Agenda item

13:15

This item will provide the opportunity to raise any issues concerning Corporate Governance and Socially Responsible Investment which need to be brought to the attention of the Committee.

It was AGREED (nem con with the abstention of Councillor John Howson) that

(a)  Mr Collins would send out the following written statement to members of the public who wished to challenge the Committee on its policy in respect of corporate governance and socially responsible investment.

Oxfordshire Local Government Pension Scheme

Pension Fund Committee Position on Responsible Investing, including matters relating to Climate Change

The formal position of the Pension Fund Committee on responsible investments are included the ESG Policy section of the Fund’s Investment Strategy Statement, which is available on the Fund’s website at:

https://www.oxfordshire.gov.uk/business/pensions/pension-fund/about-fund

and is repeated as an Annex this paper.  This document is reviewed annually, with a fundamental review undertaken every three years in line with the Tri-Ennial Valuation of the Fund and a review of the Funds Asset Allocation.  The next review is due to complete in March 2020.  In line with the guidance, the views of interested stakeholders will be taken into account in completing the next review.

The current position, which explicitly recognises the financial risks associated with environmental, social and governance (ESG) issues including climate change, was developed with the support of the Chief Responsible Investment Officer at the Brunel Company and previously at the Environment Agency Pension Fund.  She is internationally recognised as an expert in this field, and a regular award winning for her work in the area of responsible investment.

A key element of the current policy is to avoid blanket decisions, such as the dis-investment of all fossil fuel companies, but to make investment decisions on the merits of each individual case, and engage directly with companies to ensure they are acting to mitigate key risks.  The Committee believes that such a policy both enables them to best meet their fiduciary duties, as well as contributing to the development of a sustainable future for all.  The policy allows differentiation between those fossil fuel companies who are working hard to reduce their carbon emissions and switching to renewable sources of energy, and those who have buried their head in the sand.

The Committee have been challenged not only on their policy not to divest in all fossil free companies, but also why they don’t make an allocation to the passive low carbon and/or sustainable equity portfolios managed by Brunel.  It is the Committee’s view that they cannot meet their fiduciary duty by blanket decisions that all fossil fuel companies are bad, and all low carbon companies are good.  Each investment is examined for investment potential and risks to achieving that potential.  This allows the Committee to select those fossil fuel companies who are building a sustainable future through cleaning up their processes and increasing resources developing renewable alternatives.  It also allows the Committee to avoid those low carbon companies who are failing to manage other key ESG risks, including the wider risks associated with climate change.  The ability to engage with companies as an active manager, with the ultimate sanction of dis-investing if the company fails to respond positively to the engagement is also seen as a key benefit of the current policy.

The main area the Committee wish to develop is the reporting on company performance on ESG issues to enable them to validate their current policy and ensure that the Fund Managers are complying with the policy and that their engagement is effective.  This work is being undertaken in conjunction with the Chief Responsible Investment Officer at Brunel, alongside the other Funds within the Brunel Pension Partnership, and it is hoped to have the first ESG report at portfolio level available as part of the quarterly performance report to 31 March 2019; and

(b)  to note the piece contained in the 2018 Quarterly Engagement report of the Local Authority Pension Fund Forum (LAPFF) which referred to corporate governance and socially responsible investment (included on the Addenda to this meeting).