Lothian reveals ESG targets

Lothian Pension Fund has unveiled a target to measure 100% of its equities for carbon intensity within three years as part of broader plans to embed ESG considerations into its investment processes.

The scheme, which has around £8 billion in assets and is the second largest in Scotland, issued the proposal as part of its operating plan for 2020/21. The plan, which centres around six strategic goals, was put before and approved by the pensions’ committee in March.

As part of efforts to integrate ESG into the scheme’s investment activities, it proposed allocating the equivalent of 100 days in volunteering time by local pension fund employees.

The plan also included targets to save more than £5 million of annualised investment fees by increasing collaboration with other LGPS in Scotland.

The activity of investing in assets for returns that will exceed inflation in the long term has always relied on judgement, manager skill, diversification and patience, the scheme said.

“Today is no different, but judgement, management and patience are especially challenged by climate risk assessment and other environmental, social and governance issues, and the distribution of information and misinformation in this age of social media,” it said. “We must exercise our fiduciary duty to provide benefits for members and their sponsoring employers with due awareness of the complex dynamics of investing in a changing world.”