Agenda and minutes

Apologies for absence were received from Councillor Shiva Tiwari.

Apologies for lateness was received from Councillor Heather Johnson.

There were none.

Webcasting

The Chair announced that the meeting was being broadcast live to the internet and would be capable of repeated viewing and copies of the recording could be made available to those that requested them. Those seated in the Chamber were deemed to be consenting to being filmed. Anyone wishing to avoid appearing on the webcast should move to one of the galleries.

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 was no urgent business.

To approve as a correct record the Minutes of the meeting held on 4^th December 2023.

RESOLVED –

THAT the minutes of the meeting of the Pension Committee held on 4^th December 2023 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 2023.

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

The Head of Treasury and Financial Services introduced the report which outlined the performance of the Camden Pension Fund investment portfolio and the individual investment managers for the quarter ended 31 December 2023.

Karen Shackleton, Independent Investment Advisor, provided the committee with an overview of her comments on the financial markets and provided detail on the performance of the individual Investment Managers, as set out in Appendix A to the report.

Responding to a question about whether the fund was well positioned to meet the inflationary challenges, the Independent Investment Adviser informed the Committee that the inflationary situation had changed with the economy not in as high an inflationary situation as it was 6 to12 months ago. The London CIV – Real Estate Long Income Fund – Aviva which had been linked to inflation had consistently delivered a return of 7 to 8% per annum. Even with a lower inflation rate there was no reason the fund would not be able to deliver reasonable returns which made it comparable with some other secure income asset classes the fund was investing in. The Head of Treasury and Financial Services also commenting on inflationary challenges advised that the yearly annual commitments of the fund were quite high, inflation would have to stay high for a very long time to impact the fund. It was about how the Actuary valued all the liabilities in the next triennial evaluation period.

Also commenting on inflationary challenges, the Isio Investment Consultant explained that there were two types of inflation, current inflation which had been highly publicised in the news which was previously 10-11% and had now fallen to 4%. The way this affected the fund, was the actual amount of pension that needed to be paid in pounds, when inflation went up this increased the amount of pension that needed to be paid which was a cash flow issue. The more pressing issue for the fund related to longer term inflation which would increase the liability value of the fund. The impact would be more severe where the liabilities were based on a longer-term period of inflation.

Answering further Committee members questions, the Independent Investment Adviser and Isio Investment Consultants provided the following information:

·       With regards to the change at Baille Gifford, the new ESG partner was well respected and considered to be a positive appointment, who would have a consistent view across all their funds.

·       With regards to Partners, it was the right decision not to increase the allocation at the moment because they were currently struggling in comparison to other global property managers who appeared to be doing a better job. Other global property managers were also struggling as the property cycle had contracted. It was hoped that the partners view was correct that things would start improving.

·       Although the performance of the Student Accommodation Fund was mentioned in their report when it came through, as pointed out this was not  ...  view the full minutes text for item 7.

Report of the Executive Director Corporate Services.

This report builds on the Investment Strategy review that was agreed in July 2023 by this Committee and the infrastructure allocation of 4% (£76m). Two sub-funds are offered by the London CIV, the Infrastructure fund and the Renewable Infrastructure fund, and these have been appraised compared to the Fund’s investment expectations.

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 the report of the Executive Director Corporate Services.

The Head of Treasury and Financial Services introduced the report, informing the Committee that following the Investment Strategy Review in July 2023, and the Committee’s agreement to invest in the Affordable Housing Sub Fund, ISIO, Investment Consultants had been tasked with considering CIV’s two infrastructure Sub funds and asked to make a recommendation about which one to select to meet the fund’s investment strategy review requirements.

Isio Investment Consultant, Andrew Singh took the committee through the key elements of appendix A of the report, highlighting that pages 72 and 73 compared 8 key aspects of the two funds, and in their view the LCIV Infrastructure Fund came out top in 6, with 1 aspect being even, while 1 favoured the LCIV Renewable Fund relating to fund size and diversification. Page 75 provided a summary of each fund the pros and cons of how they compared to each other and the recommendation was that on balance the LCIV Infrastructure Fund was a more balanced investment and should be selected for investment.

Invited to comment on Isio’s recommendation, Sahil Arora London CIV Investment Analyst, Private Markets Team, agreed with the recommendation informing the Committee that a lot of time had been spent on the process and the information provided was an accurate reflection of the two sub funds.

Responding to questions the Isio Investment Consultant provided the following information:

• With regards to the Infrastructure Fund investing in renewable energy and having the same greenfield impact as the Renewable Fund investment, the Infrastructure Fund was more focussed on core traditional infrastructure and the greenfield impact would have a slightly lower return while the other element would have a slightly higher return.
• With regards to 40% of the portfolio invested in renewables, it was not expected that the allocation to renewables would grow over time because Stepstone indicated that they had a broad mandate to allocate where they believed they could get the best risk return, however they had indicated this could change if the Pension Fund requested it.
• It was a process of collaboration and understanding exactly what the investors wanted going forward. Whilst also conscious of the risk return dynamics, across different sectors and how that created a balanced portfolio.
• Renewables would probably be the highest exposure from a sector perspective but the plan was to keep it at the 40% level and create a diversified portfolio.
• The Synchronous Condenser was like a huge spinning pipe similar to the camshaft in a car, that spun continuously adding inertia to a grid to stabilise the fluctuations in power and energy. Infrastructure managers liked them because they had 100% CPI inflation linkage.
• With regards to the power and utility mix under the Stepstone mandate, it was more the main utilities such as water and the transmission and distribution side of the network. With regards to the power side there was no investments in oil and gas.
•  With regard to power it was  ...  view the full minutes text for item 8.

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.

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 to promote good governance and behaviour in environmental and social issues.

He also highlighted that:

·       Table 1 of the report highlighted engagement during the quarter.

·       Table 2 analysed the United Nations Sustainable goals.

·        At the business meeting in January 2024, items discussed included climate strategy, UK climate policy, carbon capture and storage, capital markets and double materiality.

·       Next year’s LAPFF work plan was tabled for Committee members comments.

·       Representatives from PIRC were in attendance to provide further information on the work.

Alan MacDougall Managing Director Pensions and Investment Research Consultants (PIRC LTD) and Janice Hayward Client Services Director (PIRC) provided the Committee with the following information;

·       A new area of engagement activity had been opened up which focussed on the supply chain in the luxury goods sector, considered employee conditions, best practices and adherence to statutory arrangements.

·       The relationship between the supply network and chains in the sector was variable, going from very good to very poor reflecting that the pressure on the sector had not been particularly strong over the recent growth of ESG focus on the sector.

·       Councillor Johnson (Vice Chair) had attended a number of engagement meetings in the sector on behalf of the LAPFF executive and it was hoped that concerns she would raise would be incorporated into future reports.

·       It was also important that investors focussed on standards expected from the sector. For example, some companies required suppliers to formally commit to applying high ethical standards and to upholding human rights. Compliance of these standards were measured by workforce related audits. An interesting focus of discussions with these companies in the future would be questions around the standards applied, how these were monitored and implemented.

·       A decision was taken at a previous meeting to review the climate policy, LAPFF’s approach to climate policy had been updated to maximise impact and competitiveness. This involved considering it from the perspective of a long-term investor interested in reducing risks and strengthening growth and competitiveness.

·       Concern that recent actions such as the removal of key long term targets risked undermining the UK’s international business reputation and the confidence of investors making the UK a less attractive place for investment, affecting its long-term competitiveness.

·       In relation to the green finance agenda, a clear implementation plan had been approved at the LAPFF business meeting in January. The next stage was to consider the kind of implementation from this policy approach and then the practical application of the plan.

Council Johnson updated the Committee on LAPFF engagement activities she had been involved in, commenting that it had been interesting and useful engaging with companies such as Caring and was due to engage with Louis Vuitton next week. Caring (company based in France) provided information on  ...  view the full minutes text for item 9.

Report of the Executive Director Corporate Services.

This report reviews the proxy voting carried out on behalf of the Pension Fund in 2023 for all shares directly owned by the Fund. The 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 2023 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 Gocke Cavusoglu PIRC Senior Researcher (PIRC LTD) were:

·       The Fund voted on 10,605 resolutions during the year (9,941 in 2022) at 679 meetings.

·       90.3% of the meetings were in the UK, 5.9% in Europe and 3.1% in North America

·       The Fund voted “for” resolutions 7,161 times (68% down from 70% in 2022) and opposed 3,444 votes (32%).

·       In the UK the Fund voted against 597 or 16% of director resolutions and outside the UK voted against 37% of directors.

·       In the UK the Fund opposed 57% (164 out of 287) remuneration reports

·       The Fund opposed 70% (365 out of 525) auditor appointments in the UK.

·       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.

·       It was noted that women were still under-represented in senior leadership roles at the executive level, showing that there was still scope for improvement. It was hoped that gender balanced boards would become the new norm.

·       Gender pay gap - in OECD countries the average gap was 11.9% between men and women. In Office for National Statistics estimates that in 2022 it was 8.3%. PIRC calculate that in the FTSE 350 the gap was 17.6% and in S&P 500 companies it was 19%.

·       Appendix A further examined director skillsets and concluded that there were concerns that there was insufficient ESG experience on FTSE 350 boards.

·       Directors with Social, Environmental, and Climate experience made up 5.45%, 3.09%, and 1.24% of the total number of directors analysed. Therefore, there were concerns that companies do not take ESG issues as seriously as industrial or financial issues and were not nominating directors adequately skilled to oversee the various ESG programmes that the majority of FTSE 350 companies were implementing.

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

·       The general independence criteria were set out on page 151 of the agenda appendix A attached to the Voting Policy report.

·       With regards to the ratio of the CEO to employee pay. This was calculated by dividing the salary of the CEO by the average salary of full-time employees. It was considered that a 20:1 ratio was acceptable within the UK remuneration structure, while the USA was higher 150:1 because it started from a higher  ...  view the full minutes text for item 10.

Report of the Executive Director Corporate Services.

This report sets out the proposed guidelines and forms the policy on which the Fund will vote its shares held in underlying investments.

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

Most of the discussion on this item had been covered under item 10 (Voting Annual Review).

A Committee member commented that a lot of detailed work had gone into this, each suggestion appeared to be really important and was supportive of the additional suggestions.

The Chair commented that he was pleased with the work done in relation to the Parker review and on economic growth and social development goals (SDG) in the workplace, noting that there were improvements and the Committee should be proud of the work, thanking the PIRC also for their work.

Resolved:

That the voting policy be approved as set out in appendix A to the report.

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. We 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 and bond assets.

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

The Head of Financial Services and Treasury Management introduced the report informing the Committee that this was the second year that CIV’s climate analytic reporting was being used although the fund had been reporting the carbon footprint for 8 years. He provided an outline of the report.

Jacqueline Jackson, Chief Sustainability Officer, and Kain Bairns Responsible Investment Analyst, London CIV attended the meeting and provided a brief overview of their report pages 251-350 of the agenda. Key points were made as follows:

• The report covered the metrics and targets recommended by the Task Force on climate related financial disclosures which was based on the 4 pillars of governance, strategy, risk management and metrics and targets.
• Appendix A Table 2 on page 253 provided an overview of the whole fund within the direct and 1^st tier indirect carbon intensity, which showed slightly higher carbon emissions at 83.4 tonnes this year compared to 81 last year.
• Scope 3 footprint had also increased to 562.7 tonnes of carbon emissions compared to 429 last year.
• This did not necessarily represent an environmental deterioration of performance by the Pension Fund.
• The benchmark for scope 3 emissions had increased across the board, there was improved measurability, improved transparency as well as companies getting much better at tracking and reporting on scope 3 emissions.
• The implicit temperature considered the absolute carbon footprint only whereas intensity metrics looked at the carbon footprint as a proportion of the revenue.
• The nature of the Diversified Growth Fund (DGF) being invested in smaller companies meant that the carbon footprint relevant to revenue to value for some businesses could be quite high but the absolute footprint could remain low and that was why it was performing well on implicit temperature basis.
• Some Fund Managers exhibiting less positive performance were the CQS and Pimco Mac Fund which had high carbon intensity and the Paris Alignment Fund which was due to their exposure to energy in the industrial sectors.
• 9 out of 10 top contributions to the significant scope 3 emissions where from the Pimco portion of the fund.
• CIV had engaged with Pimco about the general climate performance of their fund who had since introduced carbon attribution tools to change their carbon intensity.
• The type of engagement with fund managers about their carbon emissions leading to real change had been facilitated due to conversations with clients who understood some of the nuances behind fund performance.

The Chair thanked London CIV for making the information available as part of existing fees and charges, noting that the reports were very detailed and difficult to understand and wondered if a shortened version could be provided for future reports.

The following response was provided to members questions.

• The intensity metrics, such as carbon to value, carbon to revenue, average carbon intensity helped identify the less efficient companies to target as well as companies that were performing well.
• In terms of the longer-term trajectory, the  ...  view the full minutes text for item 12.

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).

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 Management and Financial Services introduced the report informing the Committee that it provided an update on developments at the London Collective Investment Vehicle (CIV) including the general meeting held in January and introduced Dean Bowden, Chief Executive Officer, London CIV who was in attendance.

Dean Bowden provided the Committee with an update on developments at London CIV, highlighting that:

He had joined the organisation in November 2022, spending some time prior to joining and during his first 2 months to understand the business internally and externally, then producing a report which outlined areas where it was felt work was required to deliver to the expectation required of the business.

An immediate change which took place to make the business relevant was increased engagement with clients, which occurred by him personally meeting all clients every 6 months. He was now on his second round of doing this and intended to continue.

The business had changed to a much more client driven approach. Two new products had been recently launched driven by client demand rather than London CIV driven which represented a change in the organisations approach.

Getting sign off of shareholders and the board to change the business purpose statement to ‘Drive down the cost of LGPS’ which ultimately meant reducing the cost of LGPS for each of the boroughs, with the ability to invest the savings elsewhere.

As part of service provision reports such as Carbon Footprint, Task Force for Related Financial Disclosures (TCFD) would continue to be provided without any additional cost to the client.

The year had been very successful compared to the previous year based on doubling the amount of pooling and new assets into the pool and £2.4million of extra savings.

The actions the organisation had taken to achieve savings made would be used to measure success and reported on every year.

With regards to maturity, CIV’s tier one capital was deemed not to be regulatory compliant which meant the Financial Conduct Authority (FCA) could close down the business. This had now been resolved which meant the organisation could provide more services such as provide a discretionary advisory service.

The business was being remodelled, governance had been reviewed and the board had reduced in size from both an executive and non-executive perspective. Time had been spent on getting the right roles and right functions in the right places, with a succession plan also being worked on.

Increased consultation and engagement on major issues within the community of LGPS for London had created general consensus across funds and pools.

Some of the new things coming based on engagement and client led demand were Nature Based Solutions, Global Equity Value and Private Debt as well as a Property Advisory Service.

The funding model was being looked at with the ultimate aim to make it as equitable as possible to have fees for work done rather than having fixed fees. CIV had reduced  ...  view the full minutes text for item 13.

Report of the Executive Director Corporate Services.

This report details the Pension Fund cash flow and membership statistics for the previous year and over the longer term.

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

The Head of Treasury Management and Financial Services introduced the report outlining that it detailed the Pension Fund cash flow and membership statistics for the previous year and over the longer term.

He informed the Committee that:

·       Inflows were up from last year £55m this year compared to £48m last year.

·       Outflows were similar to last year £65m

·       Cashflows before transfers were down from £20m to £13m

·       Investment income was up at £24m

·       The net inflow to the funds was £7m compared to being down £11m last year.

·       Camden’s Pension Fund was not cash flow negative with cash flow being relatively strong in the fund.

·       Membership numbers were now higher than when the second largest employer left the fund.

Responding to a Committee member’s question about what was required were cash flow to be less strong, the Head of Treasury Management and Financial Services advised that there were various things that could be done such as taking dividends or investing in mandates that returned income which would continue to be considered.

RESOLVED –

THAT the contents of the report were noted.

Report of the 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 2022/23 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 2022/23 Annual Report to the Pension Committee.

The Committee was informed that:

·       The report did not include the accounts, the accounts would be brought back when prepared and audited by the Council’s auditors.

·       It was a statement of what the Pension Fund had done and a summary of all the work done by the Committee as well as the Investment Manager meetings.

A Committee member commented that as a new member they had found the Annual report extremely useful and a valuable source of information with a very good summary and clear strategy.

The Chair also commented that he found it very helpful as he often referred to it when doing anything on behalf of the Pension Fund.

RESOLVED –

THAT the 2022/23 Pension Fund Annual Report be approved, as attached at Appendix A.

Report of the Executive Director Corporate Services.

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 sessions and meetings attended and a list of future training opportunities.

The Chair and Head of Treasury and Financial Services encouraged those members that had not done the training to take the on-line training modules reminding members that it was an important requirement. Also asking members to inform them if there were any other topics, they were interested in.

RESOLVED –

THAT the contents of the report be noted.

The next meeting of the Pension Committee will be held on 18 July 2024.

The Chair advised that members would be notified of the date of the next meeting.

There was none.

Having adjourned between 8.44pm to 8.47pm the meeting ended at 9.27pm