After a disappointing start to the summer, the weather gods rewarded us with plenty of August sunshine. I remained busy, even as my inbox filled with out-of-office replies. I wrote a blog post looking at whether Labour’s wealth fund would be a good idea. I also had four articles for MandateWire published. The first asks whether managers can help insurers overcome biodiversity investment hurdles. The second discusses how small schemes are reassessing their attitudes to stewardship. The third shows how the pensions review raises questions about the pipeline of investment opportunities. The fourth looks at what is stopping UK pension schemes from running on. A feature for Professional Pensions asked how easy it will be for Rachel Reeves to re-create the Maple 8 in the UK. Throughout the summer I hosted podcasts for Pensions for Purpose covering impact investing, biodiversity and renewables. More episodes will be available in September. I’m delighted to announce I’ll be launching The Professional Investment Podcast next month with Dan Mikulskis, chief investment officer for the People’s Partnership, as my first guest. Next month my latest networking event will discuss how the Labour government improves sustainability in pensions. Joining me to debate this issue are Faith Ward, Keith Guthrie, Simon Jones and Veronica Humble. Get in touch if you would like to attend!
Would Labour’s wealth fund be a good idea?
In my latest blog post I look at how Labour’s proposal is materially different from a traditional sovereign wealth fund. These look for a way for an economy to diversify away from a dominant industry, like Norway and its oil and gas industry. Instead, Reeves proposal looks to pool external funds. It’s not immediately obvious you need a state vehicle to do this − there are trillions of pounds invested in pension schemes and insurers both here and around the world happy to invest. But as the Tory government found out with the Mansion House reforms, it can be tricky to persuade UK pension schemes to invest domestically. You need to understand the regulatory, investment and market constraints which impact different types of pension schemes. In other words, there needs to be a deeper understanding by government officials of how the world of investment works.
Could managers help insurers overcome biodiversity investment hurdles?
This piece for MandateWire looks at how the £50bn a year expected to flow to insurers through buy-out can be used to protect nature. While insurers are interested in natural capital as these real-assets have long-term cash flows, these assets will also need to match insurers’ liquidity and solvency requirements. Potential assets include protecting grasslands, preventing deforestation and creating sustainable land management practices. Investment into these areas will be driven by insurers’ sustainable investment philosophy and their net zero targets. The asset manager which can design a natural capital fund within these strict requirements will have a better chance of securing assets from these institutions. But it’s not going to be easy – a conflict between insurers’ sustainability goals and their regulatory constraints is brewing.
Small schemes reassess approach to stewardship
Pressure on schemes to be effective stewards is increasing but this can be especially difficult for smaller schemes which lack resources. This MandateWire article explores how some small schemes are finding a way to outperform their larger peers by working together with independent trustees and campaign groups. By working together with ShareAction and an independent trustee, small schemes were recently able to encourage asset managers to back a particular resolution.
UK Pensions Review raises questions about pipeline of investible opportunities
Will the Labour government ensure there are the investment opportunities on offer to appeal to pension schemes in its quest to encourage more investment into the UK? This MandateWire feature looks at what investments are being created with the announcement of the pensions review, following the earlier announcement of a new National Wealth Fund. Crowding in private investment into the Fund will take a lot of structuring and a government prepared to allow private investors to get higher returns than it will receive. While the UK needs greater investment, particularly in infrastructure, it’s not clear this is due to a lack of capital rather than a lack of reliable returns. A greater understanding of which areas of the UK require investment and which type of pension scheme can provide this funding is needed.
What’s stopping UK corporate defined benefit schemes from running on?
That’s the question this piece for MandateWire addresses. Rapid improvement in funding levels means run on is now an option along with buyout. This option is being considered more seriously as both sponsoring company and schemes members can benefit from the economic success of the scheme. While it can be hard to persuade finance directors to overlook the last two decades of pain caused by the DB scheme, a new super-levy paid to the PPF could help to level the playing field. Many schemes may end up with a run-on approach by taking a wait-and-see approach.
The challenges of Reeves’ plan to re-create the Maple 8
How easy it will be for Chancellor Rachel Reeves to achieve her ambition of turning the LGPS into the Maple 8? That’s the question I examine in my latest feature for Professional Pensions. Pooling has already helped to improve economies of scale in the LGPS but a lack of clear definitions has resulted in the proliferation of many different models. Giving greater control to the pools needs to be balanced against the partner funds’ ability to focus on its local communities. Greater consolidation could, for example, lead pools to focus on infrastructure at the expense of local housing projects. But more effective pools would free up partner funds to focus more on strategic decisions. And the pools could build up the necessary expertise to invest more in the UK.
Podcasts a plenty!
Pensions for Purpose podcast
It’s been lots of fun hosting the Pensions for Purpose podcast this summer. The first five episodes have covered systems thinking, biodiversity, impact investing, how a football club led to a job at Pensions for Purpose and renewables. We have more episodes planned for the rest of the year so stay tuned!
The Professional Investment Podcast
I’m delighted to announce I’m launching The Professional Investment Podcast next month with Dan Mikulskis, chief investment officer for the People’s Partnership, as my first guest. I’ll be hosting a different guest from the institutional investment universe every other week who will be sharing their top news story with me. I’ll give the journalist perspective on the news story and my guest will explain why they think that story is important.
How the Labour government improves sustainability in pensions?
At 6pm on Wednesday, 11th September I’ll be hosting my latest sustainable networking event in Farringdon. With a large majority the new administration will have the power to making sweeping changes but its ambitions for investment will be constrained by poor public finances. This will increase the appetite to work with pension schemes to achieve the green transition. Joining me to debate this issue are Faith Ward, chief responsible investment officer for Brunel Pension Partnership, Keith Guthrie, head of sustainability for Cardano UK and for NOW Pensions as well as Simon Jones, partner and head of responsible investment at Hymans Robertson and Veronica Humble, chief investment officer for Cushon, the workplace pension provider. Get in touch if you would like to attend!
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