Agenda item

To receive the Brent Pension Fund Q3 2021 Investment Monitoring Report.

The Board received the Brent Pension Fund Q3 2021 Investment Monitoring

Report. It was reported that the monitoring report had been considered in detail by

the Brent Pension Fund Sub Committee on 21 February 2021 who had noted the key issues as set out in the report.

In considering the report, the Board noted the following:

·         The Fund had added £80m to its portfolio over this period, representing a combined return against assets of 6% (ahead of the benchmark return of 5.1%).

·         The main driver of returns were the Fund’s growth holdings with LGIM’s global equity mandate the primary contributor in monetary terms and the Global and Private Equity Funds also performing well.  Within the Fund’s Income holdings the Baillie Gifford multi-asset fund had also produced strong performance.

·         Emerging market equities were noted as delivering a lower rate of return, as well as the Capital Dynamics Infrastructure Fund and Alinda Infrastructure Fund, although it was noted these had not had a significant bearing on the Fund overall, totalling 0.5% of the Fund’s assets.

Members were then provided with a summary of the climate risk analysis and carbon intensity by Fund Managers. Key issues highlighted were as follows:

·                As a starting point the Fund was reporting in line with information produced by its Pool, the London CIV.  The Fund would, however, seek to evolve its climate risk monitoring process by monitoring against further metrics.  Key metrics were currently focussed around weighted average carbon intensity and Fossil Fuel exposure with the information covered capturing approx. 88% of the Fund’s assets, as at 31 December 21.  Members were assured this provided an accurate and reliable level of data.

·                Having noted the relative carbon intensity for each Fund as a % of assets members were advised that despite representing only 15% of Fund assets the Baillie Gifford Diversified Growth fund was responsible for 29% of the Fund’s total carbon intensity. Whilst the LGIM Global Equity Fund represented the highest % of carbon intensity (42%) it was also recognised that this represented 53% of the Fund’s assets.  Focussing on these areas, members were advised of the specific investment profile relating to the Diversified Growth Fund, which had impacted on their carbon intensity rating including investment in the German energy company RWE. It was noted that as part of the London CIV, progress would continue to be monitored in terms of the carbon intensity of that fund.

·                In terms of fossil fuel exposure, it was updated that the Fund had a 6.2% exposure to fossil fuels, in comparison to the global average of 7.3%, meaning that the Brent Fund was lower than the global average, though the Fund was still looking to decrease this level further.

Members were then updated on the impact that the conflict in Ukraine could have on the Fund. The Fund had reviewed its exposure to assets in Russia, Belarus and Ukraine, and it was noted that the Fund only had small exposure to those regions, both in the number of holdings, as well as monetary value. It was acknowledged that values of the Fund’s assets had dipped since the publication of the report, though the early signs were positive for March and the year-end position. Members were reminded that the Fund held a well-diversified portfolio, which was vital in mitigating against unexpected global events.

Members welcomed the report and with no further issues raised, it was RESOLVED

to note the report.