Agenda, decisions and minutes

Apologies had been received from Councillor Richard Webber.

There were no declarations of interest.

10.15

To approve the minutes of the meeting held on 11 June 2021 and to receive information arising from them.

The Minutes of the meeting held on 11 June 2021 were approved and signed as a correct record.

Councillor Nick Field-Johnson asked for an update on the recruitment of an Independent Financial Adviser.  Sean Collins reported that the position was currently being advertised.  Peter Davies continued to provide advice on a voluntary basis in the interim.  It was expected that the position would be filled by the next Committee meeting.

On Item 25/21, Age Discrimination Cases in the Firefighters Pension Scheme, the Committee had requested that the Monitoring Officer attend this meeting to provide an update.  However, the government guidance was not now expected to be received until October 2021.

The Chairman responded that if an extra meeting of the Committee was needed to consider the matter, he was prepared to call one.

10.15

Currently council meetings are taking place in-person (not virtually) with social distancing operating in the venues.  However, members of the public who wish to speak at this meeting can attend the meeting ‘virtually’ through an online connection.  Places at the meeting are very limited due to the requirements of social distancing.  While you can ask to attend the meeting in person, you are strongly encouraged to attend ‘virtually’ to minimise the risk of Covid-19 infection.

Please also note that in line with current government guidance all attendees are strongly encouraged to take a lateral flow test in advance of the meeting.

Normally requests to speak at this public meeting are required by 9 am on the day preceding the published date of the meeting. However, during the current situation and to facilitate these new arrangements we are asking that requests to speak are submitted by no later than 9am four working days before the meeting i.e. 9 am on Friday 3 September 2021.  Requests to speak should be sent to khalid.ahmed@oxfordshire.gov.uk. You will be contacted by the officer regarding the arrangements for speaking.

If you ask to attend in person, the officer will also advise you regarding Covid-19 safety at the meeting.  If you are speaking ‘virtually’, you may submit a written statement of your presentation to ensure that if the technology fails, then your views can still be taken into account. A written copy of your statement can be provided no later than 9 am 2 working days before the meeting. Written submissions should be no longer than 1 A4 sheet.

The Committee received a public address from Ms Al Chisholm from Fossil Free Oxfordshire.

Thank you for the opportunity to address you today on behalf of Fossil Free Oxfordshire on the subject of passive investment reallocation. And thank you, as ever, for all the important work you do to look after the fund and decarbonise it.

The backdrop for your discussion is the IPCC report, which the UN Secretary General said “must sound a death knell for coal and fossil fuels, before they destroy our planet”

Although passive fund allocation has come to seem complicated, it’s very simple. To choose the PAB fund is to choose to stop investing in fossil fuels and rapidly reduce emissions., It’s simple and risk-free. Given the escalating climate crisis and the urgent need to reduce fossil fuel extraction and emissions, it’s a no-brainer.

The alternative is to invest in a CTB fund. It means giving fossil fuel companies money to develop and explore for more fossil fuels, while at the same time asking other companies to burn less fossil fuel to decarbonise the whole economy. Its logic is entirely contradictory.

Known reserves contain more than enough to tide us through the transition to clean energy, and burning all known reserves would guarantee catastrophic temperature rises. Funding the sector to find more makes no sense.

Two main arguments for opting for the CTB have been made

1. A “Just Transition.”
2. Engaging with the fossil fuel industry.

I’d like to address each of these in the very brief time available

1. Using the concept of “Just Transition” to justify continued investment in the fossil fuel industry is an absolute travesty. Yes, there absolutely must be a rapid and just transition to clean energy that protects the livelihoods of those working in the fossil fuel industry, but maintaining investments in these companies under the guise of finding financial solutions to a political problem will simply delay political action, and will in the long run make the transition less just.

We only need to look at the experiences of the Ogoni people whose leaders were executed in the Niger Delta or the people who fished there until the catastrophic oil spills, to understand how companies like Shell can be relied upon to protect people’s livelihoods.

Anyway, it is the Government’s responsibility to ensure the just transition, not the Pension Fund Committee’s, but if the Committee is concerned with justice in this transition, it might do better to invest in clean energy technology so there are jobs for oil and gas workers to go to as this transition takes place. (Incidentally, both funds will exclude tobacco, but we see no arguments for the Pension Fund to ensure a just transition for workers in that sector.)

2. The second argument is about engagement with the fossil fuel industry. It has been going on for decades. If it was working, they would have stopped exploring for and developing new oil and gas reserves and put serious money into renewables. They would stop lobbying against  ...  view the full minutes text for item 35/21

10:20

A copy of the unconfirmed Minutes of the Local Pension Board, which met on 9 July 2021 is attached for information only.

The unconfirmed Minutes of the Local Pension Board, which met on 9 July 2021 were noted.

10:25

In a response to a request from the Chairman of Pension Fund Committee to have a dedicated item on each Committee agenda for the work of the Local Pension Board, attached is the report by the Independent Chairman of the Local Pension Board. 

The report sets out the items the Local Pension Board wishes to draw to the attention of this Committee following their last meeting in July 2021.

The Committee was provided with a report by the Independent Chairman of the Pension Board.

Sean Collins noted that the Board was back up to full strength with the appointment of Elizabeth Griffiths and Marcia Slater.  The Board’s annual report was included as an Annex.

Sean Collins also highlighted with regard to the Board’s regular reports on investment management fees that the Board had asked to ensure that we get value for money for the fees paid.  This was likely to be relevant to the discussion later in the meeting on the passive allocations.  One Member of the Board drew particular attention to the difference in fees between active and passive fund managers.

10.30

This report sets out the new passive options developed by Brunel in conjunction with FTSE Russell and Legal and General Investment Management in response to the requests from Client Funds for suitable alternatives aligned to the Paris Agreement. 

The Committee is RECOMMENDED to determine any changes to the current allocation to passive equities, and if appropriate, to the current commitments set out in the Investment Strategy Statement.

Before considering the report setting out the new passive options developed by Brunel in conjunction with FTSE Russell and Legal and General Investment Management in response to the requests from Client Funds for suitable alternatives aligned to the Paris Agreement, the Committee reviewed a slide presented by Faith Ward, Chief Responsible Investment Officer, Brunel Pension Partnership demonstrating the levers pushing the weighting of different companies up and down.  She noted that both the Paris Aligned Benchmark (PAB) and the Climate Transition Benchmark (CTB) require analysis to see if companies have breached the global compact or OECD guidelines.

Sean Collins, introducing the report, noted that the two benchmarks meet the requirements of the Institutional Investors Group for Climate Change Net Zero Framework.  The first bullet point under Paragraph 7 was no longer correct.  For both funds, the reduction in fossil fuel reserves now matches their reduction in carbon emissions – 50% for PAB and 30% for CTB.

Sean Collins also explained that the exclusion of tobacco was there because it was part of the EU taxonomy.  It was felt important to go with a standard, otherwise everyone was measuring things in different ways.

Highlighting the main differences between the two benchmarks, Sean Collins, described the PAB as more ambitious, involving immediate reductions in the fossil fuel areas.

FTSE does not have a UK Paris-aligned benchmark as it could not be sufficiently diversified.  The Working Group believed that UK investment would be better pursued through active mandates and that any passive mandates should be with the Developed World.

The Working Group also agreed that retaining 15% passive was delivering better value for money and the new benchmarks were achieving much of what you would get from active anyway.

Officers favoured the CTB as being more aligned with the current Investment Strategy Statement.  However, others on the Working Group favoured the more ambitious PAB.  They were agreed that there was no point in allocating less than 5% to either fund.

The Chair asked firstly if there was agreement to go with passive funds.  Members of the Committee agreed.

Members expressed support for the PAB for the following reasons:

·         It was the simplest and most practical approach from the point of view of the funds.

·         Given the latest UN report, it was better to go with the more ambitious fund.

·         Both funds were targeting the same return so that was not a factor.

Faith Ward noted that both funds excluded thermal coal and tar sands.

The Chair proposed that 15% be allocated to PAB.  This was seconded by Councillor Bulmer and agreed by the Committee.

RESOLVED: to allocate the 15% passive equities to the Paris Aligned Benchmark.

11.20

This report updates the Committee on the progress against each of the 10 Recommendations made in the Independent Governance Review completed by Hymans Robertson, and seek the Committee’s agreement on the way forward.

The Committee is RECOMMENDED to:

a.       Adopt the Conflict of Interest Policy as set out in Annex 1;

b.       Review the job description for a new Governance Officer role as set out in Annex 2, and agree the establishment of the new position;

c.       Comment on the future agendas for the meetings of the committee to be based on the key roles and responsibilities of the Committee as set out in annex 3, and in particular the proposal to focus on a review of investment performance annually, and the need for a separate annual business meeting;

d.       Agree the proposals to amend the current Training Policy to include an annual assessment and an escalation procedure to cover cases on non-engagement with the Policy;

e.       Ask Officers in conjunction with Hymans Robertson to amend the draft Training Programme as set out in Annex 4 based on the results of the initial knowledge assessment and bring the revised programme back to the December meeting for approval.

The Committee had before it for consideration a report updating progress against each of the 10 Recommendations made in the Independent Governance Review completed by Hymans Robertson.  The Committee was asked to agree a way forward.

Sean Collins introduced the report.  He recommended that the meeting consider each of the 10 Recommendations in turn.

1. Develop a fund specific conflicts of interest policy

In response to questions from Members, Sean Collins suggested that there should be an annual governance review.  Andrew McKerns, Hymans Robertson, confirmed that they have recommended the same format for a conflicts of interest policy across a number of Local Government Pension Schemes and that Hymans Robertson have regular discussions with the Pensions Regulator.

Recommendation a) to adopt the Conflict of Interest Policy set out in Annex 1 was proposed by the Chair and seconded by Councillor Bulmer.  The recommendation was agreed.

2. Review the Constitution of the Pension Fund Committee to widen Scheme Employer Representation.

It was agreed that there was no further action required as the Committee’s membership had been changed to comply with this.

3. Review the Terms of Reference for the Pension Fund Committee and Pension Board, to clarify roles and improve communication between the two bodies.

It was agreed that the deficiencies in communication between the Committee and the Local Pension Board should be overcome by the decision, already made, that the Chair attend meetings of the Board and that no amendments to the Terms of Reference were necessary.

4. To reduce key person risk and to support the findings of the Good Governance Project, the Committee should consider the establishment of a Governance Officer role. This role would be to support the Service Manager (Pensions) and service delivery of the Fund.

It was proposed to appoint a governance officer as well as a small team to support communications, training etc.  There would be a budgetary implication from this decision but it would most likely fall into 2022.

Councillor Bulmer proposed recommendation b) and it was seconded by Councillor Edosomwan.  The recommendation as agreed.

5. Review the agenda content for the Pension Fund Committee and Pension Board. Consider and implement an annual business meeting for the Fund.

Hymans Robertson had proposed a governance matrix and calendar to help the committee to plan its agendas across the year and focus on key issues.  Officers proposed that there was a need to reduce the focus on short-term investment performance and have a more in-depth review of investment performance once a year.  Hymans Robertson had also proposed holding a separate annual business meeting.

Councillor Bulmer stated that he was unconvinced of the need for a separate annual business meeting given that the business plan did not change much from year to year.

The Chair proposed to adopt recommendation c) on the basis that the annual business meeting be tried for one year as an experiment.  Councillor Bulmer seconded the proposal and it was agreed.

6. Review the process for risk review at the Fund.

Sean  ...  view the full minutes text for item 39/21

12.00

This report provides an update on progress against the key priorities set out in the Annual Business Plan for 2021/22.

The Committee is RECOMMENDED to note progress against each of the key service priorities as set out in the report.

The Committee received a report setting out the latest progress against the key service priorities set in the business plan for the Pension Fund for 2021/22 and was asked to note it.

Sean Collins summarised the Red and Amber ratings.  Work had yet to progress on robust arrangements to assess the effectiveness of the Engagement Strategy and Voting Process in advance of the 2022 Stocktake which was why this was rated Red.

Assessing investments in climate solutions was rated Amber as there was still a need to identify suitable metrics and benchmarks.  Customer Satisfaction was rated Amber as they were struggling to get enough feedback.

RESOLVED: to note progress against each of the key service priorities as set out in the report.

12.10

This report presents the latest position on the Fund’s risk register, including any new risks identified since the report to the last meeting. 

The Committee is RECOMMENDED to note the changes to the risk register and offer any further comments.

The Committee had before it a report presenting the latest position on the Fund’s risk register, including any new risks identified since the report to the last meeting.  The Committee was asked to note the report.

Members expressed the opinion that they needed to do more than simply note the report.  Sean Collins agreed that a stronger wording was required to reflect exactly what the Committee was required to do to take ownership.

The changes to the Risk Register were agreed.

12.15

This report updates the Committee on the key administration issues including service performance measurement, the debt recovery process and any write offs agreed in the last quarter. 

The Committee is RECOMMENDED to

i)        Agree to a further extension of the reduction is SLA target, to be reviewed at the December meeting;

ii)       Agree to the proposed changes to communication policy;

iii)      Note the amounts written off by the Pension Services Manager; and

iv)      Decide whether the fund should undertake an annual benchmarking exercise.

The Committee considered the report updating the key administration issues including service performance measurement, the debt recovery process and any write offs agreed in the last quarter.

Sean Collins noted that the report included a request to extend the Service Level Agreement targets as the team was struggling to meet them.  The team was confident that this would be the last extension they would need.  He also updated the committee on the annual benefit statements which had been a difficulty in the past.  100% of the deferred benefits and 99.5% of the active benefits statements went out by the 31 August deadline.

In response to Members’ questions about late data from scheme employers, Sean Collins agreed that the escalation procedure was not as robust as it should be and this was being addressed.

The Chair asked for it to be noted that the Committee would like to see a more robust escalation procedure for recalcitrant employers.

On Recommendation d), Sean Collins reported that Audit had asked if the annual benchmarking work should be restarted.  The officers’ concern was that it was of little use given the difficulties in comparing performance between funds.  There were other informal ways in which information was gathered.

Councillor Bulmer noted that there was a lot of useful information in the reports from Brunel.

The Chair proposed that an annual benchmarking exercise not be undertaken.  This was seconded by Councillor Bulmer and agreed by the Committee.

RESOLVED to

a)               Agree to a further extension of the reduction in SLA target, to be reviewed at the December meeting;

b)              Agree to the proposed changes to communication policy;

c)               Note the amounts written off by the Pension Services Manager; and

d)              Agree not to undertake an annual benchmarking exercise.

12.25

This report presents the Annual Report and Accounts for the Pension Fund and highlight any issues raised by external audit.

The Committee is RECOMMEDED to note the report.

The Committee was asked to note this report presenting the Annual Report and Accounts for the Pension Fund and highlighting any issues raised by external audit.

Gregory Ley reported that the audit on the main financial statements was still ongoing but they had not identified any issues as of earlier this week.  The budget outturn on Agenda Page 143 showed a £700,000 underspend, largely due to vacancies in administration staff.

The other point to particularly note was the failure by Prudential to provide information that should be included on Agenda Page 192.  The team was checking with Audit whether this would prevent the signing off of the statements by the statutory deadline.  Prudential had referred themselves to the Pension Regulator so it was well known that this problem existed.

Sean Collins noted that many local authorities has missed the deadline last year and were likely to this year.  This was a national problem.  He would confirm if they had referred the matter to the Pension Regulator.

Andrew McKerns confirmed that a number of funds had reported Prudential to the regulator.

It was agreed to note the reports.

12.30

This report summarises the findings of the annual review of the investment performance of the LGPS Funds carried out by PIRC.

The Committee considered a report summarising the findings of the annual review of the investment performance of the LGPS Funds carried out by PIRC.

Peter Davies introduced the report.  It showed slightly above median performance over the last year but slightly below over the last three years.  This was largely due to the poor performance of the equity portfolio.

He highlighted the performance of Bromley which showed the potential rewards of active funds and non-indexed positions.  It was also notable that global equities did better than UK equities.

In response to questions from Members, Peter Davies confirmed that the Bromley approach had a higher risk.

Councillor Nick Field-Johnson noted the strong performance of private equities.  He had long argued that the fund should increase the proportion in private equities.  Given the poor performance of property – and especially commercial property – he suggested that 2% be moved from property to private equities.

Peter Davies noted that the percentage in private equities will rise anyway due to the new investments by Brunel.  It was currently 9% but would rise by just under 1% per year.

The Committee is RECOMMENDED that the public be excluded for the duration of items 16 and 17in the Agenda since it is likely that if they were present during those items there would be disclosure of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972 (as amended) and specified in relation to the respective items in the Agenda and since it is considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

RESOLVED: that the public be excluded for the duration of items 16 and 17 in the Agenda since it is likely that if they were present during those items there would be disclosure of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972 (as amended) and specified in relation to the respective items in the Agenda and since it is considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

12.40

The Independent Financial Adviser will review the investment activity during the past quarter, present a summary of the Fund’s position as at 30 June 2021, and highlight any key performance issues, with reference to Tables and Graphs, the Investment Performance Reports produced by Brunel. The report does not contain exempt information and is available to the public. 

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.       Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to receive the tables and graphs, and that the information contained in them be borne in mind, insofar as they relate to items on the agenda.

The Independent Financial Adviser provided the Committee with an overview of the current and future investment scene and market developments across various regions and sectors.

The information reported was noted.

The public was excluded during this item because its discussion in public was likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3. Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it was considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information , in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority’s investments in funding the Pension Fund.

12.45

Report of the Independent Financial Adviser.

The report sets out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself does not contain exempt information and is available to the public. The Independent Financial Adviser will also report orally and any information reported orally will be exempt information.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.       Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to receive the report, tables and graphs, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

The report set out an overview of the current and future investment scene and market developments across various regions and sectors. The Committee thanked Peter Davies, Independent Financial Adviser for the work he carried out in his role.

The report was noted.

The public was excluded during this item because its discussion in public was likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3. Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it was considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information , in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority’s investments in funding the Pension Fund.

13.00

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

With this report the Committee was invited to raise any issues concerning Corporate Governance and Socially Responsible Investment.

Councillor Jo Robb asked if it was appropriate to raise with the Local Authority Pension Fund Forum (LAPFF) the issue of certain companies seeking to sue governments that were bringing in climate measures under the Energy Charter Treaty.  Gregory Ley responded that he was happy to do that.