Lothian Pension Fund's (LPF) funding level is now above 100 per cent after completion of its triennial actuarial valuation, with the fund also having achieved 96.8 per cent customer satisfaction in 2020.

The fund said this was an indication of how it had continued to deliver for members and employers despite the difficult circumstances created by the pandemic, also noting that it had paid out £165,786,532 to 33,667 members and welcomed 4,204 new members.

LPF also examined the actions it has been taking to promote responsible investment throughout the year.

LPF CEO, Doug Heron, commented: “We take the stance of being a critical friend to management teams and give advice, time to act and the encouragement to do so. But engagement must lead to action and where we fell progress is too slow, and the prospect of financial risk to us increases as a result, we’re willing to withdraw our support and end our investment.”

The fund stated that it had urged the government to align the Retail Price Index (RPI) with the Consumer Price Index including owner occupier housing costs (CPIH) by 2025 or 2030 in order to reduce uncertainty about the future of inflation.

It added that this was key as it was important that there is no confusion in the measurement to ensure that index-linked government bond markets remain liquid and orderly in the long term.

LPF portfolio manager, Ross Crawford, said: “By engaging with the UK Treasury and Statistics Authority, we sought to influence positive change in financial markets with minimal disruption to their effective functioning. Where possible, we use our knowledge and experience to assist policymakers on environmental, social and governance (ESG) issues of national importance.”

Looking at progress on climate change, the fund highlighted the importance of Green Leases, which are not yet commonplace, but could help companies to access, collate and interpret energy data from property investments.

The leases themselves may require tenants to provide data regarding things such as their energy and water usage, while property owners might offer tenants the opportunity to club together to pay for renewable energy sources at a reduced rate.

The fund pointed out that this kind of initiative was vital even from a financial standpoint as inefficient buildings were less likely to be favoured by tenants due to higher costs, increasingly common adoption of net-zero targets from potential investors and the possibility that climate-related events might damage properties.

LPF portfolio manager, Gillian de Candole, commented: “LPF is involved in investor collaborations such as Gresb (formerly the Global Real Estate Sustainability Benchmark), Institutional Investor Group on Climate Change and Principles for Responsible Investment, which enable us to continue to push for greater transparency and reporting on energy performance across our investments.”

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