Central LGPS lowers rating for fixed income manager due to environmental, social, and governance (ESG) shortcomings
In a recent development, LGPS Central, a prominent UK pension pool, has not disclosed the name of the fixed income manager that it downgraded from "yellow" to "amber" in Q2 of 2024. The downgrade was due to ESG-related concerns and a perceived lack of integration of ESG factors into the manager's decision-making process.
The LGPS Central stewardship report, published on June 4, 2024, cited that the downgraded manager was able to discuss ESG risks associated with its holdings but did not adequately mitigate those risks through stewardship. The report also reflected long-term concerns that the manager was not integrating ESG factors into its decision-making process.
The report, however, did not disclose the name of the downgraded manager, nor did it mention any specific actions taken by LGPS Central with other fund managers aside from the engagement with Barclays following the UK bank's commitment to stop financing new oil and gas fields and restrict lending to energy companies expanding fossil fuel production.
LGPS Central's stewardship provider, EOS, engaged with 687 companies globally in 2024, with 40% of issues linked to climate action. The report stated that 45% of objectives set by EOS were completed.
LGPS Central has a rating process for manager engagement disclosure. If the level of engagement disclosure is unsatisfactory or the link between engagement and investment decision-making is unclear, fund managers are marked down through a rating review.
In a separate development, Barclays provided written reassurances to LGPS Central in Q4 of 2024 that its new commitments were being followed.
Despite the lack of explicit identification of the downgraded fixed income manager, sources reference LGPS Central’s increased focus on stewardship and ESG integration. If you require the exact manager’s name, it may necessitate more direct, proprietary, or detailed LGPS Central disclosures not present in these search results.
When our website approached LGPS Central to disclose the name of the fixed income manager that was downgraded, the pool declined to disclose the name.
As LGPS Central continues to prioritise ESG integration, the downgrade serves as a reminder of the importance of active stewardship and the need for fund managers to incorporate ESG factors into their decision-making processes.
- Recognizing the importance of integrating environmental-science factors, LGPS Central downgraded a fixed income manager due to ESG-related concerns, signaling a shift towards investing in companies that prioritize climate-change mitigation.
- As the climate-change crisis continues to intensify, LGPS Central's focus on environmental-science and stewardship, as well as their engagement with fund managers to improve their ESG integration, is crucial in shaping the future of finance and the environment.
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