Agenda and minutes

To agree the Council’s procedure rules for remote meetings.

RESOLVED –

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

Apologies for lateness were received from Councillors Jenny Mulholland, Lorna Russell and Stephen Stark.

Apologies for absence were received from Councillor Ranjit Singh.

There were no declarations.

There were no deputations.

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 six

months after the meeting. After that time, webcasts are archived and

can be made available on DVD upon request.

If you have asked to address the meeting, you are deemed to be

consenting to being filmed and to the use of those images and sound

recordings for webcasting and/or training purposes. If you are

addressing the Committee your contribution will be recorded and

broadcast.”

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, 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 six months after the meeting. After that time, webcasts are archived and can be made available on DVD 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.”

There were no other announcements.

There was no urgent business.

To approve as a correct record the minutes of the meeting of the Pension Committee held on 9^th September 2020.

RESOLVED –

THAT the minutes of the meeting of the Committee held on 9^th September 2020 be approved 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 30 September 2020.

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appendix which contains information exempt within the meaning of Schedule 12A to the Local Government Act 1972 and is not for publication.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 Committee noted the performance of the Camden Pension Fund investment portfolio and the individual investment managers for the quarter ended 30^th September 2020 (quarter 3 of 2020).

The Interim Head of Treasury and Pensions informed the Committee that there was an error in Table 1 on page 38 as the column headed “12 months performance” was actually the “Year to date” performance, which showed performance for 9 months from 1^st January 2020 to 30^th Sept 2020.

The Committee noted in particular that

-      The Fund had achieved 1.6% over composite target in the quarter, and was exceeding the actuarial target return over 3 years (with 4.6%).

-      Equity markets were continuing their recovery following the crash in March due to Covid-19 with the notable exception of UK equities, which had not seen the same level of recovery as in the rest of the world. The UK equities had a higher allocation to financial and energy sectors, which had suffered badly during this period and there also remained uncertainty around Brexit.

-      UK gilts and index linked gilts were down over the quarter, but corporate bonds were up 1.5%.

-      UK property returns were also slightly up in the quarter.

-      Total fund valuation had increased by just over £40m to £1.81bn at 30^th September.

-      Liability values had been extrapolated and estimated in the region of £1.725bn based on the triennial valuation and the actuarial assumptions in that, which put the Fund at 105% funded at the moment.

-      Total Fund return over the quarter was 2.6%, and 2.1% over the trailing year, which included the period of downturn in March. It had made returns above the fund managers’ composite performance target of 1% for Q3 and 0.6% for the last 12 months, therefore, the fund managers had collectively outperformed their targets over this period.

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 Investment Managers. Where Camden represented more than 5% of each 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-fund continued to do well and were ahead of Harris by about 30% over the last 12 months. They were the highest performing sub-fund on the London CIV in Q3, in both absolute and relative terms.

(b)    Harris – Stock selection had detracted from their performance in Q3. Harris’ performance should be reviewed against the Value Index since this reflected their style of investment more closely than the full market  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services

This report presents the recommendations of the Investment Consultant, Isio, on implementation of the strategic allocations to Sustainable Equity and Inflation Linked Assets, which were agreed as part of the Investment Strategy Review in July 2020.

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.

This report presented the work on the implementation of the strategic allocations to Sustainable Equity and Inflation Linked assets, which were agreed in principle as part of the Investment Strategy Review in July 2020.

The Chair explained that the report was basically split into two parts, with section 2 relating to Sustainable Equity Allocation, together with recommendations 1-3 and with section 3 relating to Inflation Linked Assets Allocation, together with recommendations 4-6. He proposed, and it was agreed, that discussion and consideration would be split into parts in accordance with those issues.

It was noted that the findings of the Fund’s investment consultant, Isio, on investing in a passive sustainable equity fund, and on increasing the Fund’s exposure to inflation-linked assets were also included in the report in appendices A and B respectively. David O’Hara, Andrew Singh and Hermione Rigg, Isio Investment Consultants, were in attendance to present their findings and answer any questions.

The Committee noted that Appendix A2 set out additional information on the sustainable equity report of investment consultants Isio, including manager fees. This was a Part II appendix, as it contained information relating to the financial or business affairs of particular persons and was, therefore, not available to the public. Committee Members confirmed that they had read the appendix and would take it into account when making the decision.

Hermione Rigg, Isio Investment Consultants outlined the findings contained in Isio’s report on Sustainable Equity as set out on Appendix A. They had considered the fit of four potential equity funds available for investment by Camden through or alongside the LCIV platform, namely:

·       MSCI World Low Carbon Target Fund

·       Future World Index Fund (Market Cap)

·       Future World Index Fund (Multi-factor)

·       Osmosis Resource Efficient Core Equity Fund

In reviewing the four equity funds, Isio concluded that the LGIM Future World Market Cap Index Fund, available under the LCIV investment umbrella, offered the best alignment to the Camden Fund’s Environmental, Social and Governance (ESG) Beliefs and targeted priority Sustainable Development Goals (SDGs); Climate Action, Decent Work and Economic Growth and Gender Equality, and to Camden’s Investment Beliefs more broadly. The Fund aimed to offer broadly similar exposure to traditional market-cap equity exposure, but with an ESG tilt. The fund delivered very similar returns to the current MSCI World index within a suitable tracking error but had a portfolio with a reduced carbon footprint (87% reduction from the proposed investments the Fund would disinvest from). The portfolio also focused on other broader ESG factors and invested in higher ESG-scoring companies, so aligns with the Camden Fund’s wider objectives.

Although the fund was relatively new (inception was in February 2020), it had grown rapidly and already had assets under management approaching £1bn. It had a similar stock coverage compared to wider indices and since its inception had tracked the MSCI World index to within 0.6%, with a target tracking error of 0.5% to 1.0%.

Isio’s proposal was to  ...  view the full minutes text for item 9.

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.

Committee Members noted a quarterly update on developments at the London Collective Investment Vehicle (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 drive to reduce costs in the Local Government Pension Scheme (LGPS).

The Committee noted that Appendix B set out the Fund Launch plan and progress to date. This was a Part II appendix, as it contained information relating to the financial or business affairs of particular persons and was, therefore, not available to the public. Committee Members confirmed that they had read the appendix and would take it into account when making the decision.

It was reported that a London CIV budget meeting had been held on 12^th November 2020, the main issues were highlighted as follows:

-        The London CIV were aiming at 75% of pooled funds by 2023. It currently appeared that they were on track for 67%, although only 50% had currently been pooled.

-        They were aiming at a growth of £1.4bn assets under management.

-        They faced a number of challenges for instance consensus of what was good over climate friendly funds.

-        The income and expenditure statement showed that they had made a loss in 2019-2020 of £380,000, but this should be made up by a large VAT recovery next year.

-        They wanted to grow their head count from 26 to 41 by March 2022.

-        Their fees were good value for money and were lower than other LGPS pools as were their costs.

-        They had a Responsible Investment Reference Group, which had met on 6 November and would prepare a report next March focussing on carbon footprinting.

-        They were creating a specific climate policy within the Responsible Investment and Engagement policy.

-        They welcomed the Fund’s views on different target setting regarding carbon.

-        They were looking at a proxy voting provider

Officers felt that this was useful information that could be fed into Camden’s work on ESG and agreed to circulate the information to Committee Members.

ACTION BY: Executive Director Corporate Services

The Chair said that both he and Councillor Johnson had attended London CIV meetings and were impressed with their work on responsible investment. He asked that in future officers include such updates in Committee reports.

          ACTION BY: Executive Director Corporate Services

RESOLVED -

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

          ACTION BY:           ALL

Report of the Executive Director Corporate Services

Carbon footprints measure the carbon equivalent tonnage of greenhouse gases which impact on global warming. 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.

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 Committee noted an update on the Carbon Footprint of the Pension Fund’s equity assets and information on other asset classes. It also noted that on 9^th November 2020, the Chancellor of the Exchequer announced that the UK intended to introduce fully mandatory climate-related financial disclosure requirements across the economy by 2025, using the Task Force for Climate-related Financial Disclosures (TCFD) framework, while a significant proportion of the mandatory disclosure requirements would be in place by 2023.

In addition, the Ministry of Housing, Communities and Local Government (MHCLG) intended to consult next year on the implementation of mandatory TCFD-aligned reporting in LGPS by 2023. These disclosures would require that organisations provide decision-useful information to help:

a)      build awareness of climate-related risks, opportunities and impacts across the economy

b)      integrate assessment and management of these risks, opportunities and impacts

c)      inform investment decisions, improving market effectiveness through more efficient pricing and allocation of capital, empowering stewardship and driving economic change to support the transition to a lower carbon economy and resilience to physical climate risks

d)      stimulate the development of green financial products – and competition between providers of these products – with follow on benefits for consumers.

The Camden Pension Fund was supportive of the proposals, and would aim to introduce the disclosures ahead of the mandated timeline. This would make the fund transparent and able to take any necessary action accordingly.

The Committee was asked to agree to commit the Fund to introduce TCFD-aligned reporting on its investments as far as possible from 2021. By agreeing to introduce reporting earlier, pressure could be put on the Fund’s investment managers and companies to do the same, although it would be reliant on the compliance of those managers and companies to produce those disclosures.

It was noted that section 3 of the report covered the Transition Pathway Initiative, which was a global initiative launched in 2017. It was led by asset owners and supported by asset managers, assessing how companies were preparing for the transition to a low-carbon economy. They provided independent, open-access data showing whether the world’s largest high emitting companies were adapting their strategies to align with international climate goals. The most recent TPI Energy Report (September 2020) showed that Energy companies’ average Management Quality score was now 2.7, up from 2.6 last year. The Carbon Performance of 125 energy companies assessed by TPI against the Paris Agreement benchmarks showed an improvement on last year with 37% (28% in 2019) of companies being aligned with at least the Paris Pledges, and with 18% (12% in 2019) aligned with the most ambitious “Below 2 degrees” benchmark.

The Committee noted that Appendices B - D set out the carbon reports of equity fund managers Baillie Gifford, Harris Associates and Legal & General respectively. These were Part II appendices, due to licensing agreements between the fund managers and the carbon data analysts, and contained information relating to the  ...  view the full minutes text for item 11.

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 a way to achieve its objectives.

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

The Committee noted the 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 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.

It was noted that every quarter the percentage of the Fund’s portfolios with fund managers that was exposed to fossil fuel related companies and the Carbon Underground 200 Index (CU200) had been identified, where possible in the report. Market movements mostly changed the percentage every quarter as there was no policy of disinvestment from fossil fuels. It was felt important to show the difference between CU200 and fossil fuel stock.

The Chair referred to paragraph 2.18, which showed the overall fossil fuel exposure for the main equity managers and noted that further details were provided in agenda item 11 “Carbon Footprint and Climate Related Financial Reporting”. He asked that this information should be included in Performance Reports in the future.

          ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be noted.

At this point in the proceedings the Committee noted that the meeting had lasted for nearly the maximum time of 3 hours and it, therefore, agreed to move standing orders to extend the meeting for a further 15 minutes in order to finish the business on the agenda.

Report of the Executive Director Corporate Services

This report updates the employer register for all the admitted bodies in the Pension Fund and relevant data for the Committee to review in light of their funding positions and scheme status.

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 Interim Head of Treasury and Pensions informed the Committee that this report updated the employer register for all the admitted bodies in the Pension Fund and relevant data for the Committee to review in light of their funding positions and scheme status.

The Committee noted the employer issue of complying with the £95K exit payment cap, which was introduced on 4^th November 2020. Previously, LGPS members over the age of 55 being made redundant on the grounds of efficiency would typically get immediate payment of unreduced LGPS benefits, statutory redundancy payment and discretionary compensation. Now an employee over 55 would not be able to get an unreduced pension and redundancy payment if the total value of the exit package was over the value of the £95k cap. This would have a greater impact on high earners and those employees with long service. This change would ultimately reduce costs for employers, with the cost in effect being borne by the employee. Although the public sector pay cap was now in force, the LGPS Regulations had not yet been amended. The MHCLG was currently consulting on the proposals and the changes were anticipated to come into effect in early 2021. Until then, the two sets of regulations are at odds. Guidance from the MHCLG was expected shortly. The Pension Shared Service, which administered the Camden Pension Fund benefits, had been providing communications for all Employers in the Fund, and would continue to do so as the situation developed.

Committee Members recognised that throughout the Covid-19 period, many of the voluntary sector organisations were experiencing a difficult time, but stressed the importance of balancing the risk between helping the employers in these difficult times and protecting the Fund. It was noted that they made up 14% of the Fund (including the IDeA or 10% without). It was considered to be important to monitor this although this could prove difficult as financial information was not produced quickly enough to enable officers to see the position of voluntary organisations in real time. Officers, did however, contact and meet with the organisations regularly and would continue to do so.

The Committee noted that Appendix A presented the employer register of all the admitted bodies in the Pension Fund. This was a Part II appendix, as it contained information relating to the financial or business affairs of particular persons and was, therefore, not available to the public. Committee Members confirmed that they had read the appendix and would take it into account when making the decision.

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 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.

Committee Members noted that officers would circulate details of LAPFF meetings. In addition, a training session on pensions would be held for Councillor Mulholland in the new year, details of which would also be circulated to all Committee Members. The Chair asked Committee Members to inform the Interim Head of Treasury and Pensions if they wished to attend the LAPFF meetings, meetings with Investment Managers or any training sessions, including refresher training.

          ACTION BY: Executive Director Corporate Services.

                              All Committee Members

RESOLVED –

THAT the contents of the report be noted.

There was no urgent business.