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 Stephen Stark, Shiva Tiwari and Ranjit Singh.

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

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 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, 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 are seated in the Chamber or participating via Teams, you are 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.”

New Pension Find Accountant

The Chair welcomed James Gilliland, the new Pension Fund Accountant to the meeting. He had previously worked in the same role for a year at the London Borough of Southwark. The Committee welcomed him to Camden.

There were no urgent items of business.

To approve as a correct record the minutes of the meeting of the Pension Committee held on 23^rd September 2021.

It was noted that the word “imminently” should be added to the last sentence of the second paragraph on page 21 which should then read “She stressed, however, that there were no risks that were likely to happen imminently”.

RESOLVED –

THAT the minutes of the meeting of the Pension Committee held on 23rd September 2021 be approved as a correct record, subject to the above amendment.

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 2021.

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 September 2021 (quarter 3 of 2021) and since manager inception.

The Committee noted in particular that:

·         Most asset classes made gains with the exception of Asia.

·         The Actuary expected growth to be 4.5%

·         UK property had gained 13.4% over the year and 4.6% over the quarter.

·         The portfolio had a market value of £2.2bn at 30 September 2021, an increase of 1.2%

·         There was an overweight to equity of 65% compared to the target weight of 50%. This would, however, correct itself as the Fund implemented its rebalancing plans with £95m to shortly be invested in the LCIV’s Aviva Long Lease property mandate, a top-up of £57m to L&G’s index linked gilts and an investment of £95m in the LCIV Bailie Gifford DGF fund. The Fund’s allocation with Harris would also be reduced by £171m to support this rebalancing.

·         LCIV and Merseyside were currently working with the Merseyside Fund on the £190m bulk transfer out of the Fund for the Improvement and Development Agency’s assets from Camden. This would complete in Q4 2021 or Q1 of 2022. Project meetings to progress with substitution of funds were ongoing work with both sets of actuaries.

·         Asset valuations at 30 September 2021, were markedly above their level last quarter and 23.5% higher than their low of £1.8bn at 30 September 2020. This volatility had been fuelled by the Fund’s high exposure to equities.

·         The Fund had underperformed its composite target by 0.7% in Q3. Since inception, the Fund had returned 10.1%.

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 was disappointing this quarter delivering a return of -0.65% in Q3, underperforming Harris by -1.27% for the quarter and by -18.8% for the 12-month period. However, they had a very strong absolute return of +20.85%, and remained ahead of target over 3 years by 2.6% p.a. The find had transitioned across to the Paris-Aligned Fund. This would align more closely with the pension fund’s investment beliefs around climate change. The Paris Aligned fund did have an active risk of 5.10% (compared to a passive manager who would have 0.25%) which was good for an active manager. The Paris Aligned Fund had a significantly lower exposure to fossil fuel companies  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services

This report updates Pension Committee an interim valuation of the Fund by the Fund’s actuary, Hymans Robertson.

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

This report updates Pension Committee an interim valuation of the Fund by the Fund’s actuary, Hymans Robertson. Barry Dodds, Hyman Robertson was present at the meeting and summarised the main points in the Actuary’s report which was attached at Appendix A.

It was noted that since the 2019 valuation, as at 30 September 2021:

•      The past service funding position has moved from a surplus of £41m (103% funded) to a surplus of £522m (130% funded). This funding position was based on the Fund targeting an annual future investment return which has a 70% likelihood of being achieved. The increase in surplus had been largely driven by strong investment performance since 31 March 2019.

•        The future investment return required to be notionally fully funded had fallen from 4.3% p.a. to 2.8% p.a. The likelihood of the Fund’s assets achieving this required level of return had increased from 72% to 87%, therefore, the Fund was now more likely to achieve the future investment returns needed to be fully funded.

•        The outlook for investment returns over the next 20 years remained broadly stable since the last formal valuation. It was estimated that the Fund’s asset allocation had a 70% likelihood of achieving an annual return of at least 4.5% p.a. (at 31 March 2019, the equivalent return was also 4.5% p.a.).

•      The indicative impact on future contributions was that

-      the improved past service funding position would have a positive impact on Secondary rate contributions, all else being equal.

-      With regard to future service cost (Primary rate contributions), a more challenging economic outlook was expected in general in the longer term which would apply upward pressure to Primary Rates

The Committee also noted the critical dates with regard to the timetable for the Triennial valuation as follows:

-       The cut off point for the data to be used was March 2022

-       The Triennial Valuation assumptions would be submitted to the Pension Committee in July 2022

-       The formal triennial valuation would be reported to Committee in September or November 2022.

RESOLVED –

THAT the report be noted

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

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 that the latest available financial statement data and membership numbers including triggers for each of the traffic lights, were set out in the restricted Appendix A. This was a Part II appendix, 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 noted that the some of the community admission bodies were marked in red. Many were charities with little reserves and could struggle in the future. Officers were monitoring them.

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. 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 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

Climate Action was one of the principal Investment Beliefs of the Pension Fund. The Fund and Council recognised that there was a climate and ecological crisis and everything possible must be done to limit the impact of climate change whilst protecting and enhancing the natural environment.

The Committee noted that carbon footprints measured the carbon equivalent tonnage of greenhouse gases which impact on global warming within the portfolio. The Fund was concerned about climate change and how this might impact investments.

This report presented an update on the Carbon Footprint of the Pension Fund’s equity assets and also presented information on other asset classes.

In addition to monitoring its carbon footprint and exposure to carbon emitting investments, the Fund was an active member of the Local Authority Pension Fund Forum (LAPFF). LAPFF had been a leading voice within the investment community on the material threats of climate change, pressing companies to align their business models with a 1.5 degree scenario and pushing for an orderly net-zero carbon transition. The report highlighted some of the work of LAPFF and its comments on COP26, as well as the work of the Task Force for Climate-related Financial Disclosures (TCFD) and Transition Pathway Initiatives.

It was noted that carbon footprints were most commonly reported in the equity asset class and the report presented carbon footprints and information from each of the Fund’s equity managers - Baillie Gifford, Harris and Legal and General. Full details were contained in the restricted Appendices B, C and D respectively. This were Part II appendices, and were, therefore, not available to the public. Committee Members confirmed that they had read the appendices and would take them into account when making the decision

Carbon footprints were measured with reference to 3 scopes:

·     Scope 1 - direct greenhouse gases (e.g. fuel combustion, company vehicles)

·     Scope 2 - indirect greenhouse gases from the consumption of purchased electricity and other sources of energy

·     Scope 3 - indirect emissions not directly owned or controlled by the organisation (e.g. travel to work, third party distribution and logistics, production of purchased goods etc)

The Committee noted that

·         Baillie Gifford had a carbon footprint which is less than 25% of the benchmark footprint and was half the footprint in the old Global Alpha product the Fund had recently moved from. Carbon intensity and WACI have also reduced.

·         Harris’ footprint was slightly above the benchmark. This continued to be driven by two stocks (Glencore and Lafarge).

·         Legal and General were on benchmark in their global fund, due to the nature of their mandate (tracking the index), in their Future World Fund which the fund had recently moved to, their footprint was one-third of the global equity fund. L&G were also thought leaders in this space and were actively engaged with major companies and the industry to track Paris agreement reductions.

The Fund continued to engage with all managers on their approach to carbon  ...  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 achieving its objectives.

It was noted that there had been a printing error with regard to the tables on page 149 and a corrected version was circulated at the meeting (Appendix C).

It was noted that Councillor Heather Johnson would be attending the LAPFF conference in Bournemouth from 8^th to 10^th December 2021. The dates of the future business meetings were listed in paragraph 1.33, which Committee Members were invited to attend.

With regard to paragraph 1.23, page 151, it was noted that a member of LAPFF intended to visit Brazil regarding the safety of dams. Some Committee Members questioned whether an in-person visit was necessary and that a video call might be preferrable. Councillor Johnson replied that a lot of meetings had been done on-line. However, it proved useful to visit such areas to gain first-hand experience of the extent of devastation they had suffered. Companies did very little to rectify problems. Councillor McMurdo had been visiting different areas to talk to the people who had been affected by certain incidents directly and more widely and the local people welcomed his support. A dam burst in Brazil had demolished 200 homes, but only 3 homes had been rebuilt. Cllr McMurdo wanted to contextualise such disasters and see the effects for himself. It was agreed that LAPFF be informed that the Committee had some concerns with regard to whether this was an appropriate use of resources.

            ACTION BY: Executive Director Corporate Services

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 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.

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).

The Committee noted that additional information on the Fund launch plan and progress to date was provided in the restricted Appendix A. This was a Part II appendix, 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.

The Committee was reminded that the LCIV had had issues with the overall performance of the MAC fund and use of its investment grade infrastructure. In consultation with Camden and other investors it was now progressing with a blended fund with PIMCO. It was noted that, subject to the necessary approvals and FCA processing the documentation, the new sub-fund should be set up in December 2021 and funds would be transferred to that sub-fund in January 2022.

It was also noted that the Inflation Plus fund, which was a long lease fund, was about to draw the funds in full, so it was expected that the whole £95m would be drawn in the next 2 – 3 weeks. This was a major part of Camden Fund’s move to diversify.

The Chair informed the Committee that he was now co-chair of the LCIV Shareholder Committee and updated Members as follows:

-       LCIV was the first pool to commit to get net zero by 2040 which would then enable the Camden Fund to give the same committment and in turn put more pressure on its fund managers to commit to it too.

-       Gender equality was one of the Fund’s SDGs and pressure has been placed on LCIV to improve this. New Non-Executive Directors (NEDs) would be announcement soon.

-       He would be getting a briefing on the shareholders briefs tomorrow and would report back to the next meeting.

RESOLVED –

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

            ACTION: All

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 were reminded that they should have received an invitation from officers to enrol in the Hymans on line learning academy, details of which were set out in paragraph 3.4. It was a requirement of The Pension Regulator (TPR) that Committee Members should keep up their knowledge and skills. Pension Board Members and officers had also been invited to enrol.

            ACTION BY: ALL

The Head of Treasury and Financial Services informed the Committee that an investment manager meeting had been arranged for 9^th December, but this would now not take place. A meeting with Legal & General and Harbour Vest would take place on 6^th December 2021, invitations to which had been sent out.

With regard to Appendix 1, it was noted that depending on the timing of all the necessary information, Triennial Valuation could be reported to the Committee in either September or November 2022.

It was noted that an Awards Ceremony would be taken place on 15^th December. The Fund had been nominated for the Best Approach to Responsible Investment and the Chair had been nominated for the Rising Star award.

With regard to Appendix 2, some Committee Members said that they had attended meetings but their attendance was not shown on the list. All Committee Members were asked to check their diaries and inform officers if they had attended any meetings, seminars and training which had not been recorded.

            ACTION BY: ALL

RESOLVED –

THAT the contents of the report be noted.

There was no urgent business.