One of London CIV’s key visions is to be the best-in-class asset pool that delivers value for Londoners through long-term sustainable investment strategies, according to its new Responsible Investment and Stewardship Outcomes Report published this week. It goes on to say London CIV is committed to protecting the interests of clients and members by acknowledging that climate-related risks and ESG factors are a source of financial risk and opportunity.
In his Introduction, Chair Mike Craston said: “In 2022, we continued to improve the quality of our case studies to demonstrate the stewardship work we have done throughout the year. Most notably, we have added our own direct engagement and work beyond what our investment manager and EOS have conducted on our behalf. As active owners, we believe that stewardship is a powerful tool for achieving our Net Zero ambition, mitigating risk, maximizing returns, and driving positive social and environmental impact. We recognise that divestment alone would leave us with no voice or opportunity to encourage responsible corporate behaviour or add value for our clients”.
The report also highlights lessons learned from both COP27 and COP15 events; the outcomes of 2022’s 27th Conference of the Parties (COP27) on climate change elicited mixed opinions. On the positive side, a deal on “loss and damage” was reached, which established new funding agreements to support developing countries vulnerable to the adverse effects of climate change. However, there was disappointment as commitments were not made to curb emissions and achieve the Paris climate agreement’s target of limiting warming to 1.5 to 2 degrees by 2025. The UN Biodiversity Conference (COP15) also took place in the same year. It delivered a landmark Global Biodiversity Framework that was adopted by nearly 200 countries. The framework aims to protect at least 30% of land and seas by 2030, representing a significant step forward in addressing the biodiversity crisis.
Dean Bowden, CEO commented further in his summary of the report: “In 2022, we published our first Voting guidelines which set out our expectations for our portfolio companies. We have also launched the Climate Analytics Service to help our clients understand the carbon footprint of their portfolio and how they could achieve their own Net Zero ambition. Furthermore, we have taken the decision to make this available on a no cost basis, demonstrating our belief in the value and the impact that this service can have. In this year’s report, we have added more case study examples from not only our investment managers and Hermes EOS, but also from our team here at London CIV. We believe that these additional examples will help showcase our commitment to responsible investment and the positive impact that our investments have on society”.
London CIV’s Stewardship Priorities remain committed to the three key stewardship themes that were identified in 2021: climate change (intensifying focus on biodiversity), diversity and inclusion (including human rights), and tax and cost transparency (within the broader theme of principles of governance). Alison Lee, Responsible Investment Manager who compiled the report said: “These priorities were chosen due to their significant financial impact and the potential influence we can exert. In 2021, we released our first Climate Policy, outlining our expectations of our Client Funds and other stakeholders. In 2022, we published our Voting Guidelines, setting standards for our portfolio companies’ climate, diversity and inclusion, and governance practices. We also partnered with CACEIS in January 2022 to provide improved cost transparency and benchmarking information”.
As reported above, London CIV’s vision is to be a best-in-class asset pool. Jacqueline Jackson, Head of Responsible Investment takes it one step further: “Due to our clients’ future liabilities and long-term investment strategies, we must consider the financial implications of natural resource constraints and social inequalities whilst understanding how well-equipped our portfolio companies are to manage risk. The industry influence of London CIV and our client funds means we have a responsibility to drive change. We are committed to leveraging our expertise to drive leadership. What collaborative stewardship means to us London CIV takes a collaborative approach to stewardship through engagement with companies, investment managers, peers and market participants. Our approach is under constant refinement and review to reflect the evolving landscape of ESG risk and opportunity. Based on detailed research and review, we first select our annual engagement themes, refine our Stewardship Policy, Climate Policy, and Voting Guidelines as required, then work with our providers and support industry initiatives collaboratively to drive outcomes”.
London CIV’s responsible investment strategy and policy London CIV undertook a major review of its headline Responsible Investment Policy in early 2022. The policy is supported by more detailed Climate and Stewardship Policies. London CIV’s Responsible Investment Reference Group (RIRG) provides an important sounding board for our Responsible Investment activity and the Shareholder Committee is also consulted when there are revisions to our Responsible Investment Policy including to ensure it provides the necessary framework for determining stewardship priority themes. The three current priority themes set out in the policy are: climate; human rights including diversity and inclusion; and tax and transparency. We are also including biodiversity to the framework in the Responsible Investment policy.
Gus Loriot, RI Manager and London CIV’s resident ESG expert explains what ESG means for London CIV and its clients: “We believe that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Whilst our primary goal is to help our clients with meeting their pension commitments, this will only be possible by managing ESG risks and opportunities for our funds and supporting a financial system fit for the future. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole. We regard it as part of our fiduciary duty to encourage long-term sustainable growth and maximise the economic health of companies”.
The full London CIV Responsible Investment and Stewardship Outcomes Report 2023 is available on its website: https://londonciv.org.uk/stewardship
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