Lothian Pension Fund claimed this week to be the most diversified Local Government Pension Scheme (LGPS) in terms of infrastructure investments, as it announced in its 2022-23 results that 13.4% of its assets were invested in the asset class.

In its annual report, the pension fund said that at the end of March 2023, total assets stood at £9.7bn compared with £9.6bn the previous year, with a funding ratio of 106%.

The scheme claimed that with 13.4% of its total assets invested in infrastructure, its infrastructure portfolio is the largest and most diversified among UK LGPS funds. It invests in a variety of renewables, regulated utilities and other essential assets and timberlands, it said.

The value of unquoted private equity, infrastructure, timber and secured loan investments at 31 March 2023 stood at £1.7bn (£1.3bn in 2022). It also invested over £100m in renewable energy projects over 2022-23.

Last year, it saw a fund return of 7.9% for real assets led by strength in both unlisted infrastructure (19.6%) and timber and agriculture (12%) investments.

David Vallery, the scheme’s chief executive officer, said: “Despite the backdrop of unrest and change both in the UK and globally, 2022-23 for [Lothian Pension Fund] was another year of success and progress.

“We’ve focused on strengthening governance, pensions administration, finance and investment arrangements and continue to ensure our services are efficient, effective and sustainable for members and employers.”

Vallery added that the fund’s commitment to responsible investment and stewardship are “clear and continue to gather momentum”.

“Of the total portfolio, the majority is invested in the UK, and around a quarter is invested in renewables,” he said.

Sustainable investment commitment

Back in 2020, Lothian unveiled a new sustainable investment policy document that builds on its existing commitment to ESG. 

As well as reinforcing the fund’s commitment to ESG analysis as part of a risk assessment of all investments, the document stated that no new capital, either debt or equity, would be supplied to companies that are not aligned with the 2015 Paris climate change agreement.

This goes a step further than the scheme’s prior approach, which relied on both screening and engagement with investee companies.

However, according to list of holdings on the scheme’s website, Lothian invests £144m in various Macquarie Asset Management infrastructure funds, one of which is the Macquarie Europe Infrastructure Fund 5 in which Lothian invests £17m.

Back in 2016, Macquarie Infrastructure and Real Assets, which is led by Macquarie Europe Infrastructure Fund 5, acquired a 30% stake in EP Infrastructure, which owns nearly half of Eurostream – one of the biggest importers of Russian gas into Europe via a pipeline into Slovakia.  

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