Agenda and minutes

Apologies for absence were received from Councillors Tom Currie and Awale Olad.

Councillor Russell declared for the sake of transparency that she worked for Lansons, a PR agency, which had undertaken work for clients who were nominated trustees.

A deputation was received and noted from John Rutter on behalf of UNISON regarding fossil fuel divestment. A copy of the deputation statement together with a motion, which was passed by UNISON at a recent branch meeting, are attached at APPENDIX A.

The Legal Officer advised the Committee that Members had a fiduciary duty that required them to invest with the intention to seek the best returns for the Fund. Social and ethical considerations could be taken into account as long as they were not detrimental to the Fund.

Tessa Younger, Local Authority Pension Fund Forum (LAPFF), said that the pace of change was slow and frustrating. However, their engagement with companies had seen a number of companies setting targets to reduce the carbon impact within a number of years, for instance Shell recently announced that it would reduce its carbon footprint by 50% by 2050. Other companies were being encouraged to join that target.

The Chair reminded the meeting that climate change/carbon footprint had been placed on the risk register and would be monitored through LAPFF. Camden would also be looking at all aspects of climate change including vehicles emissions and air quality.

It was noted that the Government was intending to introduce new investment regulations that would allow pension schemes to “mirror members’ ethical concerns” and “address environmental problems”. These were expected to come into force next year after a consultation period.

The Committee noted that once details of the new regulations were known, officers would look at their impact. If they were to make any significant changes to the current position, officers would submit a report to a future Committee meeting.

            ACTION BY: Executive Director Corporate Services

The Committee thanked the deputation for attending the meeting and presenting their statement.

Vote of Thanks

Councillor Madlani reminded Committee Members that this was the last meeting of the Pension Committee during the 2017/18 Municipal Year and he wished to thank Councillors Freeman, Yarde, and Currie for their work on the Committee over the years as they would not be standing again in the forthcoming Council elections.

There was no urgent business.

To approve as a correct record the Part I Minutes of the meeting of the Pension Committee held on 29^th November 2017.

RESOLVED –

THAT the Part I minutes of the meeting held on 29^th November 2017 be approved and signed as a correct record.

Report of the Executive Director Corporate Services

This report reviews the proxy voting carried out by the Pension Fund during the calendar year to December 2017. Advisory services are provided by Pensions & Investment Research Consultants Ltd (PIRC).

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

The Fund attached great importance to its voting rights on investments owned and had been voting on its shares at the Annual and Extraordinary General Meetings of companies since 1996, in order to add shareholder value by seeking to ensure that companies were soundly run. The Camden Pension Fund employed a corporate governance advisor, Pensions & Investment Research Consultants Ltd (PIRC), to review company voting resolutions and execute the proxy votes of the Fund in accordance with its policy.

The Committee noted the review and analysis of the voting that had been undertaken by the Fund during the calendar year to December 2017, as executed by PIRC.

It was noted that bullet point 9 of the executive summary of the PIRC review (Appendix A, page 28) contained an error and should read “The highest level of director election opposition by region was South America, where 76.92% (2016: 64.5%) of votes were opposed or withheld.”

David Dando, Proxy Voting Services Manager (PIRC), was present at the meeting and summarised the main issues and answered questions as follows:

·         Female directors represented 23.6% of directors on FTSE350 Boards. 10 companies had an all-male Board of Directors at the time of their AGMs, although the Government had recently announced that this had been reduced to 7 or 8 companies. No female held the position of Chairman & Chief Executive, Executive Chairman or Executive Vice chairman (out of 32 directors). However female representation across the Board was sufficiently high in companies with a female Chief Executive (32.9%) or female Chairman (35.7%).

·         In the case of remuneration reports, the Fund had supported 50.57% (2016: 47.3%) of resolutions and opposed 49.43% (2016: 52.7 %). In the case of remuneration policies, the Fund had opposed more resolutions, i.e. 69.01% (2016: 75%) than it supported i.e. 30.99% (2016: 25%).

·         An article had recently been published which stated that this year environmental and social resolutions had outweighed governance resolutions.

Committee Members agreed that it was important to get feedback on proxy voting and thanked Mr Dando for his report and attendance at the meeting.

RESOLVED –

THAT the contents of the report be noted.

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 the report of the Executive Director Corporate Services.

The Committee was reminded that the Fund regards the exercise of voting rights attached to its investments as having great importance, and had been voting on its shares at the Annual and Extraordinary General Meetings of companies since 1996, in order to add shareholder value by seeking to ensure that companies are soundly run. The Camden Pension Fund employed a corporate governance advisor, PIRC, to review company voting resolutions and execute the proxy votes of the Fund in accordance with its policy, details of which were set out in the report.

David Dando, Proxy Voting Services Manager (PIRC), was present at the meeting and highlighted the following changes to the policy, which incorporated amendments to the voting approach from the previous advisor, as well as changes to the markets in 2017:

·                Oppose Article amendments to provide for “virtual only” shareholder meetings.

·                Oppose re-election of any director who misses one or more board meetings without adequate justification.

·                Oppose re-election of the Chairman if not independent upon appointment or has had executive responsibilities in the past ten years.

·                 

A further change was a policy to oppose chairman where there is no board level responsibility for ESG issues. Traditionally, this responsibility was assumed below board level, but David Dando explained that this should be elevated to reflect the increasing importance of risk on value.

He drew the Committee’s attention to page 83 and explained that due to the rising concerns regarding social, ethical and environmental issues, an additional example of shareholder proposals which Camden might support had been added “Reasonable requests for reports to climate change or ESG issues”. In response to a question he said that the term “reasonable” was a judgement call. It could refer to something that was of interest to shareholders. The intention was for improvement in this area and to encourage companies to consider and do more on climate change.

It was noted that FTSE 350 companies should provide data regarding carbon footprints, including whether or not they had targets for reducing emissions.

In response to a question, David Dando said that he did not work with London CIV or other pools, but was hoping to build a relationship.

RESOLVED –

THAT the proposed voting policy on which Camden will vote its shares, be approved as set out in Appendix A of the report.

ACTION BY: Executive Director Corporate Services

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 2017.

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

The Committee noted the performance of the pension fund investment portfolio and that of the individual investment managers for the quarter ended 31^st December 2017.

The Committee noted in particular that:

·                Global financial markets operated against a positive backdrop during the final quarter 2017.

·                Volatility had been experienced after the quarter end, so was not included in the report.

·                A strong earnings season, regionally synchronised economic growth and the long anticipated agreement to a tax cut package in the US has been cited as conditions that have supported market valuations in Q4.

·                Returns were regionally balanced with the exception of Europe. This may have been because European equity investors might have decided to take profits on 2017’s 17.2% return for the region while a stronger Euro and political considerations (including the collapse of coalition talks in Germany and a regional election in Catalonia) had also been highlighted as factors. Japan was enjoying its longest economic expansion since the 1990s and emerged as the best performing market.

Committee Members noted Appendix A “Camden Client Ranking by Manager” which detailed Camden’s exposure as clients to the overall fund or strategy managed by each Investment Manager. In future, where Camden represented greater than 5% of the Investment manager’s fund and there was a material increase due to client outflows, this would be reported to Committee on an exceptions basis.

The Committee also noted Appendix B, which presented a more comprehensive overview of the financial markets by the Independent Investment Advisor and reported the performance of the individual Investment Managers in more detail. Karen Shackleton, Independent Investment Advisor highlighted the salient points as follows:

a)            London CIV - Baillie Gifford – this sub-fundhad underperformed its target in Q4 2017 by -0.8%, but over one year delivered a return relative to target of +6.2%. Over 80% of the portfolio was concentrated in four sectors: financials, information technology, consumer discretionary and Industrials. The fund held 102 companies as at quarter end, across 23 different countries, and had an active share of 91%. For the first time since investing in the London CIV sub fund, the Baillie Gifford portfolio outperformed Harris over one year, with a return of +22.8% compared with Harris’ +16.7%.

b)           Harris generated an absolute return of +1.5% in Q4, which was 4.1% below target for the period and delivered a total return over 2017 of +16.7%, and thus achieved the targeted return for the year. The best performing stock was, once again, Glencore which added +0.77% to the total return, reinforcing Harris’ previously stated view that there was further growth potential in this holding (the company delivered a total return of 14.26% in Q4). General Electric was, for the second quarter in a row, the worst contributor, detracting -0.98% and delivering a total return of -27.93%. Harris had expressed confidence that the stock would recover over time

c)            Insight was trailing both target and a traditional corporate bond  ...  view the full minutes text for item 9.

Report of the Executive Director Corporate Services

This report concludes the search for a diversified growth fund manager for the temporary investment of the proceeds of the redemption from the hedge fund mandate before a suitable infrastructure investment opportunity is established. The report updates Members on the appointment of Ruffer LLP to the interim diversified growth fund mandate.

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

The Committee noted that this report concluded the search for a diversified growth fund manager for the temporary investment of the proceeds of the redemption from the hedge fund mandate before a suitable infrastructure investment opportunity was established. Committee Members noted the update on the appointment of Ruffer LLP to the interim diversified growth fund mandate.

RESOLVED –

THAT the contents of the report be noted.

Report of the Executive Director Corporate Services

This report provides a quarterly update on developments at the London 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 LGPS.

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

The Committee noted the quarterly update on developments at the London 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 the drive to reduce costs in the LGPS.

It was also noted that London CIV would consult with Funds during Q1 2018 on its revised vision which was based on Governance, Client and Investment, details of which were set out on pages 134 and 135 of the agenda.

Furthermore, the CIV Board had proposed three investment mandates:

·         Low cost - passive

·         Basic - blended mandates with Funds selecting fixed proportions in each one.

·         Enhanced – a mix of the above.

Rob Hall, Head of Equity and Multi-Asset, London CIV was in attendance at the meeting to provide a presentation on the update on developments.

The Committee noted that this presentation contained commercially sensitive information and that the report contained a confidential appendix, which presented the London CIV Governance Review.  These were not for publication and in order for Committee Members to discuss the content of the restricted appendices, it passed the following resolution:

RESOLVED –

THAT the press and public be excluded from the proceedings of the Committee on 8^th March 2018 during consideration of item 11 on the agenda on the grounds that it is likely, in view of the nature of the business to be transacted, that were members of the public to be present, there would be disclosure of exempt information as defined in Schedule 12A to the Local Government Act 1972 and that the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

Specifically -

Publicity in respect of item 11 would be likely to lead to the disclosure of information relating to the financial or business affairs of any particular person (including the authority holding that information) by virtue of Category 3 of Schedule 12A of the Local Government Act 1972.

Part II

The Committee discussed the contents of the confidential appendix to the report as detailed in the restricted part of these minutes.

PART I

Having discussed the content of the confidential appendix, the Committee returned to open session.

RESOLVED –

THAT the contents of the report be noted and any comments on progress be fed back to the Chair and officers.

                   ACTION BY:     Committee Members

                                                Executive Director Corporate Services

Report of the Executive Director Corporate Services

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

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

The Committee noted the engagement activity undertaken by the Fund and LAPFF (the Local Authority Pension Fund Forum) since its last meeting.

It was agreed that diversity should to be a priority in LAPFF and engagement activities, as well as climate change issues.

            ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be noted.

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 the report of the Executive Director Corporate Services.

The Head of Treasury and Financial Transactions confirmed that training would be arranged for all new Members before the Committee meeting in June. The Fund’s Actuary, investment consultant and Karen Shackleton, independent advisor, would be present. Karen Shackleton informed the Committee that she would take Members through each portfolio and mandate and would highlight what made it work or what was a concern.

            ACTION BY: Executive Director Corporate Services

It was noted that an item regarding a Fixed Income Review would be added for a future meeting.

            ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be noted.

The provisional dates for meetings of the Pension Committee being held during the 2018-19 Municipal Year are set out below:

Thursday, 28^th June 2018

Thursday, 13^th September 2018

Thursday, 22^nd November 2018

Wednesday, 27^th February 2019

Dates for all meetings being held during the 2018-19 Municipal Year will be confirmed at the Statutory Council meeting in May 2018.

The Committee noted the provisional dates for meetings of the Pension Committee being held during the 2018-19 Municipal Year as set out below:

Thursday, 28^th June 2018

Thursday, 13^th September 2018

Thursday, 22^nd November 2018

Wednesday, 27^th February 2019

It was also noted that dates for all meetings being held during the 2018-19 Municipal Year would be confirmed at the Statutory Council meeting in May 2018.

There was no urgent business.

Proposed resolution:

THAT the press and public be excluded from the proceedings of the Pension Committee on 8^th March 2018 during consideration of the respective items on the agenda on the grounds that it is likely, in view of the nature of the business to be transacted, that were members of the public to be present, there would be disclosure of exempt information as defined in Schedule 12A to the Local Government Act 1972.

Specifically -

Publicity in respect of items 11 and 17 would be likely to lead to the disclosure of information relating to the financial or business affairs of any particular person (including the authority holding that information) and not required to be registered under various statutes by virtue of Category 3 of Schedule 12A of the Local Government Act 1972. The Proper Officer has considered all the circumstances of the report and is of the view that on balance the public interest in maintaining the exemption outweighs the public interest in disclosing the information. The reasons why the public interest favours withholding the information are that the disclosure of the information is likely to prejudice the commercial interests of the Council and organisations engaged in commercial activities as the information relates to commercial activities that are conducted in a competitive environment.

RESOLVED –

THAT the press and public be excluded from the proceedings of the Pension Committee on 8^th March 2018 during consideration of the respective items on the agenda on the grounds that it is likely, in view of the nature of the business to be transacted, that were members of the public to be present, there would be disclosure of exempt information as defined in Schedule 12A to the Local Government Act 1972.

Specifically -

Publicity in respect of item 17 would be likely to lead to the disclosure of information relating to the financial or business affairs of any particular person (including the authority holding that information) and not required to be registered under various statutes by virtue of Category 3 of Schedule 12A of the Local Government Act 1972. The Proper Officer has considered all the circumstances of the report and is of the view that on balance the public interest in maintaining the exemption outweighs the public interest in disclosing the information. The reasons why the public interest favours withholding the information are that the disclosure of the information is likely to prejudice the commercial interests of the Council and organisations engaged in commercial activities as the information relates to commercial activities that are conducted in a competitive environment.

To approve as a correct record the Part II Minutes of the meeting of the Pension Committee held on 29^th November 2017.

RESOLVED –

THAT the Part II minutes of the meeting held on 29^th November 2017 be approved and signed as a correct record.