Investment firm LGPS Central lowers rating of bond manager due to Environmental, Social, Governance (ESG) shortcomings.
In a recently published stewardship report, LGPS Central, a leading investment pool in the UK, has disclosed its manager engagement and rating processes, as well as the outcomes of these engagements.
One of the key highlights of the report is the downgrade of one of LGPS Central's fixed income managers from "yellow" to "amber" in Q2 of 2024. The downgrade was due to ESG-related concerns about the manager's failure to integrate ESG factors into its decision-making process. However, LGPS Central has declined to disclose the name of the specific manager involved.
The report also states that 45% of EOS's objectives related to its engagements were completed. EOS, LGPS Central's stewardship provider, engaged with 687 companies globally. In 2024 alone, LGPS Central engaged with 661 companies regarding climate change.
Barclays, a major UK bank, was one of the companies that LGPS Central engaged with. This engagement followed Barclays' commitment to stop financing new oil and gas fields and restrict lending to energy companies expanding fossil fuel production. According to the pool's Stewardship report, Barclays provided written reassurances that its new commitments were being followed.
The report does not detail any new investments with high ESG risk by LGPS Central's managers, nor does it discuss any new efforts by LGPS Central's managers to mitigate ESG risks. It also does not specify any new downgrades or upgrades of managers in Q4 of 2024.
The report does emphasise the presence of several investments with high ESG risk and limited efforts to mitigate that risk as evidence for the downgrade of one of the fixed income managers. However, it does not mention any new ESG-related concerns about LGPS Central's engagements with its managers.
The report marks LGPS Central's engagement disclosure through a rating process, which is part of its manager rating process for disclosure of engagement. This process is designed to ensure that the pool's investments are aligned with its sustainability objectives.
LGPS Central's stewardship report provides valuable insights into the pool's engagement with its managers and the outcomes of these engagements. It underscores the importance of ESG factors in investment decision-making and the need for continuous improvement in this area. For precise and up-to-date details, official LGPS Central reports or announcements would be the best source.
The stewardship report highlights LGPS Central's engagement with environmental-science issues, particularly climate-change, as exemplified by the 661 companies it engaged with on climate change in 2024. Despite the downgrade of one of its fixed income managers due to ESG-related concerns, the report indicates a focus on finance and business decisions that align with sustainability objectives, as demonstrated by Barclays' commitment to stop financing new oil and gas fields.
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