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The UK Local Government Pension Scheme: Can pooled and passive funds adequately address human rights?

Pensions and Investment Research Consultants (PIRC) has a number of local authority clients who manage their pension funds either directly or through an asset manager. Many of these funds have either passive or pooled investments. UK Chancellor George Osborne has said that these funds must be further pooled into six sovereign wealth funds...This new mandate could cause problems for local authority pension funds in relation to the United Nations Guiding Principles on Business and Human Rights (UNGPs) in at least three respects...For such new combined asset formations to be compliant with the UN Guiding Principles, active tracking and disclosure would be essential to assess whether local authority pension funds and asset managers were appropriately measuring, using or seeking to acquire leverage. This measurement requirement highlights a fundamental human rights challenge for Osborne’s approach: funds might not be able to assess what appropriate steps are necessary to prevent, investigate, punish and redress adverse human rights impacts.

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