Agenda item

11:10

Report by Director of Finance

This report will provide a summary of the discussions held by the Climate Change Working Group at their meeting on 5 May 2022. 

The Committee are RECOMMENDED to note the progress to date, the proposed future work programme and to agree the Engagement Policy and ask Officers to use this as the basis for negotiations with the Brunel company and the other 9 Funds within the Brunel Pension Partnership in developing an Engagement Policy for the Partnership as a whole.

This Committee was provided with a summary of the discussions held by the Climate Change Working Group at their meeting on 5 May 2022. 

Members were informed that the working group had received a confidential version of the 2022 Global Investor Statement to Governments on the Climate Crisis.  It had been agreed that the Statement was consistent with the Oxfordshire Policy and that officers be authorised to sign the Statement on behalf of the Pension Fund Committee under their delegated powers.

A full analysis of the latest carbon metrics report would be considered at the next meeting of this Committee. The Sustainable Equities portfolio had appointed a new Fund Manager who specifically targeted the energy transition, which resulted in higher short term carbon emission figures with the potential for significantly lower emissions in the longer term.

Reference was made to the last meeting of the Committee, where it was asked what the implications were of applying the current engagement policy to the current portfolios.

The Committee was informed that a key point noted by the working group was that the Fund only invested in 51 of the 166 Climate Action+ companies.

The working group was broadly content with the engagement policy as it would enable sufficient challenge to Brunel and the underlying Fund Managers to manage the engagement in a timely manner, consistent with meeting the targets under the current Policy. 

Concerns were raised from the analysis that the Climate Action 100+ list did not cover the banks and financial companies associated with financing much of the on-going exploration and development of new fossil fuel reserves. 

Members were also informed that the working group noted that the UK as a portfolio had significantly higher exposure to these companies on the Climate Action 100+ companies list.

District Councillor Jo Robb commented that there needed to be stringent criteria adopted to begin to exclude fossil fuel companies from the Fund investments. She expressed concern at the lack of timescales to exclude companies and argued that these should be brought forward to enable exclusion of companies at an earlier point of time. There were still oil companies investing in oil exploration.

Discussion took place on timescales and reference was made to the Engagement Policy which set out a procedure whereby the allocation policy was reviewed annually in March. The Pension Fund Committee had a fiduciary duty to have a good reason to exclude any company. Changes could not happen overnight but would take place over the next five years.

District Councillor Jo Robb asked that the assessment criteria be amended on capital allocation so that it specifically states that the company’s future capital expenditure is aligned with the Paris Agreement goal of limiting global temperature rises to 1.5 degrees centigrade. It was noted that this wording was taken directly from the Climate Action 100+ Assessment Model and any changes would need to go back to Climate Action 100+ for consideration.  It was agreed that this would be discussed further by the working group.  

RESOLVED – (1) That the progress made to date in the work of the Climate Change Working Group be noted.

(2) That approval be given to the Engagement Policy and Officers be asked to use this as the basis for negotiations with the Brunel company and the other 9 Funds within the Brunel Pension Partnership in developing an Engagement Policy for the Partnership as a whole.