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As growing geopolitical tension and government control has caused some investors to exit China, Norway’s $78 billion pension fund KLP is stepped up engagement with Chinese mining companies at risk of breaching labour rights and responsible extraction.

Growing geopolitical tension and government control has caused investors to exit China. But Norway’s NOK 786 billion ($78 billion) Kommunal Landspensjonskasse (KLP), the fund for local government employees and healthcare workers, has no plans to exclude China from its index strategies. Instead, the fund has stepped up engagement with Chinese mining companies at risk of breaching its key concerns around labour rights and responsible extraction and mineral processing.

Kiran Aziz, KLP’s head of responsible investment, travelled to China last year to engage with companies that fall into the MSCI China Index and is convinced engagement is more important than ever.

These companies are responsible for up to 90 per cent of the global market share of the minerals they are mining, many vital to the green transition. The organisations are not used to engaging and have had no contact with investors before, she says. Moreover, new Chinese-owned mining companies continue to appear in the value chain.

“We are unsure of corruption, and these companies’ corporate culture. We spend a lot of time and effort here,” she says.

Over the past 18 months KLP has tried to engage with all 32 listed Chinese metal and mining companies in its portfolio. Of these, 24 never responded to the investor’s requests for information and dialogue, or were inaccessible through all available communication channels.

“Of the eight that either responded in writing or whom we were able to meet in person at industry seminars, five engaged in meaningful dialogue and exchanged information,” she says.

In an effort to ratchet up the pressure, she is now working with Chinese pension funds, some of which have recently visited Norway to discuss KLP’s approach to engagement and best practice.

“Engagement is very much based on relationship building, interaction, and building trust is important,” she says, declining to name the local pension funds but describing a proactive and positive discourse.

Engagement with US companies is no easier

Aziz’s determined engagement with investor-shy companies is just as challenged in other geographies too.

“The US hasn’t been any easier,” she reflects.

Many US companies do little over and above integrating existing regulations, and engagement begins and ends around their level of compliance.

“US companies have an offensive approach and are not very open to dialogue. We explain that our expectations go beyond compliance because regulation has to be applied to anyway,” she says.

In contrast, she describes companies in the Gulf as more open to dialogue and some of the biggest state investors eager “to learn.” KLP has just begun investing in Saudi Arabia for the first time. It currently excludes 12 companies in the region including Saudi Aramco, Emirates Telecom Group and Saudi Telecom, citing issues including the treatment of migrant workers, surveillance of the population, dominant state ownership and weak transition plans.

Why EU regulation may not help

Aziz only gives a cautious welcome to new EU rules on corporate sustainability reporting and disclosure. It remains unclear how the new regulation will ultimately help investors, she says.

“We will have to wait a few years before we can see what value we can extract,” she says.

She welcomes the regulation for creating a level playing field around corporate disclosure but says reporting has required a great deal of effort (for institutional investors and corporates) and interpretations of the regulation will differ. Moreover, the quantity of regulations and standards means much of the regulation overlaps.

“The assessments we do of corporate disclosure data will be different to other investors and we don’t know if it will lead to value for the end user.”

She worries that the focus on reporting has steered companies away from transitioning to a green economy. “You need a balance between reporting and enforcing reporting, and doing the actual work,” she says. “It’s difficult to say if EU regulation will lead to changes in the strategic priorities of companies.”

She also warns that reporting should not be seen as a substitute to investor engagement. A company’s level of reporting and disclosure might garner a positive ESG rating on MSCI and with other data providers. But that won’t reveal the tone and culture at the top which only becomes apparent through engagement.

“It is very important institutional investors continue to engage because when an investor chases for information it has an impact on management and the board. We hear this off the record. Although engagement comes with limited tools it sends a signal to companies to change their behaviour.”

For example, KLP owns 1 per cent of Norwegian energy group Equinor which has published its transition plan. Unconvinced that the company’s short and long term targets go far enough, KLP voiced its concerns and decided not to support it. In contrast the Norwegian government, which owns 56 per cent of the company, voted for the transition plan.

It leads Aziz to one final reflection.

“We do our part, but we also rely on government and policy makers to step up. You can’t put all the pressure on institutional investors,” she concludes.

Sweden’s largest pension fund, Alecta, has spent much of the last year continuing to work on improving governance, risk management, competence and culture in the wake of a $2 billion loss in 2023 attributable to investments in US regional banks, including Silicon Valley Bank, turning sour.

Alecta, Sweden’s biggest pension fund with 1.31 trillion Swedish kronor ($126 billion) of assets under management, has spent much of the last year continuing to work on improving governance, risk management, competence and culture.

It’s been essential, says chief executive Peder Hasslev, to rebuild damaged trust in the wake of the investor losing $2 billion in 2023 when its investment in US regional banks Silicon Valley Bank (SVB), Signature Bank and First Republic Bank turned sour. The fund also experienced losses from its investments in Scandinavian real estate company Heimstaden Bostad.

“We have worked intensively on developing and implementing improvement measures to strengthen Alecta,” said Hasslev who has been in the top job since September 1.

Alecta began investing in SVB in June 2019 and made its last investment in November 2022. The pension fund was the fourth largest shareholder in SVB.

In the immediate aftermath of the losses, Alecta fired its chief executive Magnus Billing and head of equities Liselott Ledin. This year it has continued to tighten governance following an April 2024 board meeting when four new board members were elected of which three are independent from the social partners. Alecta is a mutual fund, owned by the Confederation of Swedish Enterprise, Unionen, PTK, Sveriges Ingenjörer and Ledarna.

Alecta has also struggled to fill the position of chair on its board following the resignation of Ingrid Bonde in October 2023.

In January 2024, the committee proposed Lars Rohde but withdrew this due to a conflict of interest. Next up was Carina Åkerström, former CEO of Handelsbanken, but she resigned after just 11 days. Currently, Jan-Olof Jacke is chair of the board.

The Swedish Financial Supervisory Authority (FSA) opened an investigation into the bank losses in May 2023. A remit it then expanded to include the fund’s investments in indebted real estate company, Heimstaden Boden in which Alecta lost SEK 12.7 billion.

Preliminary findings of the FSA investigation released in July found that the company violated regulations. The FSA said it has notified Alecta of its observations from its investigations and the pension fund has been given until the 6 September to respond to the FSA.

“The fund has assisted the Financial Supervisory Authority with material and answers to ensure that the investigations can be carried out as thoroughly and efficiently as possible. At the end of June, we received an opinion letter with the Financial Supervisory Authority’s preliminary assessments. We are now working on going through it and formulating our response, in accordance with the usual process,” said Hasslev.

The pension fund returned 7.7 per cent in the first half of 2024 with the strongest performance from equities which returned 12.9 per cent in the period. Volatility in interest rates and rising long-term interest rates in Europe and the USA had a negative effected alternative investments.

However, the fund said that the prospect of lower short-term interest rates in the future has improved the outlook for real estate.

The value of Alecta’s holdings in Heimstaden Bostad rose by 3.9 percent during the period and now amounts to SEK 39.2 billion.

Alecta’s operating costs for the interim period amounted to SEK 586 million, higher than the target of SEK 576 million. The higher outcome is mainly attributable to one-off costs related to the extraordinary events in 2023.

The winds of change are blowing for the UK’s £354 billion Local Government Pension Scheme, LGPS, one of the largest DB funds in the world. New Chancellor of the Exchequer Rachel Reeves has returned from a trip to Toronto where she went to glean ideas from Canada’s Maple 8 bosses on how to create a “Canadian style” pension model in the UK.

Reeves wants to unlock the investment potential of LGPS to “back Britain” and drive investment in productive assets. She also wants to speed up the pace at which the 86 individual funds that make up the LGPS pool their assets into eight larger groupings.

A process begun in 2018 but which has been slow to create the low costs and scale that underscores the analytical expertise, portfolio efficiency, liquidity management and access to private markets via partnerships and co-investment for which the Canadian model is celebrated.

“I want British schemes to learn lessons from the Canadian model and fire up the UK economy, which would deliver better returns for savers and unlock billions of pounds of investment,” she said.

Still much to learn

The UK’s LGPS still has much to learn from the Canadian model when it comes to the benefits of scale. Although the transition to pools began six years ago, progress has been piecemeal and industry body PLSA estimates that only around £145 billion (39 per cent) of total LGPS assets have been transferred from the pension funds to the pools to date.

Some of the pools have made huge progress. Border to Coast invests on behalf of 11 local government pension schemes with a combined £64 billion of which about £45 billion has been pooled into a suite of new portfolios able to scale and cut costs: the asset manager says it has managed to cut private market fees by nearly 30 per cent.

Elsewhere, 84 per cent of Brunel Pension Partnership’s 10 LGPS clients’ investments sit within the partnership pooled structure and Brunel estimates it is saving £41 million a year for its partner funds, putting it on track to significantly surpass its longer-term target of annual savings of £43 million by 2025.

But at others it has been much slower. Witness LGPS Central, the £55 billion asset manager for eight local authority pension schemes in central England where some of the funds in the partnership have transferred 90 per cent of their assets but others only around 20 per cent.

Slow progress is reflected in enduringly high costs. According to the latest LGPS report, in 2023 administration and governance costs as well as management fees and transaction costs all jumped. Government figures estimate the whole LGPS spends around £2 billion each year on fees, an increase of 70 per cent since 2017. In contrast, Canada’s CPP Investments’ most recent operating expense ratio was just 27.5 basis points (bps).

Governance

One reason pooling has been slow is because of governance, another area the two systems diverge. The Canadian system is built on clear government policy, but the original LGPS pooling criteria was vague, only stipulating a £25 billion ($32 billion) target AUM for each pool and a commitment to reduce costs and boost investment in infrastructure.

“The government needs to ensure it offers a clear steer, coupled with consistent policy that is properly enforced – it’s worth remembering the role of policy makers in creating the Maple 8,” says Laura Chappell, chief executive of Brunel Pension Partnership. [For a detailed history of the Canadian model , including the role of policy makers and the importance of governance, visit this story reflecting the views of four of its pioneers from this year’s Fiduciary Investors Symposium in Toronto].

The £18 billion West Yorkshire Pension Fund for local government employees in the north of England is an example of how some funds have taken their own approach to pooling. It has pooled its private equity and infrastructure allocations into Northern LGPS but continues to invest the bulk of its assets via its own 20-person in-house team.

The difference in governance between the Canadian and LGPS pension systems is also evident in the fact Canada’s funds are run at sufficient distance from the government. They have independent governance, all of which facilitates agile, independent decision-making.

The LGPS’ proximity to policy makers where elected councillors and union members sit on pension fund boards will particularly manifest around compensation, another tenet of the Canadian system.

At FIS Toronto Ontario Teachers’ Pension Plan inaugural chief executive Claude Lamoureux counselled on the importance of staff compensation to ensure funds can hire and retain the best people. According to IMCO’s Annual Report, generous incentive compensation on top of a base salary meant CIO Rossitsa Stoyanova received $3.1 million in 2023.

“We understand that it is hard for councillors to feel comfortable paying City salaries, when they are also cutting services,” says Chappell who says Brunel can offer acceptable industry levels of compensation but is also constrained. “It’s the same principle you come across in investing again and again – independent governance allows you to pay what’s right for the expertise and services required,” she says.

But for all the work ahead to align the two systems, Reeves’ Toronto trip also serves to highlight the progress and similarities.

Pools like Brunel and Border to Coast have created FCA-regulated asset managers and re-tendered portfolios, moved staff to shared offices and nurtured new cultures into life.

Similar to Canada’s newest pension fund, $12 billion University Pension Plan (UPP) set up in 2020 from scratch to manage the pooled assets of three university funds. “We didn’t even have a stapler!” recalls chief executive Barbara Zvan.

Cue another comparison. LGPS pools and Canadian funds often navigate the complexity that comes with managing assets for a range of individual partner funds with different priorities. Marlene Puffer, CIO of Alberta Investment Management Corporation (AIMCo), established in 2008, explains the challenge.

“We don’t have one pool of capital that we can easily manipulate,” she says. “We have 17 clients and 32 pools of capital, and we need to make sure we’re delivering what each client actually needs. Not just at the total portfolio or total fund level, but we need to pay attention to each of these clients individually.”

investing locally

The LGPS and their Canadian peers are also aligned in another way. The Maple 8 have a strong track record of investing in Canada but not by government decree. As Canadian and UK government pressure grows on pension funds to invest more at home, both systems are united in pushing back.

At FIS Toronto independent board member and former Canadian Pension Plan Investment Board chief executive officer Mark Wiseman, a high-profile pioneer of the $4.1 trillion Canadian pension industry, sounded the alarm on Canada’s cash-strapped government’s efforts to direct capital away from being invested for the purpose of maximising risk-adjusted returns – a key principle underscoring the Canadian system.

“It will come under a different guise, it’ll be said, ‘you should invest more in Canada’, ‘you should invest more in infrastructure’, ‘we should let people have access to their capital earlier’, or whatever excuse may be the fact of the day.”

In the UK where the new government has just announced a £22 billion blackhole in public finances, the LGPS is also pushing back.

Like their Canadian peers, Border to Coast chief executive Rachel Elwell and chair Chris Hitchen, said investing more at home should “only be delivered if there is no adverse impact on the delivery of pension fund objectives.”

Similarly, Brunel’s Chappell urges policy makers to recognise that Brunel is already investing meaningfully in the UK where assets range from affordable housing and infrastructure to UK focused private equity and debt allocations to support entrepreneurs.

Veteran Australian journalist, publisher and entrepreneur Greg Bright died today aged 70. Among his huge contributions, he was a founder of Conexus Financial, publisher of Top1000funds.com. Editor Amanda White reflects on two decades of collaboration with the respected journalist who gave so much to the industry and all who worked in it.

Top1000funds.com was Greg Bright’s idea. He argued that we already knew everything about, and everyone in, the Australian institutional investment industry; how hard could it be to conquer the world? Large asset owners all face similar risks and opportunities and investment collaboration was only going to become more important, so let’s create a global community to share ideas and opportunities. It was ambitious, bold and visionary. Why wouldn’t we? I was in, I was always all in when it came to Greg’s ideas.

Greg made work fun because of his innovative brain and the amazing people he collected, often the less obvious hires and marginal souls, people that would remain close friends over many decades. He taught so many people to embrace change, be constantly evolving ideas, to create, and back yourself.

Being bold enough to put your energy, your whole self, into invention with the informed knowledge it might not work takes courage. He didn’t care about failure, creating was the point. Not that he failed much, he had too much instinct for the industry, where it was going and how the media could play a role. He invented publications, careers and companies and then he’d do it all again multiple times. I can’t think of any financial trade publication, or any financial journalist, in Australia who has not been touched by Greg’s creative hand.

Greg had so many ideas they just oozed out of him and I worked with him on dozens of them over what seems like a lifetime. Under Greg’s publishing prowess I was the first editor of Investor Weekly (after him) and the launch editor of Master Funds Quarterly, Investment Magazine, and then Top1000funds.com. It wasn’t for the faint hearted, for he was a god (is working in the shadow of a god genius or foolish?) and he had high expectations. Not that he explicitly said that, but you could feel it. Also, he had an old-school approach that meant the deep-end was something I had to get comfortable with pretty quickly.

Greg wasn’t just a journalist he was an entrepreneur in the truest sense, visualising an invented future, balancing commercial and editorial priorities, a nonchalance for risk, a ridiculous eye for talent and a true understanding of what motivated every individual, conceiving of their careers before they knew it. He never stopped working and throughout the sharing of each other’s weddings, children, grandchildren and divorce (which he described as being like a bankruptcy) we always talked business. There was no separation of family and work or friends and weekends. He lived in one fluid motion of love and interest and conflict.

Greg was the writer’s writer. The story came first and that was the best ethos to have instilled in so many young journalists he employed. What is the angle? What’s another angle? What do we know that no one else knows? What does it mean for the industry? Importantly he encouraged us to ask hard questions when the flurry of US fund managers would come through our crappy offices hungry for a piece of the growing superannuation pie; or as union-appointed fund secretaries grew in stature and prominence in a cottage industry mandated to grow. The Australian superannuation industry could have developed in a very different direction without his probing, forcing answers and accountability.

Greg was hands-on and loved his craft. He’d often quiz us randomly asking what was the biggest mutual fund in Australia (it was the 1990s), what’s the most recent mandate to be awarded for small cap equities, who is SunSuper’s transition manager? It kept us on our toes and hungry for more information, young as we were, with little concept of the power and inspiration this time would have on our lives (for a long time our wages would come in the form of a cheque, wedged into our keyboard every Friday afternoon, a signal of the tenuous link between our work and the very subsistence of the business).

But competing for stories with Greg was a waste of energy. Every time he left the office – in those days we had to leave the office, meet with people and get the story on the street – he came back with something juicy. He knew everyone and they trusted him. He was so quick and so funny, people liked spending time with him listening to his jokes and trading gossip. Greg loved to trade gossip. Being witness to his detailed stories was like being in the inner-circle, and so many in the industry will have memories of Greg sharing a piece of information or asking an opinion. His hunger for a story and his glee in discovery was infectious.

Greg could write. He’d write and write, so quickly, so accurately and with so much depth. He had a huge memory for facts and history but was nuanced in his delivery. His stories were lovely to read. Are lovely to read.

As a young journalist under his wing it was daunting. I didn’t even know what institutional investment was when I first started working for Greg in my early 20s. But I grew under his wing for one main reason: he trusted people. He knew we would make mistakes, but he didn’t micro-manage, he trusted. He would just give more and more rope, more responsibility, and I grew into that, I grew because of that. He was so smart with people. And he gave so much of his time to teach young people what he knew.

Much later, in a world where I was a lot more confident in my ability, had my own international contacts, and some good stories under my belt, every time I saw him he’d say to me: “Who do you think is the best funds management journalist in Australia?”.

It was typical Greg, pushing someone out of their comfort zone, being emotionally provocative, deliberately ambiguous, making you think. Was he challenging me, complimenting me? Whatever it was I never answered him. I just looked at him in awe, my constant mentor, unable to shift my adoration for him. Of course it was you, Greg.

The last time I saw him was a joyous occasion. A celebration for his retirement – from the industry he led, that he created, surrounded by so many journalists who had worked for him – and I turned to him and I said: “Who do you think is the best funds management journalist in Australia?”

We both laughed and hugged each other. And I thanked him. For everything.

Veteran journalist, publisher and entrepreneur Greg Bright has died aged 70.

Bright was a founder of Conexus Financial, publisher of Investment Magazine, Professional Planner and Top1000funds.com. He also created and managed a range of other titles in a career spanning more than four decades.

Bright set the standard for how the specialist media in Australia covers financial services. Starting his career as an economics writer for the Sydney Morning Herald and then as an assistant editor at the national business daily The Australian Financial Review, Bright founded Trade News Corporation in 1983.

It marked the start of an extraordinary period of creativity that saw more than a dozen publications launched, all built on the belief that the financial services industry had important stories that needed to be told, and that it deserved high-quality journalism to tell them.

Even as an old-school journo, Bright had one characteristic that few of his peers truly possessed: a strong streak of entrepreneurialism, and an ability to happily inhabit the worlds of both commerce and editorial.

His editorial instincts told him where the stories were, how industries were likely to develop, and how they should be covered. His commercial savvy created publications and business structures which allowed journalism and journalists to flourish.

Bright was prepared to back talent. He could spot it a mile away and nurture it to its full potential. He was a boss, friend and mentor to countless reporters, not only on the titles he launched, managed or edited, but on others as well.

He was demanding, in his own way, could be frank in his feedback and was often hilarious giving it. As a tragic lifelong Parramatta Eels supporter he’d often quote Jack Gibson to make a point.

He made more than one reporter better at what they do by making them more like him.

As the internet emerged as a disruptive force and the media became more volatile and reactive, the traits of accuracy, fairness, honesty, and genuine intellectual curiosity began to lose their currency. Because Bright embodied those traits and encouraged them in others, he was increasingly an anachronism to be cherished.

There is scarcely a corner of the modern financial services industry in this country that Bright did not explore through the publications he founded, which included Blue Book, Ethical Investor, I&T News, IFA, Investment Magazine, Investor Daily, Investor Strategy News, Investor Supermarket, Investor Weekly, IO&C News, Master Funds Quarterly, New Investor, Professional Planner, SMSF Magazine and Super Review. And through Top1000funds.com, his vision went global.

Bright’s influence was broader than just in the world of journalism. He was committed to shining a light on the less glamourous but no less important sectors of the financial services industry, such as custody and administration, and the publications he founded and led changed the industries they covered, always for the better.

Bright’s interests transcended financial services. Trade News published Encore magazine, a publication devoted to the film industry. And he had interests outside of publishing: Bright was a non-executive director of La Trobe Financial, and an executive director of Shed Connect.

For the past year Bright based himself at Culburra on the NSW south coast as a freelance writer, from where he continued to launch well-reasoned missives via social media – in particular, in staunch defence of the compulsory superannuation system.

He was deeply respected and will be missed by all who knew him for his energy and passion, his humour and humanity, his wit and intelligence, and for invariably being great company.

Bright is survived by his wife Christine, and by his children Sophie, Phoebe and Eddie; by his stepson Christian and daughter-in-law Tia; and by his grandchildren Tayla and Toby.

The Top1000funds.com Fiduciary Investors Symposium event series has been built on a close association with academia.

For 15 years we have been hosting asset owners from all over the world on leading university campuses, giving delegates an immersive educational experience and challenging them to think bigger.