The objective of bringing LGPS funds more in line with all other UK pension schemes and forcing them to invest in the best interests of members came a little closer after the government suffered a major defeat in the High Court at the end of June.
The government had issued guidance in September 2016 requiring LGPS funds to have environmental, social and governance (ESG) policies but added a requirement that funds could not “pursue policies that are contrary to UK foreign policy and UK defence policy”.
The Palestine Solidarity Campaign (PSC) launched a bid in the courts to overturn the regulations via a judicial review. It contended that the government had acted outside its powers and it was “lacking in certainty”. It also cited Article 18.4 of the EU’s directive on the Activities and Supervision of Institutions for Occupational Pension Provision (IORP) that states “member states shall not subject the investment decisions of an institution…….to any kind of prior approval or systematic notification requirements”.
Judge Sir Ross Cranston only agreed with the first argument citing that he couldn’t see “how the secretary of state had acted for a pensions’ purpose”. He therefore granted the judicial review.
A spokesman for DCLG said that the government would consider whether to appeal.
While the judgement was broadly welcomed it may not be quite the end of the issue as trade unions encourage the government to implement EU IORP directive into LGPS.
The judgement does however mean that Funds will have more freedom to take positions on ethical investment focussed wholly on the best interests of scheme members which must be a benefit.