Ethical investment and the Local Government Pension Scheme

Cases

Nigel Giffin QC and Zac Sammour of 11KBW acted for the Palestine Solidarity Campaign in a successful challenge to guidance issued by the Secretary of State on how local government pension scheme (LGPS) administering authorities should take account of non-financial factors when drawing up statements of investment strategy. Julian Milford, also of 11KBW, acted for the Secretary of State.

The guidance acknowledged the general entitlement of LGPS authorities to base decisions upon non-financial factors where that would not involve significant risk of financial detriment to the scheme and where authorities had good reason to think that scheme members would support their decision. But in an exception to that principle, it barred disinvestment policies directed “against foreign nations and UK defence industries”, other than where formal legal sanctions had been put in place by the government.

In a judgment handed down on 22 June 2017, Sir Ross Cranston accepted the PSC’s argument that the “defence and foreign policy” aspect of the guidance was outside the powers conferred by the Public Service Pension Schemes Act because it was not issued for a pensions purpose. Also of legal interest are the judge’s reasons for rejecting two other arguments advanced by the PSC.  He held that the guidance was not rendered unlawful by a lack of clarity in its terms, and suggested that dicta in earlier cases appeared to set too high a standard in this respect.  He also held that for the guidance to lay down general rules on investment did not amount to a requirement of “prior approval or systematic notification” such as to infringe article 18(4) of the IORP Directive on occupational pension schemes.

Read judgment here.