The Lothian Pension Fund (LPF), Scotland’s second largest Local Government Pension Scheme (LGPS) with more than £8bn (€8.9bn) in assets under management, has adopted a stock lending recall service from custodian Northern Trust.The service will allow the scheme to vote at the annual general meetings of every company it holds, by initiating the return of loan positions automatically triggered by meeting announcements, it said.Bruce Miller, the LPF’s chief investment officer, said: “stock lending is a key part of an efficient market. We believe in long-term investing, and the lending of stocks doesn’t impact on the long-term returns of the portfolio.”He added that stock lending also generates significant fee income for the scheme, providing a boost to its long-term performance. The CIO is also aware of the potential impact on voting stock lending can have.“We’re committed to voting at the AGM of every company we hold and have always excluded a portion of each portfolio from the stock lending programme. Over the last few years our voting, particularly on climate issues, has become more active,” he said.Miller said the fund had become a member of Climate Action 100+ and was part of last year’s climate resolution at BP.“We must make every effort to have the greatest impact we can in votes that we believe in. Ensuring the efficient and timely return of stock in the lending programme allows us to have the biggest impact on behalf of our members,” he noted.Albert Chen, a portfolio manager at LPF, said: “Appropriately collateralised stock lending provides investors with the opportunity to improve returns without taking on undue risk. However, the loss of voting rights is often accepted as part and parcel of securing stock lending income.”He said the scheme started discussions with Northern Trust on the possibility of an automated stock recall service during late 2019 and said he was “pleased with their acknowledgment of how important this issue has become to asset owners”.He added: “While adopting this new approach means we’ll see some reduction in stock lending income, we think the ability to vote our entire shareholding takes precedence.”Doug Heron, the scheme’s chief executive officer, said: “As a responsible investor it’s vital that we use our votes to make the maximum impact we can on behalf of our stakeholders. If this means sacrificing fee income because it’s the right thing to do, then we’ll do that.”To read the digital edition of IPE’s latest magazine click here.