Question to the Ministry of Housing, Communities and Local Government:

To ask His Majesty's Government what guidance they are providing to members of the local government pension scheme about non-financial considerations of responsible investments; and whether they plan to change the requirements for investment and divestment decisions relating to asset or country allocations and responsible investing.

Answered by Baroness Taylor of Stevenage - Baroness in Waiting (HM Household) (Whip)

The government intends to publish updated guidance on preparing and maintaining an investment strategy statement later this spring, subject to the passage of the Pension Schemes Bill and regulations containing the relevant guidance making powers coming into force. This guidance will not be subject to formal public consultation but was shared for comment with all Local Government Pension Scheme (LGPS) administering authorities, asset pools, and the LGPS scheme advisory board alongside statutory consultation on the regulations.

LGPS administering authorities will be required to set an approach to responsible investment in their investment strategy. The guidance is expected to restate the existing position that when setting their investment strategy administering authorities must consider all factors, including environmental, social and governance factors, that are financially material to the performance of investments, and that non-financial factors can also be taken into account provided they do not risk significant financial detriment to the scheme and administering authorities have good reason to believe scheme members would support the decision.

As with now, neither legislation nor guidance will dictate asset allocations or levels of investment in specific geographies. However, administering authorities remain legally required to comply with UK sanctions, including restrictions on dealings with designated individuals, entities, and countries.

Question to the Ministry of Housing, Communities and Local Government:

To ask His Majesty's Government whether they have finalised the updated local government pension scheme guidance on preparing and maintaining investment strategy statements; and if so, when they plan to publish that updated guidance.

Answered by Baroness Taylor of Stevenage - Baroness in Waiting (HM Household) (Whip)

The government intends to publish updated guidance on preparing and maintaining an investment strategy statement later this spring, subject to the passage of the Pension Schemes Bill and regulations containing the relevant guidance making powers coming into force. This guidance will not be subject to formal public consultation but was shared for comment with all Local Government Pension Scheme (LGPS) administering authorities, asset pools, and the LGPS scheme advisory board alongside statutory consultation on the regulations.

LGPS administering authorities will be required to set an approach to responsible investment in their investment strategy. The guidance is expected to restate the existing position that when setting their investment strategy administering authorities must consider all factors, including environmental, social and governance factors, that are financially material to the performance of investments, and that non-financial factors can also be taken into account provided they do not risk significant financial detriment to the scheme and administering authorities have good reason to believe scheme members would support the decision.

As with now, neither legislation nor guidance will dictate asset allocations or levels of investment in specific geographies. However, administering authorities remain legally required to comply with UK sanctions, including restrictions on dealings with designated individuals, entities, and countries.

Question to the Ministry of Housing, Communities and Local Government:

To ask His Majesty's Government whether they plan to hold a public consultation regarding changes to the local government pension scheme guidance on preparing and maintaining investment strategy statements.

Answered by Baroness Taylor of Stevenage - Baroness in Waiting (HM Household) (Whip)

The government intends to publish updated guidance on preparing and maintaining an investment strategy statement later this spring, subject to the passage of the Pension Schemes Bill and regulations containing the relevant guidance making powers coming into force. This guidance will not be subject to formal public consultation but was shared for comment with all Local Government Pension Scheme (LGPS) administering authorities, asset pools, and the LGPS scheme advisory board alongside statutory consultation on the regulations.

LGPS administering authorities will be required to set an approach to responsible investment in their investment strategy. The guidance is expected to restate the existing position that when setting their investment strategy administering authorities must consider all factors, including environmental, social and governance factors, that are financially material to the performance of investments, and that non-financial factors can also be taken into account provided they do not risk significant financial detriment to the scheme and administering authorities have good reason to believe scheme members would support the decision.

As with now, neither legislation nor guidance will dictate asset allocations or levels of investment in specific geographies. However, administering authorities remain legally required to comply with UK sanctions, including restrictions on dealings with designated individuals, entities, and countries.

Question to the Ministry of Housing, Communities and Local Government:

To ask His Majesty's Government what changes they plan to make to local government pension scheme guidance relating to investment allocations, including how they consider fiduciary duty obligations when implementing responsible investment strategies.

Answered by Baroness Taylor of Stevenage - Baroness in Waiting (HM Household) (Whip)

Administering Authorities in the Local Government Pension Scheme will be required to set an investment strategy for their fund that must include a high-level objective on responsible investment and a strategic asset allocation completed according to a template to be published in guidance. The intended template for the strategic asset allocation is published here (attached). The choice of allocation and tolerance range for each asset class is for the Administering Authority to make, in line with their fiduciary duty to scheme members and employers. Administering Authorities may choose to delegate completion of the template to their asset pool company.

Pools will be required to deliver the investment strategy set by their partner funds, including the objective on responsible investment. In order to maximise the benefits of scale, the government expects partner funds and pools to work together to develop a common approach as far as possible. The government considers that this provides sufficient flexibility to allow funds to meet their fiduciary duty.