GMPF approach to ethical investments The current value of the Greater Manchester Pension Fund (the Fund) is around £10 billion. The Fund is invested in various company shares and bonds, government bonds, property and cash around the world and has an excellent long-term investment track record. This helps keep our employer contribution rates at the lower end of the range for local authorities and, in turn, enables those authorities to spend more money on front-line services whilst maintaining attractive pensions for staff.

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We have delegated the investment management of these portfolios of company shares and bonds to a few external professional fund management firms. However, we give the investment managers detailed guidelines within which to work. 

The cornerstone of our policy on ethical investment is our interpretation of the legal position. In our view, applying ethical, environmental or any other non-commercial policy either to investments generally or to selecting fund managers, would be inconsistent with our legal duties and responsibilities. We also have a statutory responsibility to ensure proper diversification of investments. Thus we have a policy of not interfering in the day-to-day investment decisions of the Fund's investment managers. Moreover, we do not actively invest in or disinvest from companies solely or largely for social, ethical or environmental reasons. This policy is described in Section 8 of the Fund's Statement of Investment Principles below .

Click here for the Statement of Investment Principles (159 KB)

Although we will listen to special interest groups that oppose some of the Fund's investments, for example in tobacco, alcohol, gambling or pharmaceuticals, we cannot let this detract from our duty.

Considerations such as these have led us to decide not to have or develop a detailed generalised ethical investment policy. We prefer to concentrate on developing a policy that involves using voting and other contacts to positively influence company behaviour. In our view, simply disinvesting from particular companies is a denial of responsibility. Rather, responsible institutional investors should seek to influence companies' environmental, human rights and other policies by positive use of shareholder power. An example of the Fund following this stance was our concerted involvement in a successful campaign to secure improvement in Shell's approach to environmental and related matters. However, none of this prevents us applying ethical or environmental criteria on a case by case basis if considered relevant and appropriate. For example, for many years we chose not to invest in South Africa.

The whole area of voting and exercising influence over the companies one holds shares in is known as 'corporate governance'.  This Fund has a well-developed approach to such matters including:

• Having an Ethics and Audit Working Group whose role is to oversee corporate governance and related matters;
  
  
• Subscribing to the research and advisory service of PIRC Ltd who are an important adviser in this field;
  
  
• Monitoring developments in corporate governance and the activities of the Fund’s managers in this area; and
  
  
• Issuing voting guidelines to our managers including, among other matters, a UK Environmental Investment Code which, where appropriate, we require the managers to apply in their voting behaviour.
  
  
• The Fund is also a member of: the Local Authority Pension Fund Forum, which provides a large investor base to influence companies’ corporate governance and social responsibility; and the Institutional Investor Group on Climate Change, a forum for pension funds and investment managers.

We have considered the possibility of investing in specialist ethical investment funds or vehicles, but our current view is that evidence on the returns of such funds or vehicles is not as clear as it might first appear.  For example, the seeming competitive returns of ethical funds or vehicles could simply be the result of the well-known 'small companies effect' and not of ethical investing at all. The small companies effect arises because small companies can give above average returns at different times within an economic cycle. 

Ethical vehicles tend to over-invest in small companies rather than large ones, because large companies are more likely to have dealings in areas that ethical vehicles dislike. For this reason and others, including that such investment would tend to run counter to our overall preference for using shareholder power, the Fund does not invest in such specialist investment vehicles. However, we do review this periodically.

Version 1 (July 10, 2007)

Endorsed by the Management Panel of GMPF at the meeting held on September 7, 2007.

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