Agenda item

This report sets out the Fund’s proposed approach to further integrating Environmental, Social and Governance (ESG) considerations into its strategic decision making, in particular it sets out a new package of measures, subject to committee approval, the Fund intends to take in the short and medium term to manage the risk of climate change.

An appendix to the report is attached.

This report set out the Fund’s proposed approach to further integrating Environmental, Social and Governance (ESG) considerations into its strategic decision making and set out a new package of measures which subject to committee approval, the Fund intends to take in the short and medium term to manage the risk of climate change.  Mr Ravinder Jassar (Director of Finance) introduced the report and highlighted the Fund’s Responsible Investment (RI) commitment, reflected in the Fund’s Investment Strategy Statement.  He clarified that the Fund’s funding principles were as follows; to ensure that sufficient resources were available to meet all benefit as they fell due for payment; recover any shortfall in assets, relative to the value of accrued liabilities, over broadly the future working lifetime of current employees; enable employer contributions to be kept as stable as possible and at reasonable cost; and to maximise the returns from investments within reasonable risk parameters

He added that the ESG criteria of its existing investments were assessed on an ongoing basis, including regular interaction and challenge of the Fund’s investment managers (including the Fund’s asset pool, London CIV).  In recent years this had involved working with the London CIV to develop an overarching Responsible Investment policy, which the Committee endorsed and agreed to adopt in November 2018.  Mr Jassar referenced the successful strategy of encouraging the Fund’s managers to improve their disclosures and quarterly reporting with detailed breakdown on ESG matters.

Mr Jassar proposed to undertake a carbon footprint exercise for the Fund in order to improve its understanding of the Fund’s holdings. This project would be undertaken by Officers working with our investment advisors, Hymans, to scope out the project further and report back to the committee. The exercise would use the latest data on greenhouse gas emissions attributable to global companies. The data collated would be used by officers to direct research and engagement activity with a view to assessing the opportunities and risks related to the shares.  Following this, recommendations on the measurement of and actions related to carbon emissions would be then presented to the committee for approval.

Mr Jassar continued that individual funds engaging with companies on their own were thought to be unlikely to have as much of an impact and recommended working collaboratively so as to maximise their influence on major companies on topics such as climate change, labour rights and other ESG issues.  There were a number of collaboration groups, including the Local Authority Pension Fund Forum (LAPFF).  He outlined the membership and the combined investment assets of the LAPFF and added that additional information requested had been provided directly to members and the decision to join the forum brought back to the Sub-Committee.

Members then discussed investment in fossil fuel, how to engage and sought an idea as to the timescale for producing the joint report by officers and Hymans (investment advisor).  Mr Jassar confirmed that the report would be available for the meeting in February 2020.  In respect of the financial implications for joining the LAPFF, Councillor Perrin expressed his dissatisfaction.  With the above in mind the Sub-Committee RESOLVED:

i)          To note the overall report with regards to position on responsible investment and climate change;

ii)         to note the further work proposed with regards to scenario analysis, carbon footprint analysis and consideration of alternative index-tracking funds.

iii)        to agree the Fund’s membership of the Local Authority Pension Fund Forum (LAPFF)

iv)        that the investment plans be reviewed by February 2020.