11:20

 

This report provides an opportunity for the Committee to undertake a formal annual review of all its major policy documents, in line with the requirements under the Regulations (PF13). The Committee has previously agreed to review all such documents, on an annual basis (at a minimum), at its scheduled June meeting.

 

Please find attached at PF13 the following policy documents:

 

Annex 1 – The Funding Strategy Statement

Annex 2 – The Investment Strategy Statement

Annex 2(b) – Addressing Climate Change Position Statement

Annex 3 – Governance Policy and Governance Compliance Statements

Annex 4 – Communications Policy

Annex 5 – Early Release of Benefits Policy

Annex 6 – Pension Fund Scheme of Delegation

Annex 7 – Administration Strategy

Annex 8 – Procedure for Reporting Breaches of Law to the Pension Regulator

Annex 9 – Administering Authority Discretions

 

In relation to Annex 2 ‘The Investment Strategy Statement’, Councillor John Sanders has put forward the following motion for this Committee to consider:

 

‘In the light of the recent Motion in Full Council on 2 April 2019 to acknowledge a climate emergency, the Pension Fund Committee is called upon to instruct officers to investigate the best possible way it can divest itself of all fossil fuel investments (ie. the equity or bond of any company which derives more than 50% of its total turnover from the extraction and production of fossil fuels) as soon as is reasonably practicable whilst mitigating any impact on the value of the fund’.

 

The Committee is RECOMMENDED to:

 

(a)          approve the revised policy documents as set out in Annexes 1, 4, 5 and 7, noting the changes in the documents as discussed above;

 

(b)           approve the revised Investment Strategy Statement as set out in Annex 2, noting the changes as discussed in the report and

 

 

                                                i.        re-confirm its position that a blanket divestment policy is not an appropriate approach for the Pension Fund, nor to address the risks associated with climate change; and

                                              ii.        endorse the current approach and direction of travel set out in the Addressing Climate Change Position Statement, and ask Officers to fully engage in the process for developing the full Climate Change Policy document and to report back to the Committee on a timely basis;

 

(c)          re-state its approval in principle to the changes set out in Annex 3 to the Governance Policy and Governance Compliance Statement and RECOMMEND to Council via the Audit and Governance Committee the corresponding changes to the Terms of Reference and Constitution of the Pension Fund Committee;

 

(d)          agree the delegation to the Services Manager (Pensions) the responsibility for exercising the new discretionary decisions as set out in paragraph 47 above, and the subsequent changes in the scheme of delegation to ensure it is consistent with the schedule of Administering Authority Discretions; and

 

(e)          note that no new changes have been made to the Scheme of Delegation and the Procedure for Reporting Breaches of Law to the Pension Regulator.

 

 

 

Prior to discussion on this item, in relation to Annex 2 – The Investment Strategy Statement - the Chairman read out a revised recommendation to the report PF13, which had been published on the Committee’s Addenda prior to the meeting. This was the outcome of discussions with the Chairman, the outgoing Deputy Chairman and the Opposition Spokesperson for this Committee and was a replacement for the current recommendation (b) on the Agenda. The recommendation, as read, was as follows:

 

‘approve the revised Investment Strategy Statement as set out in Annex 2, noting the changes as discussed in the report and

 

(i)           endorse the current approach and direction of travel as set out in the Addressing Climate Change Position Statement, including:

·         the integration of consideration of environmental and social risks, as well as good governance and stewardship into all decision-making processes

·         contributing to a more sustainable and resilient financial system

·         ensuring all portfolios across all asset classes are carbon and climate aware

·         decarbonising the listed portfolios, and developing measurable objectives and targets

·         accessing positive climate impact investment opportunities. such as the 35% investment in renewable energy funds within the infrastructure portfolio 

·         active engagement with the underlying companies through asset managers, engagement and voting specialists and collaborative forums with other investors

·         improving the transparency of reporting including carbon footprinting and fossil fuel exposure and the impacts of our engagements

 

(ii)          ask Officers to set up a Climate Change Workshop in the Autumn to discuss how to further develop the above approach and contribute to the Climate Change Policy being developed by Brunel, seeking participation from a wide range of stakeholders to ensure a balanced discussion; and

 

(iii)        note the view of Brunel that in light of the above approach, they do not consider a top down approach to divestment to be an appropriate strategy for its clients’.

 

Before discussion on the above, and consideration of the wider recommendations the Chairman invited the speakers to give their addresses:

 

 

 

 

Julia Spragg – on behalf of Fossil Free Oxfordshire (FFO)

 

Julia Spragg began by stating that FFO continued to be seriously concerned about the consequences of climate change, adding that this Committee had the power to make a real difference. She cited a press report in October 2015 which stated that:

 

-       the £2.9bn Environment Agency Pension Fund (EAPF) had become the first in the world to change its investment choices to help meet the internationally agreed target of limiting global warming to 2 degrees centigrade;

-       this move would include divestment of 90% of its coal assets and 50% of its oil and gas stocks by 2020;

-       the EAPF would also invest 15% of the fund in low-carbon energy, energy efficiency and other businesses that help tackle climate change by 2020 and it had already moved its £280m of global share investments to a low-carbon index;

-       the EAPF’s chief investment officer that said that the new policy was not a knee-jerk reaction but followed over a decade’s analysis of the financial risks posed by climate change.

 

She stated that it was the view of FFO that the Chief Finance Officer’s report at PF13 included ‘a litany of reasons why it was too difficult to divest from fossil fuels…and Brunel Pension experts apparently agreed. However, the Brunel Partnership offered an active and a passive equity fund that would allow the Committee to take a step towards reducing the risk to the Pension Fund posed by climate risk.

 

It was the view of FFO that there was a continuing trend within the Committee to delegate more and more to the Officers whose work in the beneficiaries’ interests was hugely appreciated. However, she urged the Committee not to delegate its fiduciary responsibility to the officers and ‘show some leadership’. All County Council members had voted to acknowledge that there was a climate emergency and to now accept Councillor Sander’s motion.

 

She added that the FFO believed that the evidence was very strong that moving towards lower investment in Oil and Gas companies did not result in financial jeopardy. To illustrate this she cited the 2018 annual report of the Environment Agency’s Pensions Committee in which the Chairman wrote that their Investment Strategy had delivered 9.7% investment returns over the last 5 years. She understood that the comparable figure for the Oxfordshire LGPS was 8.8% and quoted the Chairman of EAPC stating:

 

‘I am very pleased to report that we have met our climate change goals of decarbonising our equity portfolio through reducing our exposure to ‘future emissions’ for coal and oil and gas two years ahead of target. We have reduced both by over 90% with embedded emissions from coal reserves among active managers now reduced to zero’.

 

She urged the Committee to follow this example.

 

Jess Mallaghan and Xanthe Wells – students of Gosford Hill School

 

Both spoke about the lack of need for their mothers at the age of 26 to be concerned about threats to the climate, as they themselves would be. Both would be 26 in the year 2030 by which the Intergovernmental Panel On Climate Change (IPCC) stated that this was the year by which we must have reduced global emissions by 50%, to avoid ‘a terrifying future of floods, famines, droughts, civil unrest, hunger and a breakdown of civilisation’.

 

They thanked the County Council and expressed relief that OCC had acknowledged a climate emergency and had committed to taking action. It had given them hope to hear that change was happening and that the political will was there to stop this world disaster. However, they expressed concern that investments were still being made into fossil fuels, asking what did acting on climate emergency really mean to the Committee? They pointed out that companies like BP and Shell continued to spend money looking for new oil and gas to dig up. They added that in 2015, BP was the 11^th highest contributor to emissions taking a massive 1.53% of all global emissions and Shell was the 9^th highest taking an even higher amount of 1.67%’.

 

It was their view that even if those companies were being more energy efficient in the ways in which they mined and processed the oil, or even if they were investing a tiny percentage of their revenue in renewables, they were still spending billions of pounds looking for oil and gas. It was their view that ‘this would mean an irreversible chain reaction in 12 years, and game over for much of the life of our planet’.

 

They were therefore calling on the Committee, without political intention, to do its duty for future generations and to fight for a more sustainable and clean planet. They ended by urging divestment stating that ’if humanity was not secure first – what was the point of anything else?’

 

 

The Committee then considered the revised recommendation, as set out above.

 

Councillor Lygo spoke in favour of the revised recommendation pointing out that it was the Chairman, the outgoing Deputy Chairman and his own wish to gain a balance view from all stakeholders, including from Waltham Forest Council, who had themselves divested themselves of fossil fuels, from those Councils who had not divested, from representatives from young people, and from environment groups etc, in order for the Committee to decide on the future direction of travel, including how to monitor its progress. The Chairman agreed, adding that there was a fair degree of cross-party agreement on this.

 

Councillor John Sanders, spoke in favour of his motion to the Committee which was as follows:

 

‘In the light of the recent Motion in Full Council on 2 April 2019 to acknowledge a climate emergency, the Pension Fund Committee is called upon to instruct officers to investigate the best possible way it can divest itself of all fossil fuel investments (ie. the equity or bond of any company which derives more than 50% of its total turnover from the extraction and production of fossil fuels) as soon as is reasonably practicable whilst mitigating any impact on the value of the fund.’

 

He stated that the revised recommendation was a good step forward, but stressed that, in his view, the Committee had a fiduciary duty of care to look to the future, asking where were the council targets for reducing carbon by 2019/21 and who was driving it? He added that UK pension funds held in excess of 90% of the value of the country’s GDP and fossil fuel consumption which must be engaged with; evidence of this engagement should also be apparent too.

 

Following a discussion, Councillor Sanders’ motion was put to the vote and was lost by 3 votes to 7.

 

The Committee then proceeded to discuss the Chairman, Deputy Chairman and Opposition Spokesperson’s statement as set out above. Following amendments put forward by Councillors Stratford and Bartington, the following was AGREED (unanimously)(amendments shown in bold italics):

 

(a)       to approve the revised Investment Strategy Statement as set out in Annex 2, noting the changes as discussed in the report and

 

(iv)         endorse the current approach and direction of travel as set out in the Addressing Climate Change Position Statement, including:

·         the integration of consideration of environmental and social risks, as well as good governance and stewardship into all decision-making processes

·         contributing to a more sustainable and resilient financial system in alignment with the UN Sustainable Development Goals

·         ensuring all portfolios across all asset classes are carbon and climate aware

·         decarbonising the listed portfolios, and developing measurable objectives and targets

·         accessing positive climate impact investment opportunities. such as the 35% investment in renewable energy funds within the infrastructure portfolio 

·         active engagement with the underlying companies through asset managers, engagement and voting specialists and collaborative forums with other investors

·         improving the transparency of reporting including carbon footprinting and fossil fuel exposure and the impacts of our engagements

 

(v)          ask Officers to set up a Climate Change Workshop in the Autumn to define timescales, milestones and reporting mechanisms for the above approach and to contribute to the Climate Change Policy being developed by Brunel, seeking participation from a wide range of stakeholders to ensure a balanced discussion; and

 

(vi)         note the view of Brunel that in light of the above approach, they do not consider a top down approach to divestment to be an appropriate strategy for its clients.

 

 

(b)  In relation to Annex 3 – the Governance Policy and Governance Compliance the Committee discussed the proposal put forward by the Local Pension Board at its last meeting that consideration be given by the Committee to mandating attendance by Committee members at certain training events. During discussion of this proposal, the Committee considered that a form of mandatory training was desired, however, that further thought was required and investigation carried out into this matter. It was therefore AGREED to refer these changes to the next meeting of Committee in September following further work;

 

(c)  to APPROVE the revised policy documents as set out in Annexes 1, 4, 5 and 7, noting the changes in the documents as discussed above;

 

(d)  AGREE the delegation to the Service Manager (Pensions) the responsibility for exercising the new discretionary decisions as set out in paragraph 47 above, and the subsequent changes in the scheme of delegation to ensure it is consistent with the schedule of Administering Authority Discretions; and

 

(e)  note that no new changes have been made to the Scheme of Delegation and the Procedure for Reporting Breaches of Law to the Pension Regulator.