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 Heather Johnson and Jenny Mulholland.

There were no declarations.

The Committee received and noted a deputation from Liz Wheatley on behalf of UNISON, in respect of the Climate Emergency. The statement containing the points raised by the deputation were circulated to Committee Members, as attached at Appendix A.

Councillor Russell noted that the deputation had said that UNISON’s members had raised concerns about these issues with the trade union. She asked when these issues were last consulted on with both active and retired members of the Pension Fund and whether there would be an opportunity to consult members in the future. The Head of Treasury and Financial Transactions replied that he had not received many enquiries on this issue, but agreed that it would be interesting to get the views of Pension Fund members and employers. Officers were looking at innovative platforms in which to consult Pension Fund members and were also discussing the issue with employers.

All investment advice had climate emergency laced through it which was also included as part of the Fund’s Investment Beliefs. Climate emergency was more complex that just considering divesting from fossil fuels, as it was also affected by companies involved in steel makers, concrete, car makers and buildings. It was important to consider how it was approached and officers had been engaging with a company to look at such issues

It was noted that UNISON consulted with their members through regular meetings, petitions and an online consultation was also planned.

In response to a question regarding whether or not any Councils had totally divested and if so what the implications were for their Pension Fund, Liz Wheatley said that in November 2021, Waltham Forest’s Pension Fund had 0.5% in fossil fuel investment and had set a target to be zero by April 2022 which they were online to reach. There had been no financial detriment to their Pension Fund and they were not concerned about fiduciary responsibilities. She added that she believed Camden should also have a zero target.

The Chair said that not all Pension Funds had trade union representatives on their Funds as Camden did. He had spoken to his counterparts in other authorities and none of them had totally divested as they did not have the mandates to do it. He would talk to Waltham Forest to see what their current position was. He did not want to set a target until the Fund was sure that it could be achieved.

Tessa Younger, LAPFF (Local Authority Pension Fund Forum) was in attendance at the meeting and Councillor Madlani invited her to comment.  She said that LAPFF had been very clear for a number of years when presenting to members that reaching zero admissions by 2050 only gave a 50% chance of staying within 1.5% and PIRC’s own carbon policy recognised that it was likely that 83% of the current carbon budget was going to be used up by 2027. As an example, LAPFF had been engaged with Arcelor Mittal a steel company which focused on technology. They were planning  ...  view the full minutes text for item 4.

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. 

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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.”

Vote of Thanks to Councillor Quadir

The Chair informed the Committee that this was Councillor Abdul Quadir’s last meeting as he would be standing down from the Council at the end of the 2021-22 Municipal Year. The Committee thanked him for his service to the Committee over the last 15 years or more. He had been forensic and diligent in his questioning and had attending many Committee and other meetings associated with the work of the Pension Committee during that time.

There were no urgent items of business.

To approve and sign as a correct record the minutes of the meeting of the Pension Committee held on 30^th November 2021.

RESOLVED –

THAT the minutes of the meeting of the Pension Committee held on 30^th November 2021 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 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 31 December 2021 (quarter 4 of 2021) and since manager inception.

The Committee noted in particular that:

·                The portfolio had a market value of £2.3bn at 31 December 2021, which represented an increase of 4% over the quarter. However, this figure included the prepayment of secondary contributions by Camden Council, so excluding this, the overall return on the Fund’s investments was 3.0%

·                Most asset classes saw a positive performance apart from Emerging Markets and Japan showed negative returns.

·                £170m of the Harris portfolio had been sold in two tranches, some just before quarter end and some just after to avoid the weaker trading period over Christmas. This took away 5% of the equity post quarter. Equity stood at 58% versus 50% target. The reduction following the Idea substitution of funds would take equity down to 50% so the Fund would achieve its target equity allocation thus eliminating its overweight to that asset class.

·                Further steps to conclude the July 2021 strategy review include an investment of £57m into L&G’s index-linked gilts, which officers were concluding, and an investment of £95m into the London CIV Bailie Gifford DGF fund, which was going through legal due diligence before the Fund invested leaving an expected £65m cash balance by the end of 2021-22 exclusive of market movements.

·                Investment into the London CIV Inflation Plus Fund, held with Aviva, had begun with a £61m investment in this quarter and the remaining £34m due in Q1 2022.

·                The Actuary (Hymans Robertson) valued the liabilities at 31 March 2019 at £1.613bn. This gave a theoretical estimated funding ratio in December 2021 of 126% (£1.824m of liabilities) and was based on the investment strategy returning in-line with the Actuary’s estimations for the coming years and decades. This was only an approximation, however, long-term asset performance was considerably above the Actuary’s historic expectations.

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 -0.09% in Q4, underperforming Harris by -2.48% for the quarter and by -11.41% for the 12-month period. However, because they had been such a strong manager she was not concerned about them at the moment. On 13 September 2021, £248.4 million of London Borough of  ...  view the full minutes text for item 8.

Report of the Executive Director Corporate Services

This report reviews the proxy voting carried out by the Pension Fund from 1^st   January 2021 to 31^st December 2021. Advisory services are provided by Pensions & Investment Research Consultants Ltd (PIRC).

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

This report reviewed the proxy voting carried out by the Pension Fund from 1st January 2021 to 31st December 2021. Advisory services were provided by Pensions & Investment Research Consultants Ltd (PIRC).

Representatives from PIRC were present at the meeting and Ralph Neville-Jones summarised the main points raised in their Review of Proxy Voting 2021, attached at Appendix A to the report.

-           Sustainability included gender equality, decent work and climate action. The primary resolutions linked to sustainability were currently the vote to approve the annual report and accounts, director election resolutions including the vote to appoint the CEO, chair of the board, chair of the sustainability committee or member of the board responsible by appointment for sustainability at the company

-           Camden’s voting policy was more rigorous in 2021 than in previous years, taking into account not simply board and committee independence; but also, such issues as the balance of gender on the board and whether or not sustainability concerns like meeting climate disclosure requirements had appropriate board level oversight.

-           In 2021 Camden had supported more than 70% of the resolutions it voted on, up slightly from 2020. Annual reports and Directors received more ‘for’ votes than in the previous year, although executive pay schemes were almost all opposed, with only 4 of these resolutions receiving a vote in favour.

-           Although there was a decrease in gender diversity of 3% between 2018 and 2019, board diversity had on the whole seen a gradual but consistent improvement, an increase of approximately 3.4% in 2021 compared to the approximate 8% rise in 2020. Six companies had boards comprised of 50% or more female directors, and 170 companies have boards with 33% or more female directors

-           There were 15 fewer companies with boards with more than 33% women as recommended in the Hampton Alexander and Davies reports. However, for the first time since PIRC has collected data on this subject, in the FTSE350 (without investment trusts) there were zero companies without a single female director, which showed that the final holdouts against appointing any women to the board had either relented or dropped out of the index.

-           So despite expanding the lists of grounds where PIRC might recommend or oppose vote many of the core governance issues had seen real improvement.

-           With regard to renumeration, pay outs were either reduced, deferred or suspended. Increasing the number of instances where renumeration reports received a vote in favour in 2021 although a reversal was expected with the lifting of Covid restrictions.

-           PIRC was in favour of designated non-executive directors (NEDs) and had already implemented a policy covering this role. The default PIRC position was currently to only oppose on matters related to attendance, or failures of the company to address serious employee concerns. The majority of abstentions for designated non-executives had been recommended owing to a company’s lack of disclosure regarding COVID-19 cases or fatalities amongst the  ...  view the full minutes text for item 9.

Report of the Executive Director Corporate Services

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

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

This report set out the proposed guidelines and formed the policy on which Camden would submit proxy voting on shares held in the Camden Pension Fund. The Fund appointed PIRC as corporate governance advisor in November 2013 to review company voting resolutions and execute the proxy votes of the Fund in accordance with its policy. The policy was last reviewed in March 2020 to take account of changes in the shareholder voting environment and PIRC’s revised remuneration scoring. As with the previous year, the proposed 2022 voting policy also fully incorporated the Local Authority Pension Fund Forum (LAPFF) voting guidelines, which the Fund was an active member of.

The proposed voting policy was attached at Appendix A to the report. It encompassed the Fund’s investment beliefs ensuring transparency and key points of the corporate code and good corporate governance, which included board structure, remuneration, climate change and management of ESG issues. Members noted that there were three policies covering the UK and Ireland (page 104 onwards), global policy (page 126 onwards), US policy (page 143onwards).

It was also noted that changes from last year were shown as track changes in Appendix A.

Alan McDougall, PIRC, said that PIRC was about to publish their new guidelines and would be running a seminar next Tuesday, which would look at the developments in their voting policy. They were currently going through the process of linking SDGs to voting outcomes which all clients were now interested in. The definitive document should be finalised later this year. The Chair asked PIRC to send through the details of their webinar which would be used for future training for Committee Members.

ACTION BY: Executive Director Corporate Services

Ralph Neville Jones and Alan McDougall, PIRC, highlighted the main proposed changes to the policy:

·                It was felt that there was a gap between what an ordinary member of the public would expect from an audit and what was actually required from auditors. Despite the court in the judgement of the Barings case being clear that it was the responsibility of the auditor to discover fraud some auditors still denied this. PIRC was shocked at this so they wrote to auditors asking them to confirm whether or not they would monitor for fraud. PIRC was suggesting that an explicit statement was required. Some auditors had published statements considered appropriate, but a number of others had not. PIRC was suggesting that those auditors should be voted against until they published a statement confirming that they would take their duties regarding fraud seriously.

·                Designated non-executive directors (DNEDs) were needed because the functions of the board overall were too diverse for the managementof company business to not be identified with a DNED, so it was more accountable to have them. There had been real failures with the workforce, labour disputes and non reporting on Covid. The pandemic had shown that one of the most important things was  ...  view the full minutes text for item 10.

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.

This report detailed the Pension Fund cash flow and membership statistics for the previous year and over the longer term. It was noted that usually this report would be taken at the July meeting but had been delayed due to finalisation of the 2020-21 accounts.

The Committee noted that some of the figures in section 2 “Cash Flow” were incorrect but the figures in Table 1 on page 162 of the report were correct. It was agreed that officers would circulate the correct page to Committee Members.

ACTION BY: Executive Director Corporate Services

It was noted that:

·         Table 1 showed total inflows in 2021 were £71m, total outflows were £69m, before transfer values there was surplus of £2m but after transfer values the cash position was neutral with £18,000. They had been negative for the past 2 years. Investment income increased sharply to £10.3m from £6m last year, so the overall cash inflow to the Pension Fund was £10.3m as it was neutral before investment income was included.

·         Table 5 showed scheme membership now stood at 22,642, which was a very small increase on last year. Actives made up 5,699 of employees from the Council and other employers made up 25% of the membership, with pensioners making up a third and deferred making up the rest

The auto enrolment exercise happened every 3 years and would next take place in May 2022. Currently 800 employees would be auto enrolled back into the Fund. They must decide if they want to stay or leave. Although there was a cost of living crisis, a pension was a long term saving and it was considered important to set a balance.

Table 3 (page 164) showed administration and managers fees had decreased. This was because the fund had decreased investments in various equities and increased investments elsewhere, which would have impacted on fees. Officers would report back to a future meeting on the details of the decrease in fees.

ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be 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 2020/21 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 2020/21 Annual Report to the Pension Committee.

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

    o Governance Compliance Statement

    o Investment Strategy Statement

    o Communications Statement

With regard to paragraph 2.3, it was noted that for 2020/21 scheme administration was £25.69 per member of the Fund compared to £27.70 the year before. Referring back to the previous item and the graph on page 164, Committee Members said that the fees had substantially decreased and as membership of the Fund had increased it was expected that the administration fees should be lower. Officers agreed to write to Committee Members to clarify the details.

            ACTION BY: Executive Director Corporate Services

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

Karen Shackleton, Independent Advisor, referred to page 333 and informed the Committee that MJ Hudson had dropped “Allenbridge” from its name and was now just known as “MJ Hudson Ltd”. It had also changed its address to “1 Frederick’s Place, London, EC2 8AE”. Karen Shackleton would check when the change was made and if appropriate officers would amend the report.

            ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT, subject to the accounts being finalised and confirmation of the change to the details for MJ Hudson Ltd, the 2020/21 Pension Fund Annual Report be approved, as attached at Appendix A.

ACTION BY: Executive Director Corporate Services

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.

It was also noted that

·                The London CIV have £14.6bn of assets under management (AUM) as at 31 December 2021. Total assets pooled by Client Funds were valued at £27.3bn. During Q4 they set a more realistic pooling target of 71% pooled by 2025 instead of 75% pooled by 2023. This new target forms part of the basis for their Medium-Term Financial Strategy (MTFS) and Budget for 2022/23.

·                Significant progress was being made in making ESG integral, and that London CIV had built a strong, successful team. In October 2021 London CIV were the first pool to announce their ambition to achieve net zero by 2040 and achieve net zero across operational and supply chain emissions by 2025.

·                They were progressing with the blended fund in which the pension Fund would be investing.

·                London CIV were approved as an asset owner to the first list of signatories to the 2020 UK Stewardship Code last quarter which was an achievement.

·                They had been conducting a trial with one of their client funds to assess the carbon footprint in line with the Task Force on Climate Financial Disclosures (TCFD) for its entire investment portfolio. In the future they hoped to offer this service to all client funds, which would present an assessment of the entire investment portfolio, showing relevant metrics and enabling each Pension Committee to work towards their net zero targets.

Councillor Madlani said he now chaired the Shareholder Committee and was trying to apply Camden’s SDGs and gender diversity. A body representing 33 London Boroughs had problems when waiting for sign off, as regardless of whether or not that Council had investments with LCIV they all had an equal say. This was because when London CIV was set up, the Government envisaged that it would be compulsory to invest with them, but that Government pressure was no longer there. A lot of time was spent managing boroughs which were not being supportive. London CIV would be looking at governance and how funds were managed. He felt that if a Fund wanted to leave London CIV they should be able to do so.

RESOLVED –

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

            ACTION  ...  view the full minutes text for item 13.

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.

This report brought Committee 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 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.

LAPFF has 85 members and 7 pools with the London Boroughs of Bromley, Kensington and Chelsea, and the Isle of Wight Pension Funds joining recently. Membership expectations for 2022/23 currently stands at 91 (out of a total of 98 funds in the UK), with 86 paying membership and 5 non-paying pool memberships.

It was noted that there was a strategy meeting in November which noted LAPFF’s unique approach to engagement, which was built on in the workplan. The draft workplan also included proposals progressed during the year such as the emerging focus on ‘Say on Climate'. Papers were also tabled on mining and human rights and water companies and sewage.

Tessa Younger, LAPFF, was in attendance at the meeting and highlighted the following points:

·           Referring to the quarterly engagement report, she said that LAPFF engaged intensely through Climate Action 100. Out of 160 companies only 8 were UK listed companies and climate was a systemic issue and most companies scope 3 emissions, e.g suppliers and business to business customers. Letters had been sent out to 380 companies, but engagement was often better when engagement was carried out directly with CEOs or Chairs. They were considering how they would respond to all those companies in terms of when they came back to them and to those who did not respond.

·           This week they had held a “Say on Climate” event, 120 companies attended in person and 350 attended virtually. They were trying to get everyone together who could influence change in a positive way. It had involved Sir Chris Hone of the Children’s Home Investment Fund Foundation and TCI fund management and Saracen and Partners who had co-written the letter Secretariat of the Transition Plan Task Force, Black Rock. They had also engaged with the chair of Sainsbury’s who had not responded to the letter but did confirm that they were discussing climate at a board level

·           The quarterly report reflected the LAPFF work plan and they were keen that it reflected what member funds wanted to see in that work plan.

·           Regarding Sustainable Development Goals (SDGs) a lot of work had been done on climate change, but sustainable affordable energy and sustainable cities and communities were also being looked at. LAPFF were looking to build on those SDGs and member priorities

·           She believes that climate, gender and diversity was picked up in the work plan but asked Members to see if it reflected what Camden’s plans were looking forward.

·           Executive Members did speak at quarterly business meetings as  ...  view the full minutes text for item 14.

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.

It was noted that the next meeting with Investment Managers would take place on 24^th March 2022 with Aviva and Baillie Gifford. Invitations would be sent to Committee Members.

ACTION BY: Executive Director Corporate Services

Members of the Pension Committee were reminded that they, together with Members of the Pension Board and officers, had been enrolled on the Hymans online learning academy. Training was delivered via videos, with jargon buster crib sheets and a quiz on each module. Completion could be tracked for each user so a record would be kept of which topics had been covered and which topics users needed to focus on. The training met the requirements of the CIPFA Knowledge and Skills Framework and the Pension Regulator’s Code of Practice. Officers said that they would carry out the training and share how long each module took with Members so that they would know how much time they had to commit to the training.

ACTION BY: Executive Director Corporate Services

RESOLVED –

THAT the contents of the report be noted.

The provisional dates for meetings of the Pension Committee for the 2022-2023 Municipal Year are set out below:

Thursday, 21^st July 2022              

Wednesday, 21^st September 2022

Monday, 5^th December 2022

Wednesday, 1^st March 2023

These meetings are scheduled to start at 6.30 p.m.

The Council will be asked to formally agree the Calendar of meetings for the 2022-2023 Municipal Year at its meeting on 25^th May 2022. All meeting dates avoid major religious holidays and party conferences.

The Committee noted the provisional dates for meetings of the Pension Committee for the 2022-2023 Municipal Year as set out below:

Thursday, 21st July 2022

Wednesday, 21st September 2022

Monday, 5th December 2022

Wednesday, 1st March 2023

These meetings were scheduled to start at 6.30 p.m.

It was also noted that the Council would be asked to formally agree the Calendar of meetings for the 2022-2023 Municipal Year at its meeting on 25^thMay 2022. All meeting dates avoided major religious holidays and party conferences.

There was no urgent business.