Agenda item

This report has an appendix that contains information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and is not for publication. The appendix has been circulated to the committee members only.

Any discussion on the contents of an exempt appendix will require the Committee to pass the proposed resolution at the end of the agenda to exclude members of the public and press from the proceedings for that discussion.

Tim Mpofu, Pension Fund Manager provided an update on the Pension Fund Quarterly Monitoring report. He noted that over the quarter to 30 September 2019, the Fund delivered a return of 2.9% net of fees outperforming the fixed weight benchmark by 0.4%. In addition, the Funds valuation was close to £1.1bn which suggested a good environment from an investment point of view. It was noted that that no funding update was carried out in Q1 2019, as the assumptions had been changed ahead of the triennial valuation, however this would be revised in line with the actuaries.

Michael Adam, Co-opted Member, referring to Appendix 1 of the pack asked why there had been a decline in active members. Tim Mpofu explained that the figures had been refreshed in June. A data cleansing exercise was carried out to ensure that the Council’s data was at a good standard prior to the triennial valuation. Therefore, some of the active members had moved to the deferred list.

Councillor PJ Murphy explained that the accuracy of the data was crucial, therefore enquired whether officers were satisfied with the standard of the data as it currently stood.  In response Phil Triggs explained that Barnett Waddingham were of the view that the data was at a good standard since the data cleansing work had been carried out. Officers had been working to achieve a higher standard over the last 12 months. A comparison of the current standard of data in contrast to how it was, prior to the data cleansing work could be provided to the Committee to review.

Hitesh Jolapara, Strategic Director of Finance and Governance said that regular sample checks on the data would be introduced going forward to ensure that the data was consistently being reviewed.

Tim Mpofu, Pension Fund Manager provided a summary of the Fund’s Environment, Social & Governance (ESG) Report. He explained that the Fund’s investment in the MSCI Low Carbon index had 57% less CO2 output than the global benchmark. This analysis was carried out annually by the Pension Fund through a specialist firm. In addition, the Pension Fund’s officers continued to engage with the fund managers in the development of better carbon emissions metrics and reporting. The total carbon friendly investment value was £466m.

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Councillor PJ Murphy asked if the Fund was on target for achieving Carbon neutrality by 2030 in line with Council’s priority. In response Tim Mpofu explained that a full evaluation needed to be carried out to determine the Fund’s level of exposure to carbon emissions. This exercise would be carried out in January 2020 and officers would then have a better indication on how close the Fund was to achieving its target. Phil Triggs, Director of Treasury & Pensions, explained that a Responsible Investment Policy paper was being developed (an agenda item at this meeting) and part of these discussions would help determine how the Council would achieve their target by 2030. In addition, the paper would be a working document to support and improve the Council’s carbon position over the long-term.

Michael Adam, Co-opted Member asked whether there was an opportunity to consider other ESG metrics across the board, rather than focusing on carbon exclusively to make improvements in this area i.e. how the council was performing on ESG overall. In response Matt Hopson explained that voting data could also be included, however this paper mainly focused on carbon. Michael Adam suggested that officers followed this up this with managers to determine how the Council could expand this paper to capture other ESG factors including gender paid gaps and good governance on boards.

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Kevin Humpherson, Deloitte, noted that Aviva Investors had been in touch to notify officers that there had been some changes to the role of Head of Infrastructure Equity, a new managing director of infrastructure had been appointed. Kevin Humpherson explained that he would contact Aviva after the meeting to ascertain the current position and feed back to the Sub-Committee as soon as possible.

Kevin Humpherson, Deloitte provided an update on Oak Hill Advisors outlining the key organisational and personnel changes. While there had been significant changes over the period, particularly to senior management, Deloitte were of the view that the team remained strong. Robert Okun’s retirement as the Portfolio Manager on the Diversified Credit Strategies fund was relatively gradual, with investors being aware for some time that Adam Kertzner would take over.

Kevin Humpherson, Deloitte provided an overview of five alternative asset classes selected by the Sub-Committee. These included direct lending, renewable infrastructure, social housing, emerging market debt and green bonds. For each of these asset classes a description of their main characteristics and various key considerations was provided to the Sub-Committee. In addition, majority of these asset classes were illiquid in nature, therefore the Sub-Committee should consider its immediate and future cashflow requirements and longer-term goals before making a commitment.

RESOLVED:

THAT, the Pensions Fund Sub-committee noted the contents of the report.