LCP launches new approach to responsible investment to focus industry attention on action

LCP has launched a new responsible investment philosophy to help focus industry attention on concrete action to address systemic risks posed by issues such as climate change and inequality.

Up to now, much of the industry’s work in responsible investment has focused on training, policies, disclosure and compliance. While LCP believe this is an important foundation, they say that the time is now to focus on engagement and action that makes a real-world difference.

The firm, whose clients own a representative slice of the whole economy, have set out a series of asks and expectations to the industry, asset owners and lawyers. The effects of systemic risks can hit the whole economy and can’t be avoided. The decisions that investors make about their financial holdings can contribute to changes in the real world that can mitigate these risks.

LCP’s responsible investment philosophy sets out how the firm will be bold in advising their clients. This follows on from the firm’s announcement that it will require investment managers to have joined the Net Zero Asset Managers (NZAM) initiative to be eligible for an LCP “buy” rating.

LCP’s asks to the investment industry are:

To managers:

• Use specific and relevant company case studies as much as possible.
• Contribute to common principles and approaches for assessing responsible investment where possible.
• Bring us new products and ideas that will enable our clients to invest with greater real-world impact.
• Provide examples that give real insights into your work on our clients’ stewardship priorities.
• Discuss, debate and collaborate with fellow industry professionals, including other managers.

To asset owners:

• Be open to making real changes to your investments.
• See a wider range of managers, and more often, to get updates on their activities.
• Allocate more time to discuss responsible investment.

To lawyers:

• Be consistent with any challenges raised to responsible investment – apply the same tests as you would to other investment styles or factors.
• Work with us to find solutions not roadblocks.

Ken Willis, Partner and Head of Responsible Investment Delivery at LCP, said “Our responsible investment philosophy is a clear statement of intent – so you should expect to see some changes to how we advise. Are we as an industry really investing responsibly? Are we making actual changes, or are we trapped in an ongoing cycle of tick box solutions and compliance? It’s time we got off the fence, to provide bold advice to our clients and strong engagement with asset managers.”

Claire Jones, Partner and Head of Responsible Investment at LCP, said “Systemic risks like climate change, biodiversity loss and inequality pose real threats to our clients’ long-term investment objectives. We want to help our clients invest in a way that helps to alleviate these risks rather than exacerbate them, by placing greater emphasis on the real-world impacts of their investment decisions.”

LCP advises on more than £300bn of assets across hundreds of asset owners spanning pension funds, endowments, charities, wealth managers and sovereign funds.