Strathclyde to review RBS, Shell stakes due to poor ESG scores
UK - The £10.5bn (€12.1bn) Strathclyde Pension Fund has said it may scale back its investment in Royal Dutch Shell, Bank of America (BoA) and the Royal Bank of Scotland (RBS) due to concerns about their environmental, social and corporate governance (ESG) record.
Minutes from its investment advisory panel meeting also reveal that the local government pension scheme (LGPS) has begun considering replacements for fund manager Gartmore following the departure of a number of several key portfolio managers.
Strathclyde, a signatory of the UN Principles of Responsible Investment, highlighted a number of companies in its ESG report after they continued to score low ratings, including Gazprom and Petrobras, alongside Shell, BoA and RBS.
Gazprom was singled out after receiving the second-lowest rating of 4 in three categories for the fourth consecutive quarter, while General Dynamics also received a 4 for the second successive quarter in some categories due to its involvement in the manufacture of armaments and aircrafts.
The pension fund said in its report: “A further 19 companies in the portfolio scored 4 in one of the three ESG categories, including companies such as Royal Dutch Shell, Bank of America and RBS. In line with policy, [asset manager] Edinburgh Partners will scale back investment or look for issues to be addressed by the companies rated 4.”
The LGPS is also considering a change of investment managers following the departure of Gartmore’s head of UK smaller companies Gervais Williams and other key portfolio managers.
While the scheme’s small-cap equity mandate, worth around 2% of total fund value, was still managed by the new team, Strathclyde noted Gartmore had asked Goldman Sachs to conduct a review that could lead to a sale or merger of the fund manager.
Strathclyde said: “The panel agreed that, in the meantime, it would be prudent to review alternative options for management of the fund’s UK small-cap portfolio should the outcome of the review, or further developments at corporate level within Gartmore, give sufficient cause for concern.”
The minutes also confirmed an earlier story by IPE that stated DTZ Investment Management would replace Aberdeen Property Investors as managers of Strathclyde’s UK direct property mandate, worth £1bn.
Additionally, Partners Group has been awarded the mandate for a £200m global property portfolio.
The scheme, which as of September this year had an estimated funding ratio of 85%, expected this to rise by 5 percentage points following the switch from the retail price index to the consumer price index.