Investor voices are crucial to building a successful new National Wealth Fund
We believe strongly that good government policy and initiatives in finance require meaningful consultation across the financial services industry – and nowhere is this truer than in the creation of a new National Wealth Fund, the second item in the 40 bills listed in the king’s speech earlier this summer.
Earlier this year, the Shadow Chancellor commissioned the Green Finance Institute (GFI) to appoint a Taskforce to deliver a report on how a National Wealth Fund should be structured. Aside of the Chair of the GFI, the Taskforce includes ten figures from across finance, including Mark Carney, governor of the Bank of England, and the CEOs of Aviva, Barclays, and Legal & General.
Brunel was also invited to take a seat on the Taskforce, despite our smaller scale, due to our reputation and track record on Responsible Investment (RI), especially relating to climate change and Net Zero. We also already have close links with industry bodies focused on climate change, including the Institutional Investors Group on Climate Change (chaired by our Chief RI Officer.)
We accepted the invitation, seeing it as an opportunity to ensure that investor voices help to shape the NWF.
LGPS seat at the table
But we also valued the chance for the LGPS itself to have a seat at the table. We know from experience the value that the LGPS brings to the UK economy, and its significance within the UK pensions landscape, ultimately representing 6.1 million members (and more than £360 billion in assets under management).1
As an LGPS pool, our primary responsibility is to fulfil our fiduciary commitments to our clients, but as a partnership we have shown that it is possible to do this while investing for the transition. More than that, we believe it will make better fiduciary sense in the long term.
Investor designs
The NWF aims to crowd in private capital, using initial government investment as a catalyst. We know this is only ultimately possible if the investment opportunities it presents are competitive – and comparable to private markets investments we have already made elsewhere (including in the UK).
Only then can that that initial government commitment begin to open up sectors in the new economy that remain difficult for investors to access currently. That is why investor voices are crucial, including LGPS voices. The NWF is designed to appeal to a wide range of investors across key sectors. This is clear from the Interim Report.
Purpose and structure
Fundamentally, the NWF is designed not to mandate but to attract capital, and we are frankly delighted that a voice from the LGPS world has been asked to help shape it, rather than telling us about it later.
The government has accepted that it is not itself an institutional investor. To meet with success, the involvement of experienced bodies like UKIB is crucial.
But it is also why the composition of the Taskforce matters. The process of the Taskforce consultation was independent and managed by the Green Finance Institute, with the valuable support of Oliver Wyman. It was iterative, with regular meetings and continual feedback loops in order to facilitate progress across key areas. And it was specific, with the Taskforce (and the sherpa group underneath it) also split into working groups operating across three themes: fund structure, governance, and sectors.
More than that, it consulted industry far beyond the Taskforce membership. In our own case, the PLSA kindly agreed to our request for it to host a roundtable on the NWF at one of their conferences – to which all the LGPS pools were invited. The points made during that roundtable were captured by Oliver Wyman and fed in as part of the consultation. We valued this opportunity to gather LGPS pool views to help shape the NWF.
Next steps
There remains much to do for the National Wealth Fund to become a success. But the proof will be whether investors are ultimately attracted to participate.
The consultative beginnings of the National Wealth Fund have certainly made for a good start. We hope investors continue to shape it as the work goes on.
For more on the NWF, see the Interim Report published earlier this summer