Shock as Lothian Pension Fund linked to Grenfell cladding firm Arconic

SCOTLAND’S second-largest council pension fund has shares worth £847,000 in a firm that made the cladding panels found to be the main cause of the Grenfell Tower fire that killed 72 people.

Lothian Pension Fund (LPF) – which has 79,000 members and £7.5 billion in assets – invests in a US corporation called Arconic, based in the city of Pittsburgh.

Arconic manufactured the ­cladding panels for Grenfell Tower in France and its product was never put through the standard test widely used in the UK construction industry.

A campaign group established after Grenfell – End Our Cladding Scandal – said it was “shocked” to learn that LPF has shares in the American firm and called on the fund to review its investment.

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The Ferret can also reveal that LPF invested in five major housebuilders accused of failing to resolve fire safety risks at other tower blocks across the UK, in the wake of the ­devastating fire.

The fund holds shares in Barratt, Bellway, Berkeley, Crest ­Nicholson and Persimmon. These firms have been under mounting pressure ­recently to address urgent safety problems.

LPF said it had engaged with housebuilders post-Grenfell to “ensure that problematic cladding is removed/replaced and lessons learned for the future”.

The aftermath of the tower block fire in 2017, due to flammable cladding, led to the discovery of safety defects in buildings across the country, leaving leaseholders facing thousands of pounds worth of fire safety costs.

Many people cannot afford the massive bills they now face.

Removing cladding can cost ­millions of pounds per block. The cost has often been passed on to flat owners under the leasehold system in England and Wales.

Many leaseholders have also seen sharply increasing service charges, and some have had to pay for so-called ­“waking watch” fire wardens.

In Scotland, it emerged last year that almost 400 buildings, including tower blocks, have a potentially ­deadly type of cladding. But the Scottish Government has not made public the sites of those buildings, arguing it was not in the public interest to reveal them.

The End Our Cladding Scandal campaign, set up to support people affected by the crisis, has been ­calling on the UK Government to lead an ­urgent, national effort to fix building safety issues.

A spokesperson for the campaign questioned LPF’s investments, ­pointing out it emerged during phase one of the Grenfell Tower inquiry that Arconic’s cladding panels were found to be the “primary cause” of the fire.

“We are shocked that Lothian ­Pension Fund has chosen to invest in Arconic,” the spokerson added. Pointing to LPF’s website, which states the fund has a ­responsibility to take ­environmental, social and ­governance issues seriously, the spokesperson questioned how this “noble statement sits alongside the disgraceful behaviour of Arconic”, adding: “Has LPF pursued its policy of ‘constructive engagement’ with ­Arconic?”

The spokesperson pointed out that Arconic initially refused to hand over documentation to the Grenfell Tower Inquiry, and only did so after a European Investigation Order was served by the Metropolitan Police.

Regarding firms under pressure to resolve fire safety risks in the UK, End Our Cladding Scandal ­accused them of “PR spin” and continuing to “hide behind vague statements of meeting regulations at time of construction or saying they are doing the right thing”.

The spokesperson continued: “Will LPF ­ensure it lives up to its stated ­approach of responsible investment and ensure those developers in which it is invested, such as Barratt, Bellway, Berkeley, Crest Nicholson and Persimmon, cease playing games with our lives and now, finally act to do the right thing?

“The time for passing the buck is over – this was a collective state and industry failure and both must play their part in ensuring this living nightmare is finally brought to an end.”

In reply LPF said its policy on ­responsible investment is “informed by a fiduciary duty owed to members and employers”, set out in law, to invest for the best returns to ensure pension benefits can be paid when they fall due.

The fund added it has a “transparent approach” and publishes all ­investments on its website along with information on how it invests. This includes information on how its ­investment team integrates environmental, social and governance into its decision-making to “ensure that both the financial and non-financial ­factors are taken into account”.

LPF’s spokesperson added: “We are as horrified by the Grenfell ­Tower tragedy as everyone else, and we fully support the view that individuals and companies should be held to account for wrongdoing. ­Responsible investment is about assessing the future prospects of companies and ­influencing positive change, and we focus our efforts on working with our investee companies to improve ­business ­practices.

“Over the past 12 months, we and our engagement provider have engaged directly on this issue with companies we hold within the UK housebuilder and construction ­industry to ensure that problematic cladding is removed/replaced and lessons learned for the future.”

Last month Michael Gove MP, secretary of state for housing (above), sent a letter to the development ­community urging them to work with him to ­deliver a lasting solution to this crisis. He asked companies to make financial contributions to a fund to “cover the full outstanding cost to remediate unsafe cladding on 11-18 metre buildings, currently estimated to be £4bn”.

Arconic did not reply to our requests for a comment, but a statement on its website details the firm’s policy on human rights and social responsibility. It says: “We value human life above all else and are committed to operating worldwide in a safe, responsible manner which respects the environment and the health of our employees, our customers and the communities where we operate. Our focus on safety also includes an ongoing commitment to maintaining a secure work environment that respects the dignity and worth of every employee, which drives our continuous improvement approach in our robust safety programs.”

A spokesperson for Barratt said: “We do not believe that leaseholders should have to pay for necessary remediation work at their developments and we are working with managing agents and building owners to find suitable solutions to support leaseholders and residents in buildings we built.”

A spokesperson for Bellway said: “Bellway takes fire safety of our developments extremely seriously, and we have invested significant resources into tackling fire and building safety issues head on. We fully appreciate at the heart of the issue is the need to ensure leaseholders and residents feel safe in their homes, which is why since 2017, Bellway has committed £164.7 million to make fire safety improvements where we are responsible, or to put in place interim fire safety measures at no cost to leaseholders.”

Crest Nicholson did not reply to our requests for a comment but a statement on its website details its policy on “community engagement”. It says: “We always aim to deliver positive impacts in the communities in which we operate. We engage with local communities to listen and understand any concerns they may have over new development. We are committed to bilding (sic) the right infrastructure and community spaces for the benefit of new and existing residents. We are proud to deliver many initiatives which provide increased social value and deliver a positive outcome for all those involved.”

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Berkeley did not reply to our requests for a comment but its website states: “Berkeley has always been driven by a clear purpose – to build quality homes, strengthen communities and improve people’s lives. We have established a unique culture, and strong values that shape the way we work, and haven’t changed since our inception.”

Persimmon declined to comment but its website says: “Building homes our customers love and happily live in for many years is at the heart of our entire business. Customer care is fully embedded into our ethos, with growing customer satisfaction ratings reflecting the hard work and effort that our colleagues put in every day. Our work continues to ensure every customer has an excellent experience of engaging with our business.”

Norway’s state investment fund, NBIM, has also been asked to ­pressure cladding firms and builders to fix fire safety issues, by the campaign. NBIM is an investor in three companies that were involved in producing materials used on Grenfell Tower, ­including Arconic.

Last month End Our Cladding Scandal called on Norges Bank to pull £5.7bn of funds from companies if they fail to do so.