasingly important. While the S in ESG is often the poor relation, and is given less scrutiny by many investors, in this case risks relating to poor labour practices has become financially material.

It’s also difficult terrain for investors to navigate, due to differing accounts of the situation on the ground. Companies have tried to improve. On some key issues – such as the use of recruitment fees – a substantial amount of money has been spent seeking to provide redress. Yet workers, activists and unions continue to raise significant concerns.   

In this webinar we will hear from a range of experts and organisations involved in improving standards in the rubber glove industry. In the first half we’ll be hearing about ongoing concerns relating to labour practices in the sector.

Anton Marcus –Trade Zones & General Services Employees Union

Andy Hall – migrant workers' rights advocate

Tom Grinter – IndustriALL

Then we’ll take some questions. You can put these either in the chat or use the Q&A function.

In the second half of the webinar we’ll focus on some of the policy responses, including public procurement, and the business-led initiative the Responsible Glove Alliance.

Pauline Gothberg, Swedish County Councils and Regions

Nusrat Uddin, Wilson's solicitors

Anna Pienaar, Executive Director, Responsible Labor Initiative & Responsible Glove Alliance

Then we will have the opportunity for further questions.

To start us off, Tom Powdrill from PIRC is going to give a very brief introduction to its work on this topic...

(I am moderating another Labour Standards investor event on 18 October "LAPFF & IndustriALL Webinar: Employment injury insurance for garment workers in Bangladesh. Registration here)

LAPFF at Thirty - the voice of Local Authority Pension Funds

This week I was in Bournemouth for the 30th anniversary conference of the Local Authority Pension Fund. I am one of its Vice Chair's. This 6 minute video was produced to celebrate the history of LAPFF and a reminder of the good work it has done over the years.

Newham Pension Committee: Launch of our new ESG Investment Policy

This "blended" physical and virtual meeting worked pretty well. There was 5 Newham Councillors present in the former staff canteen area of the Dockside building, while Council officers and advisors joined via zoom from all over the UK. Members of the public could view the meeting via YouTube. 

I was so pleased to speak in favour of the revised ESG policy which means that we will soon have a 0.2% exposure to carbon industries, support for a just transition, tackle pay inequality, support gender diversity, tackle tax avoidance and support Labour rights. 

We need to do much, much more with regard to ESG but this was a very welcome start. 

WORK – The ESG Conference

 (This looks interesting. It should not have needed the onslaught of Covid to raise the profile of "Social" in ESG. There is also too much #LabourRightsWashing going on ) 

"WORK – The Conference

The Covid-19 pandemic has served to remind us of the vital role played by workers in a range of industries. Our societies rely on often modestly paid workers in sectors like food production and distribution.

Yet despite increased rhetoric about the importance of the S in ESG, most events touch briefly on these issues, in particular in relation to labour and employment. We know that investors are interested in understanding employment issues more deeply, and that workers and labour organisations want their concerns to attract more attention from responsible investors.

To shift the balance, we have decided to a day-long online ‘conference’ devoted to employment-related ESG issues, and nothing else. It will put work, and workers, centre stage for once.

Sessions will focus on topics such as labour market policy, the materiality of employment issues, the importance of bargaining power and more.

Speakers include:

Matthew Taylor, head of UK Government's Review of Employment

Paul Nowak, Deputy General Secretary, Trades Union Congress

Dr Wanda Wyporska, Executive Director, The Equality Trust

Christine Berry, author writing on democratic ownership (Verso 2022) and senior fellow at the Finance Lab

Katie Hepworth, Director of Workers' Rights, Australian Centre for Corporate Responsibility

Caroline Escott, Senior Investment Manager - Active Ownership, Railpen

Damon Silvers, Director of Policy and Special Counsel, AFL-CIO

Duncan Symonds, Executive Director, IFM Investors

If you would like to attend please register on the link below, there is also a link to register on the attached conference flyer.

https://us02web.zoom.us/webinar/register/WN_i46-VaJjT0iph0RZccoREQ

Please note, the conference will run in two sessions (10:00 - 12:30 & 14:00 - 16:30). After registering, individual login details will be provided for each session via a calendar invite to the email provided".

FTSE 100 chief executives 'earn average salary within 3 days'

 

By 5.30pm today (Wednesday 6 January) the average FTSE 100 Chief Executive would have already earned more this year than the average annual salary of UK workers. They only had to work 34 hours to earn £31, 461 which is the average medium wage for full time workers. 

Median FTSE 100 chief executive pay was £3.61m in 2019.

This is 120 times more than average. .

While many would accept that Chief Executives of large successful companies should get decent pay why has this ratio from average to top earner increased from estimated 50 times in 2000 and 20 times in the 1980s? 

A rather strange justification from the Adam Smith Institute for such a massive growth in pay for Chief Executives. Claiming that studies show the negative impact of deaths of CEOs on company share prices? A Vicky Pollard justification for such silliness. Of course a company share price would tend to be negatively impacted if its CEO dies suddenly. 

The Adam Smith Institute ought to remember what their names sake wrote in 1776 about shareholders being ripped off by agents (modern day chief executives) 

All these pay deals for chief executives are voted upon at annual general meetings. ESG advisor PIRC reminds pension trustees such as myself that "There's a pretty easy test for trustees here - check your asset managers' voting records. If they are voting for most executive remuneration policies they are helping to create this outcome. If you don't like what you see, don't let them vote your shares".

I shall look forward to my next trustee meeting

Hat tip BBC, High Pay and TUC. 

Unreported Deaths - Covid_19 cases in UK Food Processing Plants

 A damning report by PIRC here into the failure of many UK food processing plants (the UK's biggest manufacturing sector) to properly report the deaths of their workers from Covid_19 to the Health & Safety Executive and to take effective action to protect them. 

Private sector pension trustees and Local Government Pension committees (and boards) ought to be pressing their fund managers and advisors to be taking this issue seriously. The reputational and legal risk to investors is potentially huge. 

It is about time the "S" in ESG (Environmental, Social & Governance) is taken as seriously as "Environment" and "Governance". 

We have the term "#GreenWashing" to describe the prentence by some fund managers and advisors that they take Environmental issues seriously. 

What can we call those who don't take any real notice of #social issues? 

Fund managers deny Pension Trustees & their members a voice says AMNT

 

Well done to the AMNT (Association of Member Nominated Trustees) for this excellent stance on the refusal of many pension fund managers to allow trustees and pensioners to hold them to account for the way they vote in company Annual General Meetings. 

Too often the big fund managers vote against their own trustees ESG policies in what is called "pooled funds" which many pension schemes have no choice but to invest in. The suspicion is of course they do this in their own commercial interests instead of pensioners. 

The AMNT have managed to persuade the Government to set up a working party on barriers to pension trustee voting. 

Watch this space

Vote for Worker Board Members at Walmart AGM for better Governance and to tackle Covid-19 pandemic

Today I took part as a pension trustee in a online seminar with USA Walmart workers and their trade union, about governance and the abysmal response of the retail giant Walmart to the Covid-19 emergency.

Their workers spoke about the dangerously confused and fragmented response by management, which meant that workers and customers were put at unnecessary risk with little or no PPE provided, inadequate or non existent measures to social distance nor proper deep cleaning of stores.

It sounded like a complete and utter "f**k up", made worse by a woeful provision of sick pay for staff if they become ill and inadequate (at best) company medical insurance.

Next week there is the Walmart shareholders Annual General Meeting and there is a resolution calling for some of the company board members to be elected by its own staff.

If you look at what has happened with the very low levels of Covid-19 in Germany, which has had worker board members as a norm for decades, maybe this shows how companies have better governance and are more safely run if they have worker reps on their actual board.

I made the point at the seminar that as a long term investor I don't want for us to invest in a company that treats its staff badly and puts them and its customers at risk in a pandemic. It is not only morally (and legally) wrong but a bad decision to invest in a company that is so poorly run in an emergency that it allows its staff and customers to be put at deadly risk!

The AGM is next week and the motion for elected worker reps is proposal 7. Please contact your Pension or fund managers and if they own stock on your behalf in Walmart let them know your views. 

"What next for responsible investment in the LGPS?" Professional Pensions 25 Sept 2019

Recently there seems to have been a surge in interest in responsible investment, also known as ESG, in the Local Government Pension Scheme (LGPS) world. 

My email inbox is filled with invites to meet advisers or attend seminars and conferences on this subject, near and far (and sometimes very far!)

Maybe, ten years after Lord Myners slated trustees for being "asleep at the wheel" and allowing the 2007/08 crash, we are finally beginning to understand its importance? The days of carrying out a beauty parade, picking a manager because he had a good record, then concentrate forever more on its latest quarterly returns, are now mostly long gone.

More likely this interest is being driven by the acceptance (apart from a certain president across the pond) that we face a climate emergency and responsible investment is needed to stop an environmental disaster and achieve a just transition, while still delivering an income for pensioners.

There is still no widely accepted definition for responsible investment, or ESG, except we are not "ethical" investors - but, in the words of the late Ian Greenwood, "that does not mean we are uninterested in ethics". Instead, there is a fairly widespread belief that pension funds are for the long term, and superior returns can be produced by funds that invest in companies that are well managed, open and transparent, act in interests of its asset owners, do not exploit their workers, and do not destroy the environment. We need this extra return to meet our pension liabilities.

The trauma of LGPS funds being forced to pool is now receding and the pools will now have the scale (eventually some £250bn in eight collective investment vehicles) to be even more demanding of their fund managers and investments, while individual funds who still retain the liabilities must now hold the pools to account.

For even greater influence and reach, LGPS funds and pools should partner more with other pension schemes and stakeholders with shared interests. For example, these can include faith and social impact investors, charities, non-governmental organisations, university endowment funds, the media, trade unions, and regulators - both in the UK and abroad.

It is not just that scale can get those behind the scenes, face-to-face engagements with company chairs or help get media attention if you have a "name and shame" public spat - but sharing information and resources, all year round, is key to success. We need to know what is happening.

Scale and cooperation also helps with the ongoing battle for transparency on costs and charges; the LGPS, supported by trade union Unison, has been successfully leading this campaign.

Another relevant responsible investment campaign must be to challenge the continued refusal of most fund managers who offer conventional pooled funds and trackers to allow the owners of these funds to vote its shares as it sees fit. This is nonsense. I cannot believe that, in this day and age, fund managers cannot find the computer programme to allow this to happen. The various excuses I have heard over the years are simply pitiful. Owners of capital are being denied the right to exercise their responsibilities as owners. If you don't believe me this is wrong then check out what 18th century economist and philosopher Adam Smith says about this.  

Overall, I am optimistic about the future with regard to responsible investment. I don't think this is just a "blip" or something solely faced by the LGPS. Colleagues in the private sector say the same. When I first started in pensions we were told that we would be sued if we considered anything other than maximising financial returns. Now we are told the exact opposite.

Cllr John Gray, writing in a personal capacity, is a member of the London Borough of Newham pension committee and joint vice-chair of the Local Authority Pension Fund Forum.

(article in Professional Pensions: Paywall)

Pension fund anger at Sports Direct's Mike Ashley: 'There’s a problem here'

This morning I went to the Sports Direct Annual General Meeting, during which I had at times a rather robust conversation with its founder, majority shareholder and Chief Executive Officer, Mike Ashley. The media were banned from the meeting.

Hat tip article Oscar Williams-Grut. Senior City Correspondent, Yahoo Finance UK

"Sports Direct (SPD.L) received an angry reception from major shareholders on Wednesday at a tightly controlled meeting with investors.

The discount sports retailer faced a shareholder rebellion at its annual general meeting with investors. Press were barred despite intense public interest in the company.

At the AGM, 9% of voting shareholders rejected Mike Ashley’s reappointment as CEO and 17% of independent shareholders who voted tried to stop David Brayshaw being reappointed as a director. Other directors faced smaller rebellions.

Founder Ashley owns over 60% of shares in the business, meaning he was always set to win all the AGM motions. However, independent shareholders expressed their anger at the way the company is being run at the voting box and outside the AGM.

“I’m hoping that everybody wakes up, smells the coffee, realises there’s a problem and fix it,” John Gray, vice-chair of the Local Authority Pension Fund Forum, told the press.

Sports Direct has in recent months lost its auditor, unveiled a surprise £600m ($742m) tax bill, and warned that its controversial acquisition of bust department store House of Fraser is hurting the wider business. It is currently struggling to appoint a replacement auditor.

‘Insufficient challenge’
“Without being personal about it, there is insufficient challenge to Mike Ashley on a board level,” Gray told the press outside the AGM in London’s Soho.

“When you’re dealing with a majority shareholder, somebody like Mike Ashley — who I’ve never met before — you need to have a robust team of directors, confident in what they do with extensive experience in order to stand up to him.”

Gray, who is also a councillor in the London borough of Newham, said he represented 80 local authority pension funds with assets of £250bn ($390.1bn). Collectively, his organisation represents the retirement plans for 4 million UK citizens.

“It’s really, really important that when we have issues with companies that we have to invest in because they’re in the index, that they meet with us and address our concerns properly,” Gray said.

“I don’t want to have another robust conversation in 12 months time but we will if necessary.”

Gray said he voted against all motions at the AGM, which attracted less than 20 attendees and ran for about an hour. Ahead of the meeting, advisory group Institutional Shareholder Services (ISS) counselled investors to vote against Ashley’s reappointment as CEO.

“This could be a test case for good governance in the UK,” Gray said. “The issue over the way workers are treated at Sports Direct should have been a signal to everybody: there’s a problem here.”

Sports Direct was criticised by MPs in 2016 for “appalling working conditions and practices,” after an investigation uncovered workers at its Shirebrook warehouse being paid below minimum wage and penalised for taking breaks, as well as health and safety breaches.

“It’s not just about workers dignity and their rights — it follows through with the governance in the company,” Gray said, “and that’s why you’ve got a £600m unexpected tax bill from the Belgian government, that’s why the auditors have walked away from Sports Direct, that’s why — and there may be other reasons as well — they can’t find an auditor.”

Sports Direct was due to appoint an auditor at today’s AGM. The company told investors it was “in the middle of a process” but did not comment further.

If Sports Direct is unable to appoint an auditor in the next seven days, it will have to ask business secretary Andrea Leadsom to step in and appoint one on its behalf.

‘Panto villain’

Besides questions over governance and auditing, Sports Direct’s board also faced criticism for their failure to pay a dividend.

“The share price is low because who’s going to buy a share when you’re not getting a return?” Laurence Corbet, a Sports Direct shareholder for over a decade, told the press outside the meeting.

Corbet said he too voted against all the resolutions but said he would support management if they introduced a dividend. He called Mike Ashley the “enfant terrible of retail, but he gets things done.”

Ashley, who owns over 60% of Sports Direct, complained at the AGM the media was “painting me as a panto villain”.

A spokesperson for Sports Direct said after the AGM: “We remain totally focused on delivering our elevated proposition, which following the AGM continues to be supported by the investor community.

"We are already seeing some exciting milestones with the acquisition of Jack Wills, the opening of the new Flannels flagship store in London, and plans for Fraser are now in motion.

"We are building a young and dynamic executive team to assist in this transition but making sure we retain the core values in the existing business that have allowed the business to prosper over the years.”

The spokesperson gave no update on Sports Direct’s auditing situation.

Wednesday’s AGM also saw a small protest from fans of Newcastle United, the football club owned by Ashley.

Local Government Chronicle Investment Summit 2018

Last week I went to this summit in South Wales on investment in the Local Government Pension Scheme. There was around 250 Councillors and Council pension staff from all over the country.

I am particularly interested in the latest ideas on Risk, Asset allocation, ESG (Environmental, Social, Governance - also known as socially responsible investment), investment in housing and infrastructure.

The opening speaker John Roe from Legal & General gave his perspective on the UK and global economy. He argued that he did not think that the equity market was expensive and made an observation that rising income inequality had led to the rise of fascism and the anger that caused Brexit. I asked him in the Q&A what was the solution and he said greater taxation of the international elites and an open debate on immigration. Not often do I hear calls for greater taxation in such conferences (I agree totally with him on this point)

Next we were invited to visit different briefing sessions. I went to the one on "Fixing our broken housing model". Which turned out to be an introduction to the merits of pension funds investing in purpose built private sector rental but not alas, fixing the complete and utter mess that UK housing is in.

Back in the main hall we heard of research by Hymans Robertson that following the changes in the LGPS in 2014 some scheme members had actually seen their future pension entitlement rise by 24%.  Which is mainly due to rubbish pay in the local government in recent years which has failed to match inflation.

In a focus session on ESG investing there was some compelling evidence from MSCI that good ESG is "material". Good ESG investments tend to have better cash flow, be less risky, result in greater dividends & make it 3 times less likely to suffer serious incidents such as the Volkswagon fraud and BP Deepwater disaster.

At the next focus session, Abbie Llewellyn-Waters, from Jupiter gave evidence that ESG can deliver "Alpha" performance. Also, with regard to the S (social) in "ESG", she was clear that “the better that companies treat their workers, the better the companies financial results.....without a shadow of a doubt”

Roger Phillips, chair of  LGPS National advisory board spoke to a meeting of Councillors only on its annual report. Membership of the LGPS had increased to 5.6 million members, had £263 billion in assets, 1700 different employers and enjoyed in 2017,  a 19.5% increase in investment performance. However funds need improve their data management.

At the session on “Infrastructure, urban regeneration & real estate”, to wake everyone up, I asked the panel who had spoken about the investment opportunities on investing in this asset class about the statement by Sir Howard Davies, Chair of RBS who said on Question time early this year that “PFI was a fraud on the people”.  He had argued it was always cheaper for Governments to borrow money than private organisations to spend on infrastructure. How do you respond to this statement?

The response was that Government does not want such debt on its balance sheet. Which is an argument post 2008 crisis and post quantitative easing that I have not heard for many years.

In the last session of the day with the Pension Regulator & the FRC, I asked both speakers why was it that in private defined benefit schemes, up to 50% of trustees were nominated by beneficiaries but in the LGPS, a public defined benefit scheme, there was no obligation whatsoever to have any beneficiary representation on its boards?  The regulator replied that they did support member nominated representatives in the private schemes because they can challenge "group thing" but they also have pension trustees boards that only have professional trustees on it.

I note that Labour is committed to make 50% member nominated representation compulsory in all pension schemes.

At the summit dinner the guest speaker RH Lord Winston of Hammersmith, who was as entertaining and as "nice" in real life as he appeared on the telly.

In the morning after more presentations on successful partnership working (Pooling) and protecting your equity portfolio from a future crash (which I am sure is coming sometime soon) I went to a briefing session on "Is sustainable investing just a romantic notion?" session with Newton.

Who pointed out that some $300 billion was invested in alternatives to carbon in 2017. They also compared modern day oil reserves with the 19th century slave ships which became "stranded assets" when slavery abolished

Secretary to the National LGPS advisory board, Bob Holloway, reflected on 35 years involved with local government pensions and announced a meeting with the minister for council pensions committee chairs on 15 November 2018.

In the last session on Devolution and Regionalism, Dawn Turner, CEO of the Brunel Pension Partnership talked about not investing infrastructure because the Government tells us to do it but if it fits our needs & purposes. Also, we are not impact investors but should be aware of any positive or negative impacts from our investments. Not just globally, but in the UK as well

Final speaker was Paddy Dowdall, from Greater Manchester Pension Fund about their investing in housing... “Council provides the land and the Pension fund provides the capital” also “by definition residential housing is local & who knows more about local than councils”. For many years they have invested a percentage (5%?) of fund locally and managed to avoid any "moral risk" by making sure that the actual investment decisions are made independently.

Overall, a very informative and useful summit. It has now been running for 30 years but will no doubt have to change in the future when the pools take on investment decisions from local funds even though funds will retain responsibility for liabilities and asset allocation.

Why Pensions are so important and organising to defend the Local Government Pension Scheme

Today I had a record breaking 3 meetings on Pensions. First I chaired a meeting of Greater London UNISON reps who sit on local Council Pension Boards (see group picture of Forum members above).

UNISON has cross service group national and regional forums on the Local Government Pension Scheme (LGPS). The overriding purpose of these forums is to defend and improve the LGPS which 4 million UK workers depend upon and has £250 billion in assets.

We discussed:-

• Support appropriate take up of the 50/50 option, especially for low paid workers who would otherwise leave the LGPS. Point out you still get full life insurance cover with 50/50
• Recruiting and training for new reps; 
• LGPS fund manager Baillie Gifford refusal to talk to trade unions about manufacturer Tesla's appalling  health & safety record.
• Indemnity insurance for Pension board members. The saga continues. Why do some funds have it but others say it is not necessary? 
• How to challenge inaccurate calculations of pensions (a rep reported that there has been some awful big mistakes made); 
• Poor governance arrangements on some London Pension boards; 
• Member representation on the London Pension Fund Authority
• Access to UNISONs financial advice partner Lighthouse; 
• Carbon divestment campaign. Branches and Climate campaigners need to work together. 
• Carbon Neutral investment; 
• New Minister for Local Government Pensions (who knows his stuff); 
• 2018 LGPS PLSA conference; 
• Millions of pounds of savings already made by London Pension funds due to UNISON's work on exposing excessive fees:
• Problems with the London Collective Investment Vehicle (especially with Governance and ESG)
• Disaster. The government wins legal appeal that they can force LGPS to invest in line with the whims of Boris Johnson as Foreign Secretary. What could possibly go wrong?  
• We finished with a minutes silence for the victims of Grenfell. 

Union rights ARE an ESG issue!

            An intelligent and thought provoking post as ever by Capital Stewardship blogger Tom P here (and below) on the failure (I could be a little more direct) of the ESG (Environmental, Social, Governance) industry to promote Labour rights. As someone who has an interest as the UNISON NEC member for the UK charitable and voluntary sector, I wonder how many of these organisations actually recognise trade unions for their own staff and have collective bargaining? Or realise if they don't - they are failing to follow the United Nations Global principles on human and Labour rights? 

By coincidence last week I attended a meeting of the Association of Member Nominated Trustees (AMNT) working group on their "Red Lines" initiative. Which is a new approach to pensions shareholder engagement and voting at Company AGMs. Labour rights and trade union recognition are accepted as key "Red Lines" - as important as environmental or corporate governance.

(Tom P) "I've blogged a little previously about what I see as a general failure of labour issues to make it very high up the ESG agenda. As someone who has worked with and for trade unions in different ways for much of my adult life I find this frustrating, particularly as it contrasts sharply with progress on environmental issues in responsible investment. So I thought I'd go into a bit more detail.

One of the things that troubles me is the apparent tolerance some people in responsible have for poor behaviour by companies on labour rights. I very much doubt this sort of behaviour would be tolerated in respect of other ESG issues. I think it is worth restating, as obvious as it should be, that labour rights are human rights. Therefore, where unions raise concerns about companies' not respecting labour rights this should not be seen as a "difference of opinion" between employer and employee, but a potential violation of human rights. Also, unions are very often able to provide specific breaches of labour law by companies. The consequences of such breaches vary considerably between jurisdictions but the key point is that companies are breaking the law, often repeatedly.

Seen in these terms, I question why investors do not take alleged labour rights violations more seriously. Aside from the danger in being seen as tolerating abuses of human rights, I would argue that investors should see this as a serious hazard warning. If a company is breaking the rules over and over even if you don't personally like/support unions you should be concerned about whether this is indicative of a wider management attitude.

However, for some reason this message doesn't seem to get through. I doubt a company that could be shown to have repeatedly violated environmental regulations would be given the benefit of the doubt by many ESG folks, but this does happen with labour rights. To take a real life example, imagine the reaction if a company stated that it would lobby aganst certain environmental standards because it was bad for business, and if it repeatedly used lawyers to frustrate attempts to make it more environmentally responsible. I think we know that most RI people would think this was intolerable.

Yet this is exactly what happens when unions try to organise within companies. It is far more acceptable in the ESG world for a company to oppose unionisation, even when this strays into alleged breaches of the law, than it is for it to decline to adhere to voluntary environmental initiatives or targets. I have even seen an asset manager with some ESG credibility report publicly that it supports a company's right to campaign against unionisation because it thinks this is in the interests of the business.

I genuinely get it that the working lives of retail workers, or dockers, or bus drivers are to most people in the the RI world a less interesting thing to look at than climate change, particularly if those workers live in developed countries and sound a bit thick. Engaging over these issues maybe doesn't have quite the same feeling that you are contributing to something important. But actually the ability of workers to bargain for a fair share is closely linked to inequality, surely quite an important societal issue.

It's a bad news story really: the decline of trade union strength is closely correlated with increased inequality, as an IMF paper pointed out last year. The effects might be two-fold, weaker unions mean that labour is less able to bargain for a fair share, but also reduce the countervailing power that once held corporate management in check. Is it any wonder that the US, with its weak labour law and numerous anti-union companies (and union-busting firms that advise them) is so unequal? So if you are concerned by inequality you should be concerned by companies that try to prevent or reverse unionisation.

Finally, I think it's important to flag up the issue of beneficiary interest and representation. I genuinely believe that RI policies and practices should reflect beneficiary concerns where possible.

There is a lack of good info on what beneficiaries really want to see in RI policies but some of the limited info we have suggests that they put more emphasis on basic employment-related issues than the ESG community as a whole does. If this is broadly correct this may be because they see a self-interest in it. We also know that beneficiaries want to get a decent return and are worried about getting ripped off. Therefore an RI policy that was generally rooted in beneficiaries' interests might have more to say about workplace terms and conditions on the one hand, and fees and charges on the other. To state the obvious we are long way from that, although this is broadly the territory that unions seek to occupy.

I do worry a bit that the priorities expressed in responsible investment can sometimes look like the liberalism of the well off and successful. We're very good at flying around the world to conferences and signing up to global initiatives. In contrast, bus drivers complaining about shift patterns or faulty heaters can seem rather dull. If you've never done a menial job, or struggled to get on at work, you may well consider some of the complaints that union members raise to be trivial, or whiny. But these are the people whose money makes responsible investment possible. Without their pensions you and me don't have jobs. I think they have a right to expect that their voice gets a better hearing than it does currently".

(hat tip chart to http://www.unionswork.us/)

Red Line Voting gets Green light to Save Planet, Respect Human Rights and Stop Fat Cats

I was really pleased to take part in the debate and vote in favour of the AMNT's Red Lines initiative which was approved at our summer conference on Wednesday this week. They cover a wide range of environmental, social and corporate governance issues.

Red Line Voting empowers pension trustees to make responsible investing a reality and will direct fund managers to oppose poor governance practise in companies where failure poses a risk to its shareholders.

Trustees bodies will be able to instruct fund managers to follow all Red Lines en bloc or a sub section.  It should not cost the scheme for doing so. Fund managers will have to comply with these instructions or explain why not and then run the risk of being sacked by trustees.

On environmental Red Lines the AMNT  worked with Carbon Disclosure Project and will be urging pension schemes to adopt them as they believe it would take climate change up the UK corporate agenda.

On social issues the Red Lines include trade union recognition, race equality, gender equality, commitment to equality monitoring and publishing the data, that companies should have a plan to introduce the Living Wage, and get rid of zero hours contracts.

On governance there will be a vote against the remuneration policy if any director is paid more than 100 times the average pay in that company’s UK workforce. Also on governance companies should have a tax policy stating what their tax practises are.

The AMNT are now planning to launch Red Line Voting in Autumn, in time for the 2016 voting season. They have have worked closely with UKSIF on the development of these Red Lines and major fund managers are already preparing to implement Red Line Voting instructions.

The big campaign now is to persuade pension schemes to adopt Red Line Voting, particularly those in pooled funds. Up to now investors in pooled funds were in practise unable to direct the engagement and voting on the shares associated with their investments. Red Line Voting gets round this. Fund managers may receive dozens of Red Line Voting instructions, but they are all the same instructions so they can then allocate votes pro rata. Since more than £2-trillion of assets under management in the UK are in pooled funds this could have a significant impact.

The AMNT has been granted £75,000 by the Joseph Rowntree Charitable trust over two years to develop and launch this initiative.

Red Line Voting is a revolutionary concept. I agree with "Responsible Investment" magazine that this is "a major evolution in UK Pension funds" but think "Engaged Investor" got it right when they called it "Power to the People: the new power for trustees to control fat cat behaviour".

Many people have been involved in the AMNT project on Red Lines but special mention to its Co Chair Janice Turner, who thought it up and was the driving force behind it and Co Chair, Barry Parr and Committee member, Bill Trythall. 

Red Lines - How to start an Investment Governance Revolution

(this post was pulled in January since I didn't realise that we had to wait until formal launch of Red Lines which took place yesterday. I will post further on this "revolutionary" proposal)

Picture is from last weeks workshop on "Red Lines" run jointly with the AMNT (Association of Member Nominated Trustees) and UKSIF (United Kingdom Sustainable  Investment & Finance Forum)

AMNT co-chair Janice Turner talks about her "Red Lines" idea to the audience.

Pension funds are blamed for being partly responsible for the crash of 2008. As asset owners they were "asleep at the wheel" and did not take their responsibility seriously and allowed the banks and financial institutions to nearly destroy our economy and seriously damage our investments.

What "Red Lines" hopes to do is to allow all pension funds regardless of size assert their rights of ownership on the assets they own and are responsible for. Small pension funds do not have a voice even though they are estimated to own £300 billion of assets. Large pension funds can afford to engage with their fund managers and the companies they own but they always lose important votes at company AGMs since most fund managers interests are not aligned with asset owner interests.

In a telling phrase from AMNT activist Bill Trythall (on left of photo) there are "Armies without generals and generals without armies".
 
Janice compared the current arrangements with the electoral system in the 18th Century when only the rich and powerful had a vote.

What  "Red Lines" is about is small and large pension funds, as well as a wide range of other charitable and ethical funds, agreeing a common set of Environment, Social and Governance (ESG) beliefs and instructing their fund managers to vote in a certain way or explain why not.

The devil will be in the detail of course but it should not be beyond the wit of man or woman to agree a common set of voting instructions to fund managers on issues based, for example, on the UK Stewardship Code or the United Nations Compact on Human Rights.

If companies do not comply with "Red Lines" instructions without good reason then fund managers should vote against the Board at AGMs and if fund managers do not comply without good reason, then they should run the risk of being sacked by trustees.

After speeches there were various workshops on how to formulate and enable "Red Lines". It is at an early stage and is going to be a time consuming and difficult process to bring about but potentially "Red Lines" will indeed revolutionise governance practices and bring about more responsible ownership and accountability.

Committee on Workers Capital - Global Proxy Review 2014

Check out this report published last week by the Committee on Workers Capital (CWC). 

The CWC has "over 200 members from 25 different countries, the CWC connects labour union organizations around the world to advance the responsible investment agenda on the global stage". 

The Global Proxy Review  takes an international view on the way fund managers vote the shares they hold and manage on behalf of workers pensions funds at Company AGMs. Use this information to hold fund managers to account for the way they vote on important environmental, social and governance issues (ESG).