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UK roundup: Environment Agency, Merseyside, Aviva

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UK - The Environment Agency Pension Fund is seeking one or more managers to run an emerging market equity portfolio for the scheme.

Elsewhere, the Merseyside Pension Fund has set out its position relating to the oil sands campaign, and Aviva has agreed a pension deficit funding plan with trustees.

A tender notice issued by the Environment Agency on behalf of its £1.4bn (€1.6bn) active pension fund revealed the scheme is offering an emerging market equity mandate valued at between £50m to £150m, subject to its investment strategy review and strategic asset allocation.

It is seeking one or more managers to run the portfolios, preferably on a segregated basis with an excess return target of 3% per year on a three-year rolling period. The Environment Agency said it was looking for managers to "incorporate and integrate financially material environmental, social and governance (ESG) criteria in line with best practice sustainable environmentally responsible investment".

The agency stated it was open to a broad range of product types and approaches to integrating ESG factors, such as traditional emerging market equity mandates with an ESG overview or mandates with an ESG core to the selection process. But it warned it would prefer positive selection using sustainable criteria rather than negative screening.

The contracts are for an initial period of three years with the option of a further three-year extension subject to performance. The closing date for applications is 2 June 2010 and further information can be obtained from the Environment Agency's procurement department.

The £4.2bn Merseyside Pension Fund has revealed it is considering abstaining from the vote on the shareholder resolution calling for more disclosure on the oil sands project at Shell's annual general meeting (AGM) next week.

Institutional investors, including pension funds from the UK, US and Australia, and lobbying groups such as FairPensions, have filed a resolution at a number of oil company AGMs calling for more information about Canadian oil sands projects (See earlier IPE articles: Pension funds lose oil sands campaign against BP and Oil sands resolution continues to gain pensions support).

In a statement, Merseyside Pension Fund said it was "fully committed to considering ESG factors as part of its investment process" and recognises the significance of climate change and its potential impact on its investments, including its "significant shareholdings in BP and Royal Dutch Shell".

However, it argued that although the development of Canadian oil sands is a "contentious subject", with concerns ranging from economic viability to the ecological impact of mining operations, the pension fund has been acting as a responsible owner by working with the Local Authority Pension Fund Forum (LAPFF) to engage with BP and Shell. it said this was "in order to ensure that these environmental and social risks are being adequately addressed". (See earlier IPE article: LAPFF opposes oil sands campaign and back BP).

Merseyside claimed the engagement process had resulted in a "great deal of information" being released into the public domain that mostly meets the disclosure requirements called for in the shareholder resolutions.

It stated: "MPF takes the view that shareholder engagement on this issue has produced some progress, but that it should remain ongoing: for this reason, MPF voted to abstain on the resolution at the AGM of BP. We acknowledge Shell has gone further down the path of disclosure, but feel that more information is needed regarding their plans for future development. Therefore, MPF will give strong consideration to once again voting to abstain on the resolution at the 18 May AGM".

Elsewhere, the insurance company Aviva has announced it has agreed a pension deficit repayment plan with trustees.

In its interim management statement for the first quarter of the year, the company revealed it intended to pay £365m into the Aviva pension scheme in 2010 to help address the pension deficit.

Andrew Moss, group chief executive at Aviva, said: "We have agreed a long-term funding plan for our main UK pension scheme in this quarter, which we expect will eliminate the deficit over time. When combined with our proposal to close the scheme to future accruals, this should provide a welcome degree of certainty on funding for all our stakeholders."

Last month the company announced plans to shut both the Aviva and RAC DB schemes to future accrual and move staff to a money purchase arrangement, after the combined deficit of the two schemes increased from £1bn in 2006 to around £3bn last year. The three-month consultation period begins in June, with the changes expected to take place in April 2011. (See earlier IPE article: UK roundup: East Riding, Aviva, Gwynedd, Hounslow).

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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