Agenda item

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 years. Sawan Shah noted that they had stayed above the benchmark in previous years and the figures presented showed the returns over 3 months, 12 months and 3 years. The figures were described as a snapshot in time. For example, in 2022, every asset class performed poorly, and all funds looked to have underperformed. However, due to different cycles, the funds all looked relatively good and performed well in 2021 across the board, outperforming the benchmark and peer group figures. As such, funds went through different cycles depending on the focus and market environment, and it had been a difficult environment over the last 2 years for active managers to perform well because the source of returns had been the ‘magnificent seven’ and if the managers were not in those in line with global markets then they performed worse. Despite this, the overall growth of the London CIV was reported to be acceptable to officers. Kenneth Taylor added that, going forward, the Fund would like to see managers allocating money to a particular part of the market or a particular strategy. Specifically, LGPS pools like the London CIV could create blended funds, which offered a greater level of sophistication to help spread the risk.

With no further questions or comments, the Committee thanked officers for their work in delivering the update and RESOLVED to:

(1)        note the update.

(2)        agree that membership of the LAPFF should continue.