UK - The £1bn Aberdeen City Council Pension Fund is State Street Global Advisors' first client to sign up for Friends Ivory & Sime's responsible engagement overlay (reo) programme.
The win follows last September’s alliance between SSgA and FIS. The deal made SSgA the first passive manager to offer socially responsible index tracking funds in the UK.
The responsible engagement overlay programme will allow Aberdeen to pursue social, environmental and ethical objectives without compromising its financial obligations.
As FIS currently manages a £25m active equity portfolio for the council, Aberdeen felt it appropriate to apply responsible engagement overlay to an SSgA-managed £300m passive portfolio.
Aberdeen City Council director of finance and information and communications technology Gordon Edwards said: “We think this type of approach to socially responsible investment is the most responsible approach because it separates the investment process from the engagement process. There is no compromise in terms of investment returns in what we expect from the benchmark.”
He added: “The fund’s long-term commitment to engagement is seen as protecting and enhancing shareholder value and thereby fulfilling its fiduciary duty, through addressing areas such as environment, climate change, labour standards and human rights.”
FIS managing director of retail and institutional business Peter Arthur said a number of other leading pension funds are actively discussing how the reo programme could be used in the management of assets. FIS launched its responsible engagement overlay programme in autumn 1999 in response to changes that were introduced in the Pensions Act 1995, which forced trustees to state their SRI policy.
The programme works by engagement and encouraging best practice SRI methods within the company, rather than the traditional approach of avoiding companies that do not adopt socially responsible objectives.
By Paul Sanderson
This week's top stories included Cardano announcing plans to acquire Now Pensions from a Dutch pension fund later this year.
Royal Bank of Scotland (RBS) faces a £102m impact on liabilities as a result of equalising guaranteed minimum pensions (GMPs), according to its annual results.
Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point