Agenda and minutes

The Committee received apologies for the absence from Co-opted Member Elizabeth Bankole.

Members are invited to declare at this stage of the meeting, the nature and existence of any relevant disclosable pecuniary or personal interests in the items on this agenda and to specify the item(s) to which they relate.

Councillor Johnson declared two areas of interest:

Firstly, that he is in receipt of an Officer’s pension as he worked prior to his retirement for Brent Council.

Secondly, he noted that he is the Vice Chair of Chalkhill Primary School who is in the Brent Pensions scheme.

To approve the minutes of the previous meeting on 21 February 2024 as a correct record.

RESOLVE That the minutes of the previous meeting held on 21 February 2024 be approved as an accurate record of the meeting.

None.

No deputations were received.

To receive the Brent Pension Fund Q1 2024 Investment Monitoring Report.

Kenneth Taylor (Senior Investment Analyst, Hymans Robertson LLP) introduced the report, which outlined the performance of the Brent Pension Fund over the first quarter of 2024. In introducing the report, he stated that performance was in a positive position overall, with the Fund ending the period with a valuation of £ 1.26 billion, up from £1.2 the previous quarter, representing a 4% return. The Committee heard that the Fund’s equities were again observed as the main drivers of returns, with Legal and General Investment Markets (LGIM’s) global equity mandate as the primary contributor in monetary terms. The Fund’s exposure to UK equities was also reported to have contributed to performance but on a smaller scale. Global equity markets delivered around 20% returns, and the council saw positive net contributions from its UK equity returns this quarter, although this was outperformed by global equities due to the UK’s underweight to the technology sector, which continued to outperform in Q1 2024.

Continuing to present the performance of the Fund for Q1, Kenneth Taylor highlighted that, in relation to Manager Performance, LCIV Baillie Gifford Multi-Asset and LCIV Ruffer Multi-Asset had underperformed against their targets, with performance over the past 12 months and 3 years lagging behind their respective benchmarks. As a result of the Fund’s downgraded rating over the last 12 months, the Committee had agreed to reduce the allocation to the LCIV Baillie Gifford Multi-Asset Fund and consider further recommendations to sell and utilise the proceeds to meet the strategic objectives of the Fund.

In presenting the performance, Kenneth Taylor highlighted that growth assets currently comprised over 50% of the pension fund, but this was planned to decrease over time. The Fund was stated to be looking to move its portfolio to consist of a greater number of protection funds, primarily in bond investments. These were often used to provide portfolios with lower-risk investments that balanced the potential risk from other, more volatile investments. An evaluation of the fund’s investments was noted to be coming in the 2025 valuation to assess liabilities and how they are compared to assets. Investment strategies would also be revisited. Funding levels were discussed next; the Committee discussed current liabilities, and officers' calculations showed a healthy improvement from 2022 to 2024. The performance of tech stocks and stocks from the ‘magnificent seven’ tech companies were stated to be leading the way as a result of the recent artificial intelligence boom. The Committee was advised that 7-8% of fund investments were held in these companies. Whilst these were extremely profitable, officers noted that more diversification was desired going forward.

Regarding the UK equities held by the Council, officers noted they made a healthy contribution to the fund, but Capital Dynamics was not performing as expected. Property holdings through Fidelity and UBS Triton were also key investments reported to be underperforming, the reasons for which were outlined in the agenda document. Within income assets, officers highlighted that both property mandates and multi-asset funds detracted from performance on a relative  ...  view the full minutes text for item 6.

To present the draft Pension Fund Annual Accounts for the year ended 31 March 2024.

George Patsalides (Finance Analyst, Brent Council) introduced the report, presenting the draft Pension Fund Annual Accounts for the year ending 31^st March 2024.

In presenting the report, George Patsalides highlighted that, during 2023/24, the value of the Pension Fund’s investments had increased to £1,259m (2022/23 £1,116m). This was largely driven by a rise in global equities following a shift in rate expectations, coupled with lower-than-expected inflation figures. In relation to cashflow, this had increased over the last year and was in a positive position. He established that, overall, the Pension Fund retained a very strong financial position with healthy funding levels. He drew the Committee’s attention to the regular investment monitoring reports for further details on investment performance for 2023-24.

In terms of the next steps for the year-end accounts, the Committee heard that the Audit and Standards Advisory Committee had been presented with an indicative draft audit plan in March 2024, which had now been finalised. There were timelines included for when each stage of the audit would be completed, the details of which were contained in Appendix 2 of the report. Providing an update on the progress against the timeline, officers confirmed that the audit had started in June and was underway, with the aim to be completed by September 2024. The findings would be presented to the audit and standards advisory committee. 

Following the conclusion of the update, the Chair welcomed questions from the Committee. Questions and responses are summarised below:

·             On the subject of the audit, Independent Chair of the Pension Board, David Ewart, announced that the Pensions team would be provided with specialist auditors and audit managers separate from the rest of the council. This was decided to provide the pension fund team with external auditors possessing a greater market focus as it was felt a different skillset was required for pension fund accounts. The hope of this being that this would provide new perspectives and insights into options available to the fund.

The audit fees could be viewed on page 102 of the Audit and Standards Advisory Committee report dated 28 March 2024. Sawan Shah (Head of Finance – Pensions and Companies, Brent Council) explained that fees were set through the Public Sector Audit Appointments (PSAA) procurement framework, which all local authorities had opted into and were beholden to. Those fees had increased significantly since the previous year as the auditors had adopted a new set of practices and criteria that needed to be appropriately resourced.

·             It was stated that Brent currently had no backlog issues and, therefore, was not affected by the backstop dates imposed by the government.

In thanking the Finance team for their work on being one of the first local authorities to have their audit completed last year, the Committee RESOLVED to note the Draft Pension Fund Year End Accounts 2023-24.

To present an update on the Fund’s net zero road map and updated London CIV responsible investment policy.

Sawan Shah (Head of Finance – Pensions and Companies, Brent Council) introduced the report, presenting an update on the Fund’s net zero road map and London CIV's Responsible Investment Policy. The Pension Fund Sub-Committee was asked to note the update.

Officers highlighted the risks and opportunities for pursuing net zero, explaining that a pension fund's primary responsibility was to ensure it could make payments to its members, and having a balanced and diversified investment strategy was key to that. However, it was highlighted that decarbonising a portfolio which invested in multiple funds globally across many different sectors was a considerable challenge. Whilst “net zero” portfolios were noted to be hard to invest today they were also noted to open up new opportunities in time. For example, a transition to Net zero provided the opportunity to invest in companies leading the way in the climate transition. The report detailed the achievements of Pension Funds so far in relation to the transition to net zero, with Brent’s Fund having developed and invested approx. £40m so far into the LCIV Infrastructure Investment Fund, of which 40% was allocated to the renewable sector.

The Pension Fund had also introduced an allocation into BlackRock’s Low Carbon equity fund in 2021, and this formed a core part of the Fund’s equity allocation, which was seen as the first step in the evolution of the fund's strategy to make more responsible investments and to actively reduce the overall carbon intensity of the Fund. ESG and Climate Risk considerations were also noted to play a significant part in LCIV’s manager's selection and monitoring process. LCIV had recently strengthened ESG elements of the Multi-Asset Credit Fund. These changes exclude corporate issuers with the weakest ESG credentials or omit issuers that generate 10% or more of their revenues from thermal coal mining, oil and gas extraction, or power generation from thermal coal or liquid fuels.

Officers stated that they were reviewing Global Equities, which made up one of the asset classes with the highest carbon intensity, meaning reducing carbon emissions for this holding would be significant. In the previous year, the Sub-Committee had considered desirable and undesirable characteristics and key areas and how it would want any potential new mandate to be shaped in the area and officers were now reviewing different fund options from 3 fund managers against those characteristics with the recommendations to be presented to the next meeting.

Before moving on to questions, the Chair wished to note a paper circulated to the previous Committee in relation to the review of global equities, and asked for this to be circulated to all councillors to give them an understanding of the net zero journey the Fund was going on.

Having thanked Sawan Shah for the overview, the Chair invited questions and comments from members, summarised below:

·             Regarding responsible investment, the Committee highlighted that the LCIV report focused heavily on climate and felt there was a lack of clarity in relation to other ESG issues such as human rights.  ...  view the full minutes text for item 8.

To present members with an update on engagement activity undertaken by the Local Authority Pension Fund Forum (LAPFF) on behalf of the Fund.

George Patsalides (Finance Analyst, Brent Council) introduced the Local Authority Pension Fund Forum Engagement Update.

The report asked the Committee to note the update and express their view on Brent’s continued membership of LAPFF (the Local Authority Pension Fund Forum). George Patsalides explained that the LAPFF was an organisation that worked on behalf of local authorities to promote the highest possible standards of corporate governance in the companies invested in, which the Brent Pension Fund joined alongside 86 other funds of the Local Government Pension Scheme (LGPS). The forum produced reports for its member funds every three months, highlighting the engagement activity for each quarter. The commitments pushed by LAPFF were noted to demonstrate the organisation's commitment to responsible investment and the usefulness of engagement in achieving its and the council’s objectives.

Highlighting one of LAPPF’s current efforts, officers noted that the LAPFF were urging large organisations in the banking industry (e.g. Barclays, HSBC) to develop their net-zero transition policies and push water and utility companies to address failures in supply infrastructure. Producers of luxury goods had also been lobbied to push for gold standards in worker pay and practice. Officers believed collaborating with other like-minded investors through the LAPFF could affect real-world change and influence companies in ESG terms. Brent Pension Fund alone would have minimal sway against these large companies, but it was felt that with sustained collective effort and pressure from the LAPFF, companies would take notice of their requests. As a result, officers recommended continued membership of the LAPFF.

·             On the subject of the LAPFF’s efficiency, the Committee wished for assurance that the lobbying that LAPFF were doing was working and resulting in meaningful outcomes. Sawan Shah (Head of Finance – Pensions and Companies) noted that the recent Q1 report was a good example of the LAPFF demonstrating its impact. For example, the case studies provided by Barclays and HSBC showed that LAPFF lobbying had successfully secured new commitments to reduce environmental impacts through reduced funding to projects relating to oil and gas investments. The LAPFF was now working on achieving similar changes in Canadian Banking practices. Whilst engagement with market leaders was difficult, officers noted that without the LAPFF, the current level of research, effort, and contacts would be greatly reduced.

·             The Committee highlighted the opportunity to collaborate with partners across London on shared priorities outside of climate and environmental factors within ESG, such as divestment from arms sales companies, and asked whether enough engagement had taken place with the other members of LCIV to have those conversations about priorities. Officers replied that opportunities were always monitored but the Fund would not want to commit to a divestment strategy at this stage. The Fund would monitor what others were doing in relation to ESG issues outside of climate and environment, and where there was the opportunity to influence LCIV with other partners that would be considered. 

·             Returning to London CIVs performance, the Committee asked whether the poor performance was a pattern over the past few  ...  view the full minutes text for item 9.

To provide an update on the provision of the LGPS online learning facility.

George Patsalides (Finance Analyst, Brent Council) introduced the report, which provided an update on the provision of the LGPS online learning facility and informed committee members of recent training developments. In introducing the update, he highlighted that existing members of the Committee would have been provided with a training plan, and the report outlined who had completed the modules within the agreed timeframe. Those members who were new to the Committee should now have received their log-in details for the training platform and should now be able to access training. Those new Committee and Committee members who had not completed their modules were asked to follow the timelines outlined in Appendix 3 and complete 1 module a month going forward. Officers re-emphasised the importance of members sharpening their knowledge and skills in relation to the Pension Fund.

With no further questions or comments, the Chair thanked George Patsalides for his work in delivering the training plan and the Committee RESOLVED to note the plan.

To note the minutes of the Pension Board meeting held on 25 March 2024.

Independent Chair of the Pension Board, David Ewart, introduced the minutes from the most recent Pension Board meeting, dated 25 March 2024. He outlined the function and structure of the Pension Board to new members of the Committee, highlighting that the Pension Board was a statutory body that reviewed the performance of the Pension Fund and was made up of an equal number of employer and member representatives. In comparison, the Pension Fund Sub-Committee’s role focused on the investment and management of the Fund. The two bodies worked together to oversee the governance of the Pension Fund and received minutes of each other’s meetings.

The Chair thanked David Ewart for the update provided, and with no further issues raised, it was RESOLVED to note the minutes from the Pension Board held on 25 March 2024.

To consider the exclusion of the press and public from the remainder of the meeting as the remaining report to be considered contains the following category of exempt information as specified in Paragraph 3, Part 1 Schedule 12A of the Local Government Act 1972, namely: “Information relating to the financial or business affairs of any particular person (including the authority holding that information)".

To consider the exclusion of the press and public from the remainder of the meeting as the remaining report to be considered contains the following category of exempt information as specified in Paragraph 3, Part 1 Schedule 12A of the Local Government Act 1972, namely: “Information relating to the financial or business affairs of any particular person (including the authority holding that information)".

At this stage in the meeting, the Chair advised that the Sub-Committee needed to move into closed session to consider the final item on the agenda. It was therefore RESOLVED to exclude the press and public from the remainder of the meeting as the reports and appendices to be considered contained the following category of exempt information as specified in Paragraph 3, Schedule 12A of the Local Government Access to Information Act 1972, namely:

“Information relating to the financial or business affairs of any particular person (including the Authority holding that information)”.

To update the committee on recent developments regarding Brent Pension Fund investments held within the London CIV (CIV).

The Board received and RESOLVED to note a report that provided an update on recent developments regarding Brent Pension Fund investments held within the London CIV (LCIV).

Notice of items to be raised under this heading must be given in writing to the Deputy Director – Democratic Services or their representative before the meeting in accordance with Standing Order 60.

None.