Tower Hamlets Council's Pension Committee has been warned that divesting from companies implicated in human rights abuses could significantly impact the fund's returns. A report presented to the committee on Tuesday, September 15, 2026, revealed that while excluding companies listed on the UN Office of the High Commissioner for Human Rights (UNOHCHR) database might have a minimal effect on expected returns (approximately 0.4% of the index), broader exclusions based on other lists could lead to substantial changes in the fund's risk and return profile.
The committee considered analyses from London CIV and Marsh, which assessed the pension fund's holdings against five specified lists, including the UNOHCHR database, the Boycott, Divestment and Sanction (BDS) National Committee, Who Profits Research Center, the American Friends Service Committee (AFSC), and the UN Special Rapporteur's Economy of Genocide report. Marsh's analysis indicated that exclusions based on these latter four lists could range from 10% to 21% of the index, potentially leading to significant changes in the Fund's risk and return characteristics. A combined application of all lists would require de-duplication and portfolio-level modelling to ascertain the full impact.
The report highlighted that significant exclusions could lead to increased employer contribution rates if the fund's return falls below the assumed rate for funding purposes. If the Fund earns less than the return assumed for funding purposes, the funding level may deteriorate and employer contribution rates may need to rise, all else being equal. This would have financial implications for employer contributions to the Pension Fund, which is a charge to the Council's General Fund.
The committee resolved to proceed with a targeted exclusion and divestment approach for companies within the scope of the UNOHCHR database, requesting London CIV to provide a detailed implementation plan. However, for the other four lists, no automatic exclusion or divestment decision was made at this stage. Instead, London CIV has been asked to conduct further due diligence, reporting back on aspects such as list governance, evidential standards, actual exposure, investability, projected risk and return, costs, and stewardship alternatives. London CIV will model credible options for the broader lists, including enhanced engagement and escalation, revenue- or activity-based thresholds, watchlists, targeted exclusions supported by verified evidence, and mandate-specific approaches.
The committee also requested special training on Environmental, Social and Governance (ESG) matters for both the Pensions Committee and the Pension Board. This training is recommended to cover topics such as the Pensions Committee's fiduciary duties (with consideration of financial and non-financial factors), ESG policy (from a, conflicts and lobbying perspective), engagement, collaboration and escalation routes, legal opinions, pros and cons of divestment options, and alternative investment options that adhere to the highest ethical standards.
While the Full Council can express policy positions, the Pensions Committee retains the fiduciary duty to act in the best interests of its members and must adhere to statutory Local Government Pension Scheme (LGPS) governance arrangements. Decisions on Pension Fund investments must be made by the Pensions Committee, acting in the best interests of its members and adhering to statutory LGPS governance arrangements. The committee must consider financial and non-financial factors lawfully and avoid fettering its discretion. The administering authority remains responsible for setting its investment strategy, while implementation is undertaken through the pool (London CIV).
The final statutory guidance issued on June 29, 2026, advises against exclusions for investments in individual countries, investment styles, or companies, suggesting that any departure from this norm would require careful consideration and legal advice. The report can be found in the Public reports pack here and supplementary information is available here.