Agenda and minutes

To agree the procedures for the operation of hybrid meetings.

RESOLVED –

THAT the Council’s procedure rules for hybrid meetings be agreed.

Apologies for absence were received from Councillors Heather Johnson, Jenny Mulholland, Will Prince and Gio Spinella.

Apologies for lateness was received from Councillor Shiva Tiwari.

There were none.

Broadcast of the meeting

The Chair to announce the following: ‘In addition to the rights by law that the public and press have to record this meeting, I would like to remind everyone that this meeting is being broadcast live by the Council to the Internet and can be viewed on our website for twelve months after the meeting. After that time, webcasts are archived and can be made available upon request.

If you have asked to address the meeting, you are deemed to be consenting to having your contributions recorded and broadcast, including video when switched on, and to the use of those sound recordings and images for webcasting and/or training purposes.’

Any other announcements

Broadcast of the meeting

The Chair announced that “In addition to the rights by law that the public and press have to record this meeting, he reminded everyone that the meeting was being broadcast live by the Council to the Internet and could be viewed on the website for twelve months after the meeting. After that time, webcasts were archived and could be made available upon request. 

? 

If you were seated in the Chamber or participating via Teams, you were deemed to be consenting to having your contributions recorded and broadcast, and to the use of those sound recordings and images for webcasting and/or training purposes.”

Requests to speak at the Committee on a matter within its terms of reference must be made in writing to the clerk named on the front of this agenda by 5pm two working days before the meeting.

There were none.

There were none.

To approve as a correct record the Minutes of the meeting of the Pension Committee held on 5th December 2022.

RESOLVED –

THAT the minutes of the meeting of the Pension Committee held on 5th December 2022 be approved and signed as a correct record.

Report of the Executive Director Corporate Services

This report presents the performance of the Pension Fund investment portfolio and that of the individual investment managers for the quarter ended 31 December 2022.

Consideration was given to the report of the Executive Director Corporate Services.

The Committee noted the performance of the Camden Pension Fund investment portfolio and the individual investment managers for the quarter ended 31 December 2022.

The Committee noted in particular that:

·       There had been modest increases in equity markets and falls in other asset classes including those such as property and private equity that had previously outperformed.

·       Rate rises and inflation had continued around the world though there were increasing expectations that inflation had now peaked. Bond yields in the U.K. were now back to normal following recent government budgetary upset.

·       Real assets had begun to fall in value after strong showings in previous quarters. Property and commodities remained very volatile with increasing evidence of a slowdown in British house prices, and in global commercial property. Commodity prices also remained very volatile.

·       Table 2 in the report provided the value of the assets held by each investment manager. The portfolio had a market value of £1.88bn as of 31 December 2022, which represented a decrease of 0.19%, or £3.6m over the quarter.

·       Table 3 – Asset class allocations within the funds relative to different asset targets. These were increasingly close to the target allocation and the proportion of assets held as cash reduced again this quarter.

·       Table 7 showed the individual investment manager returns and performance over the past year. The Fund was 3.7% behind the target for the quarter and 8.9% for the year, which the Pension Fund Accountant said was disappointing. The Equity Manager Harris was best performing for this quarter of the year, whereas Baillie Gifford had a particularly poor 12 months. Among other managers the London CIV Real Asset Long Income Fund managed by Aviva and the Multi Asset Credit Fund managed by CQS and Pimco contributed negative returns over the year and over the quarter.

·       With regards to the carbon footprint of the fund the overall carbon footprint had remained much the same as the last quarter, remaining at 2.3% of assets invested in fossil fuels, and fund exposure to the carbon underground 200 index of companies had fallen slightly from 1.55% to 1.33% this quarter.

Karen Shackleton, Independent Investment Advisor, highlighted the salient points as follows:

London CIV - Baillie Gifford as mentioned previously had been having problems. It had underperformed Harris this quarter by 5.12% for the quarter and also trailed the MSCI World Growth Index for the quarter by 4.77%. Over 1 year they trailed their target by a considerable amount. She informed the Committee that she was surprised that the London CIV had not had this manager under enhanced monitoring because they had a 1- and 2-year trailing return of 15%. She was meeting with the manager next quarter to carry out high level due diligence to get more detail on the performance issues. She was of the view that the main reason for the underperformance was that the growth index underperformed the value index. The growth index returned 4.77%  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services.

This report reviews the proxy voting carried out on behalf of the Pension Fund in 2022 for all shares directly owned by the Fund. Camden Pension Fund’s voting is carried out by Pensions & Investment Research Consultants Ltd (PIRC).

Consideration was given to a report of the Executive Director Corporate Services

The report reviewed the proxy voting conducted on behalf of the Pension Fund by PIRC (Corporate Governance Advisor) in 2022 for all shares directly owned by the Fund.

It also analysed the voting data in terms of regions, meeting types, categories of resolutions, as well as looking at trends and hot topics for voting during the year. Some of the key headlines highlighted in Appendix A by Francesco Navarrini Head of Research (PIRC LTD) were:

·       The fund voted on just under 10,000 resolutions in 2022 (9,941) at 683 meetings – a similar volume to 2021

·       91% of the meetings were in the UK, 4.1% in Europe and 3.2% in North America

·       The Fund voted for resolutions 7,002 times (70%) and opposed 2,913 votes (29%). The votes for were down on 2021 (74%).

·       In the UK, the Fund voted against 19% of director resolutions and outside the UK voted against 37% of directors.

·       A considerable number of vote recommendations against directors in 2022 had occurred where the chair of the sustainability committee, or the chair of the Board in their absence, had failed to ensure that adequate attention and supervision was given to sustainability issues, usually but not limited to a lack of or insufficient level of board oversight or company reporting and disclosure.

·       The escalation on opposing the Chair of Sustainability Committee ensured that the Fund could hold the designated board accountable for the governance of sustainability which was positive news.

·       In the UK, the Fund opposed 57% (279 out of 491) of remuneration reports. Overall, the level of opposition from shareholders on remuneration policies increased compared to the previous year with 24 companies receiving significant opposition (10% of the votes).

·        In 2022 out of 251 FTSE-350 companies 188 had a CEO pay ratio higher than the PIRC policy proposed 20:1, or 75% of companies. There were 63 companies that had a CEO pay ratio lower than the proposed 20:1 (25%). Across all remuneration votes the Fund opposed 454 out of 805 votes (56%).

·       The Fund opposed 67% (333 out of 500) of auditor appointments in the UK. There was an increase in the number of auditor resolutions which Camden supported when compared to the previous year. 2021 and 2022 saw significant auditor rotation, leading to an improvement in the average tenure length of auditors.

·       Gender diversity was one area that had shown significant consistent improvement since 2015, following the Davies and Hampton-Alexander reviews.

·       Camden opposed the chairs of nomination committees where female representation was below 33% or no statement was given committing to the target. Since 2018 the overall percentage of women in FTSE350 boards had risen overall from 26% to 38% during the year under review. The Hampton-Alexander review set out three main aims in 2016:

·       To comprise of at least 33% women on boards by 2020. For the first time since that report, the FTSE350 in aggregate fully adhered to and exceeded the recommendations of  ...  view the full minutes text for item 9.

Report of the Executive Director Corporate Services.

This report sets out the proposed guidelines and forms the policy on which Camden will submit proxy voting on shares held in the Camden Pension Fund.

Consideration was given to a report of the Executive Director Corporate Services

The report set out the proposed guidelines and formed the policy on which Camden would submit proxy voting on shares held in the Camden Pension Fund.

The Fund appointed PIRC as corporate governance advisor in November 2013 to review company voting resolutions and execute the proxy votes of the Fund in accordance with its policy. The policy was last reviewed in March 2022 to take account of changes in the shareholder voting environment and PIRC’s revised remuneration scoring. As with the previous year, the proposed 2023 voting policy also fully incorporated the Local Authority Pension Fund Forum (LAPFF) voting guidelines, which the Fund was an active member of.

The proposed voting policy was attached at Appendix A to the report. It encompassed the Fund’s investment beliefs ensuring transparency and key points of the corporate code and good corporate governance, which included board structure, remuneration, climate change and management of ESG issues. Members noted that there were three policies covering the UK and Ireland (page 97 onwards), global policy (page 119 onwards), US policy (page 134 onwards).

It was also noted that very few changes were proposed from last year. The key changes were highlighted on pages 93,94 and 95 of the report relating to over boarding, non-independent members and the CEO or highest paid officer of the company’s remuneration.

The following responses and comments were provided to Committee members questions:

·       The CEO’s pay was not included in the calculation of the employees pay.

·       The fund did not vote in opposition where the gender pay gap was deemed to be too excessive although the gender pay gap was reported on.

·       In terms of whether there were any proposals to include this in the voting policy, proposals relating to the gender pay gap would need to be looked at in more detail as to how this could be challenged and made realistic.

·       In terms of the 90% meeting attendance requirements, there was no distinction Committee members and Directors, all were required to meet these criteria.

·       PIRC had looked into how better reporting could be provided by companies on the ethnic makeup of boards, to provide this information would require more understanding, knowledge and information of how companies self-assess ethnic background information and the level of safety that could be attached to the information provided. Ethnic background information was also a controversial issue in continental Europe.

·       In relation to whether the climate emergency was being taken seriously and the proposals were radical enough to encourage companies to give this due regard, there was movement and developments behind the scenes which were considering these issues.

·       Some of the issues being considered was whether the Chairs of Companies and Boards responsible for the Climate Strategy had the right skills to deliver the targets set. Also, to look at the position/policy of companies on net zero emissions, decarbonisation and environmental sustainability.

·       A number of actions that could be implemented quite quickly, include to  ...  view the full minutes text for item 10.

Report of the Executive Director Corporate Services.

This report brings Members up to date with engagement activity undertaken by the Fund and on its behalf by LAPFF (the Local Authority Pension Fund Forum) since the last Committee meeting.

This work is important to the Fund’s ambition to be a fully engaged investor and demonstrates its commitment to Responsible Investment and engagement in Environmental, Social and Governance (ESG) issues as the Fund works to maximise returns on investment.

This report has an appendix, which contains information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and is not for publication. The appendix has, therefore, been circulated to Committee Members only.

If the Committee wishes to discuss the contents of a closed exempt appendix it may pass the proposed resolution identified at the end of the agenda to exclude members of the public and the press from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services.

The Head of Treasury and Financial Services informed the Committee that this was a regular report presented to Committee Members updating them with engagement activity undertaken by the Fund and on its behalf by LAPFF (the Local Authority Pension Fund Forum). This work was important to the Fund’s ambition to be a fully engaged investor and demonstrated its commitment to Responsible Investment and engagement in Environmental, Social and Governance (ESG) issues as a way to achieve its objectives.

He also highlighted that:

·       At the last business meeting on 25^th January 2023 the Israeli-Palestinian conflict was raised and the various risks companies operating in the Occupied Palestinian Territories incurred, and how far such risks undermined the business operations of those companies in the context of allegations of human rights abuses.

·       The draft LAPFF workplan sets out a range of current and anticipated company and policy engagement areas for the coming year. LAPFF members were asked to feed back any thoughts on this draft work plan proposed by the Executive.

·       Those comments would be collated reviewed and made to the executive in March.

·       LAPFF set out in detail how they intended to spend their time on the workplan.

Alan MacDougall (PIRC LTD) informed the Committee that the model of engagement adopted by the LAPFF was a very sophisticated model which took into account all sorts of factors for example on the work on Brazil, this was first organised to introduce the model of collecting the views of local communities affected by the dam breaches and made it a point that whenever they met Asset Managers to ask them what kind of engagement was done with community representatives. The majority answer was none and in relation to a question about what notice they took of the views of employees, it was relatively few that took any notice.

The following responses were provided to members questions

·       It was agreed that the background details on Drax would be sent to members.

o   ACTION BY: PIRC Managing Director

·       More details on Drax were covered in a report at the last Pension Committee meeting.

·       Committee members were welcome to go on the mailing list for the quarterly reports. The LAPFF chair also does a weekly update which provided current up to date information. It was noted that the LAPFF Newsletter was included on the Pension Committee agenda.

·       In relation to Amazon, and its tax transparency the lead on shareholder resolution was the Greater Manchester Pension Fund, which was a Perth initiative rather than a LAPFF initiative. There were 15 shareholder resolutions on the Amazon AGM last May with more resolutions likely this year.

RESOLVED -

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services.

Climate Action is one of the principal Investment Beliefs of the Pension Fund. The Fund and Council recognise that we are facing a climate and ecological crisis. The Council must do everything possible to limit the impact of climate change whilst protecting and enhancing our natural environment.

Carbon footprints measure the carbon equivalent tonnage of greenhouse gases which impact on global warming within the portfolio. The Fund is concerned about climate change and how this might impact investments. This report updates on the Carbon Footprint of the Pension Fund’s equity assets and also presents information on other asset classes.

Consideration was given to a report of the Executive Director Corporate Services.

The Head of Financial Services and Treasury Management informed the Committee that:

·       The report set out how important the journey to net zero was for the Council and the Fund and this was embodied in the Council’s investment beliefs

·       Camden had been reporting on its carbon footprint for the last 6 years. This year the CIV’s Climate Analytics Service had been used which provided more detail.

·       It helped understand the journey to decarbonise the fund, become more sustainable and transition to net zero.

·       The analysis presented would make the fund TCFD compliant. These helped to build awareness of the risks, manage those risks, inform the decision making and consider new products.

Gustave Loriot, Responsible Investment Manager London CIV attended the meeting and informed the Committee that:

·       Over the past 2 years London CIV had worked to develop inhouse processes and tools in order to estimate climate performance metrics for funds on the CIV pool and also in funds that clients were invested in off the pool.

·       This analysis only covered public market funds.

·       The Climate Risk Dashboard on page 222 of the agenda provided a summary of the high-level climate performance matrix that were calculated across the funds that were analysed

·       The aggregate carbon intensity of the Fund’s holdings was 429.1 tCO2e/mGBP – not including, the funds outwith the scope of the CIV’s Climate Analytics work. This translated into an implicit temperature rise of between 2.5 and 3^oC – that was, more than was aimed for in the Paris Agreement. The largest single contributor to carbon intensity was the LGIM Global Equities fund

·       Among the equity managers, Harris had substantially the lowest carbon footprint, and the lowest WACI, although individual emitting stocks remained. Baillie Gifford had a much-reduced footprint, being in the Paris-aligned version of the product, but here scope 3 emissions complicate the picture, and raise the footprint above that of the benchmark. The LGIM Future World demonstrated a pleasingly low footprint, and speaks to the efficacy of LGIM’s stock selection criteria within their passive mandate.

·       Many of the non-equity managers continued to take steps to report their footprints and think about how they ensured their underlying investments or managers (for funds of funds) started to mobilise in order to track this data, although there is still some way to go before all assets in the portfolio can be footprinted in a comparable way.

·       While the Climate Analytics reports represent a big step forward in the Fund’s ability to report comparatively on many of its assets, in the future it would be desirable to bring all elements of the Fund’s assets under this umbrella. Some of the smaller fund managers still had work to do in order to bring their reporting into line with TCFD standards, however.

Members commented that it was a really interesting report and were happy that it had been done.

The following response was provided to members questions.

·       With regard  ...  view the full minutes text for item 12.

Report of Executive Director Corporate Services.

The Pension Fund is required to produce an Annual Report under the Local Government Pension Scheme Regulations 2013. This report presents the 2021/22 Annual Report to the Pension Committee.

Consideration was given to a report of the Executive Director Corporate Services.

The Pension Committee was reminded that the Pension Fund was required to produce an Annual Report under the Local Government Pension Scheme Regulations 2013. This report presented the 2021/22 Annual Report to the Pension Committee.

The Committee noted that the Annual Report pulled together many of the reports and statements the Fund produced and was a good source of information on key matters about the Fund. The individual statements included in the Annual Report had been revised where appropriate, and the versions in this Annual Report would be adopted and taken forward as the current version. These included:

§     Governance Compliance Statement

§     Funding Strategy Statement

§     Investment Strategy Statement

§     Communications Policy Statement

§     Risk Register

The Committee was informed that:

·       The report also included the 2021/22 Pension Fund Accounts, which would be audited by Mazars. The Council’s auditors would issue an opinion on the accounts included in the Annual Report.

·       The audit had not commenced due to national issues on the Council’s main accounting statements for 2019/20 and 2020/21 which had delayed the preparation and auditing of 2021/22 accounts. Therefore, the report was subject to any amendments identified during the audit process, and the report was pending the inclusion of the auditor’s report.

·       At the time of writing there were no further amendments or issues expected from the audit. Were any to be received they would be reported back to the Committee, as necessary.

·       It was noted that these were draft accounts and subject to audit.

·       The Annual Report would be published on the Council’s pension fund website with the caveat that the accounts were still subject to audit and will be reissued once the final audit opinion had been received.

o   ACTION BY: Executive Director Corporate Services

·       The Committee delegated authority to the Executive Director Corporate Services in consultation with the Chair to sign off the final Pension Fund Annual Report once the Council’s Auditors had issued their opinion on.

          ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT,

subject to the accounts being finalised, the 2021/22 Pension Fund Annual Report be approved, as attached at Appendix A.

Authority be delegated to the Executive Director Corporate Services in consultation with chair to sign off the Pension Fund Accounts 2021/22.

ACTION BY: Executive Director Corporate Services

Report of the Executive Director Corporate Services

This report presents the individual results of all employers in the Fund as assessed by our actuary Hymans Robertson.

Consideration was given to a report of the Executive Director Corporate Services.

The report presented the individual results of all employers in the Fund as assessed by the Council’s actuary Hymans Robertson.

To date 24 employers had confirmed their new contribution rates and officers were engaging the remaining 2 employers (both charities) to confirm their contribution rates. The Executive Director Corporate Services had responsibility for agreeing final valuation results and employer contributions.

Appendix A set out the draft actuary’s assessment of the contributions due from each of the employers over each of the next three financial years and the draft valuation report.

The Fund must obtain a rates and adjustment certificate which includes the final results of all employers. This included a primary (future service costs) and secondary (deficit recovery) contribution rate for each employer in the Fund. Officers and advisers were presently working towards achieving this.

Once a set of final contribution rates had been agreed for all employers Hymans would issue a final valuation report with the official rates and adjustments certificate detailing individual employers’ contributions. The LGPS regulations stipulate that this must be issued by 31 March 2023.

This was the first time the rates had been presented to Committee and had been included for transparency.

The Chair commended officers for their transparency.

RESOLVED -

THAT the contents of the report be noted.

At this point in the proceedings the Committee agreed to adjourn for 5 minutes for a comfort break.

Report of the Executive Director Corporate Services.

This report provides a quarterly update on developments at the London Collective Investment Vehicle (CIV) in creating sub-funds for the spectrum of asset classes, on-boarding of assets and development of the CIV’s staff resource. Progress with the London CIV contributes to the Government’s pooling agenda and drive to reduce costs in the Local Government Pension Scheme (LGPS).

Consideration was given to a report of the Executive Director Corporate Services.

This report provided a quarterly update on developments at the London Collective Investment Vehicle (CIV) in creating sub-funds for the spectrum of asset classes, on-boarding of assets and development of the CIV’s staff resource. Progress with the London CIV contributed to the Government’s pooling agenda and drive to reduce costs in the Local Government Pension Scheme (LGPS).

It was noted that:

·       The Royal Borough of Kensington and Chelsea intended to leave the pool and must give notice by the end of March 2023.

·       A shareholder exiting the Pool may lead the CIV to make changes to the existing Pension Guarantee Agreement and Pension Recharge Agreement. Informal briefings to shareholders will take place on an ongoing basis.

·       The UK Housing Fund had received FCA approval and was expecting its first subscriptions in March 2023. The CIV had shared analysis of the 16 public funds (ACS structures). This shows that 19% of funds were beating target over the one-year period and 31% since inception. Of those 16 funds 3 had “enhanced monitoring” and none were “on watch”.

·       One of those in enhanced monitoring invested in by Camden Pension Fund was the Bailie Gifford Diversified growth fund. CIV concerns and action points had been shared with Baillie Gifford and a further in-depth review would take place within six months.

RESOLVED –

THAT the contents of the report were noted.

Report of the Executive Director Supporting Communities.

This report sets out items scheduled for future agendas of this Committee together with a record of training/ meetings attended and a list of future training opportunities.

Consideration was given to a report of the Executive Director Corporate Services.

The Committee noted the items scheduled for future agendas of this Committee together with a record of training/meetings attended and a list of future training opportunities.

The Head of Treasury and Financial Services informed members that he had recently completed the Pension Regulator survey which had specifically asked about Member skills, knowledge and training.

He reminded members that It was important that they prioritised training via the Hymans online portal. Informing members that other topics covered included Scheme governance, risk management, record keeping, annual benefit statements, reporting breaches, pensions dashboards, climate change, tPR codes of practice and enforcement, and equality and diversity.

The Chair and Councillor Burrage confirmed that they had started the Hymans training and encouraged other members to do the training.

Members also requested that the Investor belief workshop should be included as an item on a future Pension Committee agenda, aligning this with wider member training. Members were also asked to think about other areas which they felt required a deep dive into.

A member pointed out that there had been no retired observer or GMB observer on the Committee for at least a year. The Chair and Head of Treasury Management and Financial Services confirmed that this was being looked into.

RESOLVED –

THAT the contents of the report be noted.

The next meeting of the Pension Committee will be held on Monday 24^th July 2023.

24^th July 2023.

There were none.