Legal & General (LGIM), the largest manager of Local Government Pension Scheme (LGPS) mandates in the UK, has been awarded the contract to manage Brunel’s passive equities portfolio – estimated to be worth over £4bn (€4.5bn).
In January, RI reported that Brunel – one of the UK’s new local government pension ‘pools’ – had conducted a ‘reverse roadshow’ for prospective fund managers, outlining its preference for ESG integration.
Mark Mansley, Brunel’s Chief Investment Officer, told RI that LGIM was appointed – following a manager search that considered “wider RI and ESG factors” – due to its record on stewardship and governance. When asked how ESG was incorporated into the new mandate, he said: “With all passive mandates, the level of stewardship is particularly importantly – large passive managers need to be engaging with companies actively and systematically, and LGIM was particularly strong in this area”.
In addition, Mansley explained that the inaugural mandate includes “a low-carbon” option, which he expects “several clients” to allocate to. He confirmed that this would not be LGIM’s Future World Fund – the headline-grabbing climate-tilted fund seeded in 2017 by HSBC Bank UK Pension Scheme – as it did not “meet the specification of any of the portfolios”.
Mansley, however, did leave the door open to allocating to the fund in the future, stating that Brunel “may in the future reconsider use of this fund or, more broadly, the potential for similar innovation with LGIM, subject to client priorities”.
Mansley added that other “ESG-based approaches” would also be considered in future, depending on client interest.
Brunel, which joined the Principles for Responsible Investment in March, is currently searching for active equity managers to manage £1.2bn in UK equities and £600m in global low volatility equities.
Both Brunel and LGIM are signatories to the LGPS Advisory Board’s Code of Transparency, the voluntary code for local authority asset managers whereby signatories commit to the “transparent reporting of LGPS investment costs and fees to administering authorities”.
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