Agenda item

Responsible Investment & Engagement (RI&E) Report Quarter 4 2023/24

Report of the Director of Finance

Minutes:

The Director of Finance submitted the Responsible Investment and Engagement Report to the Panel, which included the Climate Stewardship Plan for 2023/24, the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report and the LGPS Central Quarterly Stewardship Update.

 

The Panel was reminded that the Q42023 Stewardship Report which was not received from LGPS Central at the Panel meeting in March 2024, was included as part of LGPS Central’s submission for the 2023 UK Stewardship Code Compliance Statement to the Financial Reporting Council (FRC). A link to this report was now available and provided to the Pensions Panel for information  LGPS Central Annual Stewardship Report 2023.

 

Climate Change Strategy

 

In March 2023, the Pensions Committee approved the Fund’s updated Climate Change Strategy (CCS) which set out the Fund’s approach to managing the risks and opportunities presented by climate change, with the aim of achieving a net-zero carbon investment portfolio by 2050.

 

It was noted that there would be several agenda items at the Pensions Committee meeting being held on the 28 June 2024, which would focus entirely on climate change and the Fund’s Climate Risk report, in particular the Fund’s decarbonisation roadmap, and the specific set of 2030 targets that had been included in the CCS. It was noted that the Fund was likely to have achieved some of its targets earlier than anticipated, so next steps would need to be considered, but these would form a part of the Actuarial Valuation and Strategic Asset Allocation review that would be taking place later in 2024 and 2025.

 

Climate Stewardship Plan and Engagement

 

No additional engagements were presented as part of the Climate Stewardship Plan (CSP) this quarter. Whilst the CSP was a good addition to the Fund’s climate reporting it had not been as useful as first anticipated. As a result, it had been agreed that there would not be a CSP for 2024/25, but instead Officers would work with LGPS Central on a new sustainability monitoring service. This would have a wider scope than just Climate Change and this would be reported to Members at a future meeting. There would also be an opportunity to discuss this product further at the Pensions Training Day taking place on the 5 July 2024, where LGPS Central are presenting on Stewardship and Engagement.

 

Other areas of engagement undertaken by the external investment managers related to Modern Slavery, Climate Change and Plastic Reduction.

 

The LAPFF Quarterly Engagement Report was presented to the Panel. Key areas highlighted included LAPFF’s engagement with UK banks, HSBC and Barclays, over climate change and lending to fossil fuel companies, LAPFFs meeting with the Chief Financial Officer at United Utilities to discuss the company’s plans for reducing overflows, and LAPFFs engagement with luxury goods companies in relation to Human Rights.

 

LGPS Central Quarterly Stewardship Report Q1 2024

 

The Panel was reminded that LGPS Central had introduced four engagement priority themes which had been developed in conjunction with Partner Funds, these are ‘Climate Change’, ‘Natural Capital’, ‘Human Rights’ and ‘Sensitive/Topical Activities’. The four themes were now reflected in their Quarterly Stewardship Report. It was noted that there was still some work to be done to refine the report, and the Fund would feed back to LGPS Central to help to develop it.

 

The Panel received the usual quarterly updates from its investment managers on details of votes cast on corporate resolutions. Carolan Dobson highlighted the 4,248 resolutions that had been voted against, or abstained from, by Legal and General and insisted that it would be impossible for Legal and General to know what each of these resolutions relate to. Whilst it was acknowledged that, in global markets, this wouldn’t have a major impact, it would have significant impact in the UK market. It was agreed that Fund Officers would contact Legal and General  and ask them to provide information and context on the level of management resolutions either voted against or abstained on.

 

Councillor Colin Greatorex highlighted the four priority themes that had been implemented by LGPS Central and suggested that the topic of “Sensitive/Topical Activities”, was too general, and hoped that it would become more focussed on specific topics as it became more developed.

 

Resolved: That the content of the Responsible Investment and Engagement report, including the Climate Stewardship Plan (Appendix 1), the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report (Appendix 2), and the LGPS Central Annual Stewardship Report 2023 and Quarterly Stewardship Update (Appendix 3), be noted.

 

Supporting documents: