Agenda item

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report summarises the items presented and decisions made at the Pension Committee meetings on 30 November 2021 and 3 March 2022

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

The Pension Board was reminded that it had responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report summarised the items presented and decisions made at the Pension Committee meetings on 30 November 2021 and 3 March 2022.

It was noted thatin November the portfolio had a market value of £2.2bn, equities were overweight at 65%, but the March report showed that this had reduced to 58%. PIRC data showed the Camden Pension Fund in a favourable light compared to other funds. Both equity managers had struggled although overall the Fund had had a positive performance.

The Pension Committee also took reports on

·         the Employer’s Register – the Council made up 86% so the remaining 14% was made up of other employers. It updated the Committee on membership and the substitution of Improvement and Development Agency (IDeA) funds and the payroll was now with the Merseyside Fund, and the asset transfer was anticipated to take place on 19 April 2022.

·         Carbon Footprint – there had since been some major movements and footprints had come down. UK equity assets with L&G (£275m) had been transferred to the Future world Fund which excluded companies that failed to meet minimum carbon standards and tilted away from poor ESG companies to good ESG companies. This would reduce the amount of fossil fuel investments held by the Fund. Most of the Fund’s assets in BG were moved to a Paris Aligned Fund, the remainder around £180m would go to Merseyside as part of the substitution of IDeA funds.

In March it was noted that the Fund was valued at £2.3bn, slightly up from the previous quarter, although since that time the war in Ukraine had started. The performance report included progress on the asset allocation rebalancing agenda. The planned £171m invested in Harris had been sold and £61m had been invested in Aviva, the long lease inflation plus mandate. This resulted in the equity weighting reducing to 58% and once the IDeA substitution of funds was completed it would bring it back down to the target weighting of 50%. Since the report £57m had now been invested in Index Linked gilts, £95m invested in the Baillie Gifford DGF fund (multi asset fund). Benchmarking data showed that the Fund had done well over the 3 years and 5 years periods and was ahead of its peers on average. Both Baillie Gifford and Harris were still underperforming and Baillie Gifford were significantly behind by 14% in 1 year, which officers were monitoring. Harris tended to buy stock cheap and sell high whereas Baillie Gifford bought companies that should have good asset growth. London CIV were looking at a new value product.

The Fund had already disinvested from Standard Life and would get out of Insight shortly and use that money to get into the MAC (multi asset credit) fund. The Fund was looking at getting out of Ruffer, but that would happen over time There was nothing that really concerned the Pension Committee about the other fund managers.

The Pension Committee also took reports on

·         Corporate Governance Annual Report – PIRC (corporate governance advisor) set out what happened on the Fund’s voting record. The Fund voted on just under 10,000 resolutions in 2021 at 724 meetings, opposing 41.6% of renumeration reports. The Pension Committee had been pleased to see that for the first time gender diversity had improved on boards of FTSE 350 companies and executive committees of FTSE 100 companies which were now comprised of more than 33% of women, although more work needed to be done on senior board positions and chief executives. It highlighted that ESG skills were not covered on boards and made recommendations on that.

·         Voting Guidelines Report incorporated investment beliefs ensuring transparency and key tenants of the corporate code and good corporate governance code. Guidelines on broad structures renumeration, climate change and ESG issues. There were 3 voting policies to deal with the different markets - global, UK and US.

·         London Collective Investment Vehicle Progress Report – the London CIV had £14.6bn of assets under management. Total assets pooled by Client Funds were valued at £27.3bn and they expected 71% pooled by 2025. Mike O’Donnell, the Chief Executive Officer, had indicated that he was only going to stay on for another year. The London CIV wanted to achieve net zero by 2040 and achieve net zero across operational and supply chain emissions by 2025.

It was noted that London CIV 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. Officers would confirm if the trial covered the three scopes.

ACTION BY: Executive Director Corporate Services

·         Engagement report – LAPFF had 85 members and 7 pools and were largest contribution was to climate action.

·         Business Plan - This would be a very busy year for the Pension Committee due to the Triennial Valuation. Members of the Pension Committee and 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.

Training would be offered to all new Members of the Pension Committee and Pension Board on 6^th June 2022.

With regard to the impact of the situation in Ukraine, it was noted that the Fund overall only had 0.27% invested in Russia companies, which amounted to £6m out of £2.3bn. Officers had contacted all managers stating that Camden deplored the situation and asking what holdings they had in Russian companies. Harris had no holdings in Russian companies, Baillie Gifford had holdings in a bank and an IT company which only amounted to 0.7% and L&G (passive tracker) had 0.2% holdings. Baillie Gifford and L&G said that they were marking the assets down to zero and would sell them as soon as markets opened.

The Pension Regulator wrote to all schemes on 31^st March 2022 reminding them of their fiduciary duties as it was a balancing act to ensure that pensionable benefits were covered by assets, but at the same time did not want to be holding assets that were offensive or not in line with the Fund’s investment beliefs. Officers contacted LAPFF about this and they were in contact with companies like BP and Total whose investments were largely in oil. BP confirmed that they would sell their investment in a Russian oil company. Officers would inform LAPFF of the Pension Board’s concerns.

Pension Board members were of the view that the situation was deeply concerning from both a financial view and moral view. The Pension Board were aware of its fiduciary duty but in so far as possible would like to see action taken on the moral aspect.

The Pension Board asked the Committee to give some consideration to acting through LAPFF about Councils collectively using shareholders to put pressure on companies who continue to trade with Russia.

ACTION BY: Executive Director Corporate Services

The Pension Committee should also explore what Camden’s approach should be and communicate that to LAPFF and others.

ACTION BY: Executive Director Corporate Services

RESOLVED – 

THAT the contents of the report be noted.