The 2024 Mansion House Speech: Points for Private Fund Managers

The proposals will advance several measures already in train, as set out in the previous government’s Mansion House agenda (and announced in the July 2024 King’s Speech).  The principal measures are threefold:

1. Consolidation and scale of defined contribution (DC) pension schemes
2. Introduction of a standardised ‘value for money’ framework for trust-based DC schemes (to form part of the upcoming Pension Schemes Bill)
3. Putting the public sector’s defined-benefit market, the Local Government Pension Scheme (LGPS),  on a clear, firmer trajectory to scale and consolidate, as well as measures to improve scheme governance and investment; the government plans to move to a new operating model for the LGPS pooling reforms in March 2026

This is a flagship area of the proposals and brings impetus to ongoing initiatives in this area.  They build on other developments designed to help drive DC investment in private capital and accelerate interest in the Long Term Asset Fund in particular (as covered in our recent Horizon Scan).

On optimising LGPS pooling for the future, the consultation proposes minimum standards: (i) administering authorities (AAs) set the investment strategy for their fund but must delegate its implementation to the pool and take principal advice from the pool; (ii) pools must be established as FCA-authorised investment management companies; (iii) AAs transfer legacy assets to the management of the pool; and (iv) pools are required to develop the capability to conduct due diligence on local investments and manage these investments effectively.

The government notes that as of 31 March 2024, only £178 billion (45%) of LGPS assets (split across 86 AAs) was invested through the eight established ‘megapools’. This means that a significant proportion are missing the opportunity to benefit from the lower fees, enhanced investment opportunities, and improved efficiency and resilience that pooling can bring.

This area includes a series of proposals and two published consultations:

1. Progressing proposals to regulate environmental, social, and governance (ESG) ratings providers (with publication of draft legislation and a consultation response, open until 14 January 2025)
2. Consultation on value and use cases for a UK green taxonomy (open for comment until 6 February 2025)
3. Consultation planned on economically significant companies disclosing information using future International Sustainability Standards Board-based UK Sustainability Reporting Standards
4. Alongside co-launching a Transition Finance Council with the City of London Corporation, a planned consultation (expected in H1 2025) on how best to implement requirements for transition plans
5. Launching integrity principles for voluntary carbon and nature markets

The government seeks to establish whether a UK taxonomy (a classification tool which provides users with a common framework to define which economic activities support climate, environmental, or wider sustainability objectives) would be additional and complementary to existing policies in meeting its objectives of mitigating greenwashing and channelling capital in support of its sustainability objectives.  This will be of interest, given the EU taxonomy is expected to become more embedded in the EU’s sustainable finance legislation, and the possibility of a sister regime in the UK has been on the agenda for some time.

International interoperability, business safeguard principles, and governance and oversight are some of the key design considerations the government is seeking input on. In particular, market participants are asked to help  with any lessons learnt from taxonomy implementation in other jurisdictions.