GMPF invests in various company shares and bonds, government bonds, property and cash around the world and has an excellent long-term investment track record. This helps keep our employer contribution rates at the lower end of the range for local authorities and, in turn, enables the authorities to spend more money on front-line services whilst maintaining attractive pensions for staff.
We invest over 50% of GMPF's assets in well diversified portfolios of UK and overseas company shares. Further assets are invested in company bonds. GMPF has holdings in some of the largest companies in the world. You can see list of GMPF's top twenty holdings in the annual report and a full list of GMPF's holdings can be found by clicking on the link below, or visiting our Investments homepage.
We have delegated the investment management of these portfolios of company shares and bonds to a small number of external professional fund management firms. However, we give the investment managers detailed guidelines within which to work.
The cornerstone of our policy on ethical investment is our interpretation of the legal position. In our view, applying ethical, environmental or any other non-commercial policy either to investments generally or to selecting fund managers, would be inconsistent with our legal duties and responsibilities. We also have a statutory responsibility to ensure proper diversification of investments. Thus we have a policy of not interfering in the day-to-day investment decisions of GMPF's investment managers. Moreover, we do not actively invest in or disinvest from companies solely or largely for social, ethical or environmental reasons. This policy is described in Section 9 of GMPF's Investment Strategy Statement.
Investment Strategy Statement (357 KB)
Although we will listen to special interest groups that oppose some of GMPF's investments, for example in alcohol, gambling or pharmaceuticals, we cannot let this detract from our duty.
Considerations such as these have led us to decide not to have or develop a detailed generalised ethical investment policy. We prefer to concentrate on developing a policy that involves using voting and other contacts to positively influence company behaviour. In our view, simply disinvesting from particular companies is a denial of responsibility. As responsible institutional investors we seek to influence companies' governance arrangements, environmental, human rights and other policies by positive use of shareholder power. An example of GMPF following this stance was our concerted involvement in a campaign to secure improvement in News Corporation's approach to corporate governance arrangements. However, none of this prevents us applying ethical or environmental criteria on a case by case basis if considered relevant and appropriate. For example, for many years we chose not to invest in South Africa. Moreover, the legal status of the Fund is such that all property is held by Tameside MBC and consequently we would not do anything that conflicted with its statutory duties as a Local Authority.
The whole area of voting and exercising influence over the companies one holds shares in is known as 'corporate governance'. GMPF has a well-developed approach to such matters including
- Implementing its voting policy in partnership with a specialist advisor (currently PIRC Ltd) who provides appropriate research and vote execution services that cover the major markets in which shares with voting rights are held. GMPF votes in line with the recommendations of its advisor, having judged that the advisor’s voting guidelines promote high standards of corporate governance and responsibility and enable GMPF to exert a positive influence as shareholders concerned with value and values;
- Having an Investment Monitoring and ESG Working Group whose role is to oversee corporate governance and related matters, including monitoring GMPF's external managers’ stewardship behaviour;
- Monitoring developments in corporate governance and the activities of GMPF's managers in this area;
- GMPF is also a member of the 'Local Authority Pension Fund Forum', which provides a large investor base to influence companies' corporate governance and social responsibility; and the Institutional Investor Group on Climate Change, a forum for pension funds and investment managers; and
- Enhancing and refining its engagement approach by undertaking a carbon footprint assessment. This assessment will identify the key sectors and stocks that are contributing to GMPF's carbon risk and will provide a quantitative assessment of carbon risk at an absolute level and relative to a benchmark. A key benefit of the assessment is that it will assist in identifying opportunities to engage with our fund managers and portfolio companies.
We have considered the possibility of investing in specialist ethical investment funds or vehicles, but our current view is that evidence on the returns of such funds or vehicles is not as clear as it might first appear. For example, the seemingly competitive returns of ethical funds or vehicles could simply be the result of the well-known 'small companies effect' and not the result of ethical investing at all. The small companies effect arises because small companies can give above average returns at different times within an economic cycle.
Ethical vehicles tend to invest more in small companies rather than large ones, because large companies are more likely to have dealings in areas that ethical vehicles dislike. For this reason and others, including that such investment would tend to run counter to our overall preference for using shareholder influence, GMPF does not invest in such specialist investment vehicles. However, we do review this periodically.