To approve the minutes of the meeting held on 6 March 2020 and 7 May 2020 (PF3) and to receive information arising from them.

The Minutes of the Meetings held on 3 March 2020 and 5 May 2020 were approved and signed as an accurate record.

Matters Arising

Minute 10/20 – Sean Collins reported that they had now paid the death grant to the Daughter and received no comment and had paid the death grant to the Son and had received thanks for all the hard work from the team.  Officers were currently progressing the setting up of a trust fund for the Granddaughter with her family.

Minute 8/20 – Sean Collins reported that all six members of the Local Pension Board had completed the Assessment, but that only 6 out of 11 members of the Committee had completed it.  The Chairman apologised for not completing the Assessment.  He hoped they would still produce a realistic view of the statement of knowledge of the Board.  He had asked Sean to investigate whether there was any further training to keep the Committee up to date with relevant knowledge.  Sean Collins undertook to send a link round to the online courses.

Councillor Roz Smith reported that she had completed the Assessment twice it had not worked.

This meeting of the Pension Fund Committee will be held virtually in order to conform with current guidelines regarding social distancing. 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 29 May 2020. Requests to speak should be sent to Deborah.miller@oxfordshire.gov.uk together with 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.

Where a meeting is held virtually and the addressee is unable to participate virtually their written submission will be accepted

.

Written submissions should be no longer than 1 A4 sheet.

The Committee received the following address:

Ms Al Chisholm addressed the Committee on behalf of Fossil Free Oxfordshire. She congratulated the Committee and its officers for travelling a huge distance in the Fund’s response to climate change over the past year. She recognised two particularly positive elements contained in the Climate Change Policy and Implementation Plan. They welcomed the adoption of the 1.5 ^oC target and the important commitment to keep abreast of climate science as it developed. They also applauded the target to reduce the portfolio’s GHG emissions by 7.6% each year.  They further supported the proposal to invest 100% of the £250M global equity mandate in Brunel’s Sustainable Global Equities portfolio with the caveat that we would like Brunel to publish the GHG emissions and Fossil Fuel exposure data for that fund.

She then highlighted two areas where they strongly believed the documents needed to be further developed if those targets were to be feasible and people were able to have confidence in them.

The first was the need for a visible plan that more clearly set out a series of actions and milestones to reach the laudable aims to make those annual emissions reductions and to invest in line with a 1.5 ^oC limit. The plan should give dates by which each milestone would be achieved. She called on OPF to:

1.    confirm how, and by when, the 7.6% p.a. target was to be measured across the portfolio.  They would like to see an outline of the methodology it proposed to use to create estimates of actual reductions; how investment metrics (which should be absolute, not relative emissions) relate to the 7.6% p.a. target and how metrics would be used to exclude investments.  Any methodology used must be realistic, for example, Carbon-capture and storage scenarios should only be considered when backed up by detailed plans and committed investments.  Establishing this methodology should not be considered a prerequisite to the following elements of the plan; instead the objective should be to demonstrate the progress of the plan. 

2.    make a formal request of Brunel to provide funds that would enable OPF to meet its 7.6% p.a. target including zero carbon passive and managed funds, and ensure that Brunel is reducing GHG emissions in all their portfolios by at least 7% PA, as stated in Brunel’s Climate Change Policy.

3.    work with Brunel and the other Brunel pension funds to develop a plan to implement the funds developed in response to (1 & 2) and develop a plan to integrate those funds into the OPF portfolio.

4.    reduce the emissions of the portfolio immediately by excluding obvious outlier investments and not wait until a baseline is produced for the 7.6% p.a. assessments. Any credible “engagement and selective divestment” strategy would start by excluding any fossil fuel company still exploring for or developing new fossil fuel reserves, because this fundamentally cannot be aligned with 1.5 ^oC warming. Recent analysis from the Transition Pathway Initiative [1] (see graph below)  ...  view the full minutes text for item 102/20

Report by the Director of Finance (PF5)

The report provides the feedback to the Committee on the recent consultation exercise on the Investment Strategy Statement including the Climate Change Policy, and proposes final changes to the draft document.

The Committee is RECOMMENDED to consider the responses to the recent consultation exercise and approve the changes to the draft documents as set out in the report and incorporated in Annex 3.

In March, this had Committee reviewed its Investment Strategy Statement and completed the fundamental review of its asset allocation following on from the tri-ennial Fund Valuation.  For the first time, the Investment Strategy Statement included a Climate Change Policy as an annex to the document.

As required under the relevant Regulations and guidance, the Committee agreed to consult all key stakeholders on the draft Statement approved at the March meeting.  This process was undertaken over a 6-week period from the beginning of April to the middle of May.  The Committee now had before it a report, which set out the key issues raised in the consultation responses and recommended the Committee to approve the final Investment Strategy Statement including the changes to the draft Statement set out in this report.

In the view of the number of the consultation responses highlighting key issues in the implementation of the Climate Change Policy rather than any specific changes to the Policy itself,  it was felt that the report needed to be considered alongside the Climate Change Policy Implementation Plan included on today’s agenda.

The Chairman indicated that it was his intention to take item 5 and 6 together, as they were interrelated.  This was agreed by the Committee

In introducing the report, Mr Collins set out the approach they took to the consultation.  All possible steps had been taken to reach all members of the scheme including, sending out the consultation to all employers asking them to share it with all scheme members.  Officers also made the consultation available on the Website and notified scheme members by newsletter.  27 responses had been received and the responses were set out in Annex 2.

The vast majority of consultation responses had talked about the Climate Change Policy which was expected as it was the main new area of the consultation.  The main areas of the consultation were set out in Annex 1.  The vast majority of the consultation responses were very supportive of the policy and the direction of travel.  The main comments were in relation to it be strengthened slightly to make it more explicit in certain areas. 

The report sets out the four main key response areas.  There was agreement that the Paris Agreement should be used as a benchmark, together with a comment about tightening up targets on that.  There were more people wanting blanket divestment in fossil fuels, although those who accepted the position, wanted greater clarity around the targets that were being set and the sanctions that would follow.  Metrics were also provided, and these were set out in the report.  Other issues that people raised were also included in the report.   These were set out in terms of what had been done in terms of changing the Investment Strategy Statement and Policy; the issues we thought were issues of detail rather than issue of principle had been set out in the implementation plan.  There were also a few details that they thought they could not respond to and  ...  view the full minutes text for item 103/20

Report by Director of Finance (PF6).

The report sets out how the Pension Fund plans to implement its Climate Change Policy (hereinafter referred to as ‘the Policy’). The key commitment of the Policy is to transition investment portfolios to net-zero Greenhouse Gas Emissions (GHG) by 2050, consistent with seeking to limit the temperature increase to 1.5ºC above pre-industrial levels. The actions in the implementation plan have been developed to work towards delivery of this commitment. The Policy requires the Fund to establish intermediate targets in pursuit of the commitment.

The Committee is RECOMMENDED to:

(a)           adopt the Climate Change Policy Implementation Plan; and

(b)          determine the action it wishes to take in respect of the transition of the existing UBS global equity mandate to Brunel considering the information provided under the second bullet point of paragraph 6.

The Committee had before it a report, which set out how the Pension Fund plans to implement its Climate Change Policy (hereinafter referred to as ‘the Policy’). The key commitment of the Policy was to transition investment portfolios to net-zero Greenhouse Gas Emissions (GHG) by 2050, consistent with seeking to limit the temperature increase to 1.5ºC above pre-industrial levels. The actions in the implementation plan had been developed to work towards delivery of this commitment. The Policy requireed the Fund to establish intermediate targets in pursuit of the commitment.  The discussion and debate on this item was taken under item 5.

RESOLVED: to

(a)           adopt the Climate Change Policy Implementation Plan; and

(b)           (on a motion by Councillor Mark Lygo, seconded by Councillor Kevin Bulmer and carried by 10 votes to 0, with 1 abstention) to determine  committing 100% of the UBS portfolio to the Sustainable Global Equities portfolio.

Report of the Independent Financial Adviser (PF7).

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 Committee is RECOMMENDED to receive the report.

The Committee had before it a report which set out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself did not contain exempt information and was available to the public. The Independent Financial Adviser will also report verbally, and any information reported orally will be exempt information.

Mr Peter Davies, Independent Financial Advisor in introducing his report, referred the Committee to the table at page 1 of the report, the economic consensus forecasts had been downgraded quite a bit since writing the report, and the UK consensus now stood at -8.7 for this year and the USA slightly lower at -3.8And eurozone -8%, but those were very sensitive to as when lockdown was relaxed and Government support received etc. 

Markets had recovered quite a lot since the end of March and in round numbers if the overall fund fell by £370m in the first quarter (13.5%), then at the moment it had recovered a half of that (£185m) to the first order so the position was not looking anywhere as near as bad as at the end of March, but was nevertheless a fall since the start of the year of 7% which was very substantial in historical terms.

The big test would come when Government support such as Furlough pay was tapered off and Government funding to companies had been fully invested and which companies would still be going concerns come the Autumn.  It would take some time to see what the total effects were and that was true of the listed market and the bond market and also through the private equity market.  Looking at the companies they were invested in, there was not a big exposure to the leisure industries, not through Adam Street and very little through the listed portfolio, but there will still be a case where companies are in difficulties and it would be a while before the Committee saw the extent of that.  The rebound outlook, therefore, particularly in the equities markets may not be so good in the next few months as the actual effects become more apparent.

Councillor Nick Field-Johnson questioned what the Committee’s outgoing were going to be and what the liability of the fund would be over the next 5 years and over the next 10 years to ensure we had ample coverage.  He asked whether the Committee could have a brief report on this matter.

Mr Collins reported that the Committee had received a report on that as part of the Assest Allocation report back in March.  M J Hudson had carried out a piece of work to look at the matter.  At the time, they were basing it on what their projections of what the Asset Allocations decisions would be.  That now needed to be updated.  The figures from the Actuary suggest in the main that the contributions received were more than sufficient to pay for the pensions going out for the next five years.  The  ...  view the full minutes text for item 105/20