The Chair paid tribute to his predecessor, Councillor John Horner, who sadly passed away on 10 May 2022. The Chair led a minute’s silence in remembrance of Councillor Horner.

Councillor Gifford praised the contribution made by Councillor Horner, stating that the Pension Fund was in a healthy position due in no small part to Councillor Horner’s knowledge and dedication.

The Chair stated that Councillor Horner was a diligent and highly respected chair with a strong grasp of detail as well as an understanding of the bigger picture. He would seek to follow Councillor Horner’s example

There were none.

None.

To consider the minutes of the meetings held on 7 March 2022 and 17 May 2022.

Resolved:

That the minutes of the meetings held on 7 March 2022 and 17 May 2022 be approved as a correct record and signed by the Chair.

There were no matters arising.

The Chair proposed that Councillor Bill Gifford be Vice Chair of the Sub-Committee and was seconded by Councillor Mandy Tromans.

There were no other nominations.

Resolved:

That Councillor Bill Gifford be appointed Vice Chair of the Pension Fund Investment Sub-Committee for the ensuing municipal year.

Martin Griffiths (Technical Specialist – Pension Fund Policy and Governance) introduced the report which provided updated governance information relating to Warwickshire Pension Fund’s forward plan, risk monitoring, training, and policy. He advised that, following discussion with officers, it was proposed to remove specific COVID-19 risk scores from the Risk Register as these risks would be included within the other general items within the Register.

In response to Councillor Millar, Martin Griffiths acknowledged that COVID-19 remained an ongoing threat, however, individual risks associated with the Pandemic had been allocated across specific risk categories.

Councillor Gifford suggested that a broader ‘pandemic’ risk be included within the Risk Register. It was impossible to predict when the next pandemic could occur, but the experience of COVID-19 demonstrated the importance of being prepared.

In response to Councillor Gifford, Chris Norton (Strategy and Commissioning Manager, Treasury, Pension, Audit and Risk) advised that employers’ ability to pay contributions was monitored closely. A register of ‘breaches’ was maintained, and action would be taken if an employer failed to meet their obligations. He stated that this was a very uncommon occurrence and information relating to employer contributions was regularly reported to the Local Pension Board.

In response to the Chair, Victoria Moffett (Lead Commissioner, Pensions and Investment) advised that risk scores were reviewed on a quarterly basis with a focus on long-term and short-term market risks. These were covered in the Quarterly Investment Monitoring Report (agenda item 8).

Resolved:

That the Sub-Committee notes the content of the report.

Philip Pearson (Hymans Robertson) presented the report which provided details of the Fund’s carbon exposure and sought approval for the adoption of a set of metrics against which carbon exposure could be measured and tracked.

In response to Councillor Millar, Philip Pearson advised that, in many circumstances, engagement with investment managers was a more effective means of lowering carbon emissions than divestment. By requesting details of a company’s plans to reduce carbon, and holding it accountable for delivery of the plan, long-term asset owners could act positively to lower emissions. If a company failed to engage or meet its targets, the Pension Fund could choose to withdraw its investment.

Councillor Millar underlined the importance of a defined timescale for this process. For example, a carbon-intense company could prevaricate and delay implementation of a carbon reduction plan. She asked if a definitive cut-off date would be mandated.

Philip Pearson advised that failure to deliver a carbon reduction plan would be an adequate reason for divestment. He stated that a plan should have tangible milestones to enable monitoring of its implementation. As soon as a commitment was not met, the manager or asset owner should divest. In practice, this could be challenging as it required considerable effort by investment managers to monitor the progress made by companies against carbon reduction plans.

Councillor Gifford expressed support for engagement with the backstop of divestment. He highlighted the importance of ensuring that investment managers act promptly to prevent ‘green washing’ by companies not fully committed to achieving their targets.

Bob Swarup (Independent Advisor to the Sub-Committee) highlighted the benefits of establishing a clearly defined governance framework for climate change which identified approaches to monitoring and oversight as well as risks and opportunities. He highlighted the areas of hidden risk, such as investment in infrastructure where there was an increased risk of flooding.

Anthony Fletcher (Independent Advisor to the Sub-Committee) stated that active investment managers were engaging with companies on behalf of the Pension Fund. However, there was a need to focus on passive investments which could otherwise be overlooked.

In response to Councillor Millar, Rachel Elwell (Chief Executive, Border to Coast Pensions Partnership) advised that Border to Coast Pensions Partnership (BCPP) had made a commitment to reach net zero by 2050. The Company was also a member of Climate Action 100+. She stated that BCPP was developing a roadmap to net zero carbon. Governance would be determined by a joint committee which would develop metrics to track carbon. A workshop would be held in July 2022 to set targets. Approval of the roadmap would be sought from the Company’s Board, prior its publication in October 2022.

Chris Hitchen (Chairman, BCPP) emphasised that effective governance was key to lowering emissions. He expressed support for engagement, stating that BCPP would engage with companies with the option of divestment if no progress was made.

Councillor Hammersley queried whether prioritisation of climate change considerations could present a barrier to the Fund’s principal responsibility, to act in the best financial  ...  view the full minutes text for item 4.

To consider passing the following resolution:

‘That members of the public be excluded from the meeting for the items mentioned below on the grounds that their presence would involve the disclosure of exempt information as defined in paragraph 3 of Schedule 12A of Part 1 of the Local Government Act 1972.’

Resolved:

That members of the public be excluded from the meeting for the items mentioned below on the grounds that their presence would involve the disclosure of exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972.

The Sub-Committee received a confidential briefing.

The Sub-Committee received a confidential briefing.

The Sub-Committee received a confidential briefing.

The Sub-Committee received a confidential briefing.

The Sub-Committee received a confidential briefing.

At 13:00, the Chair moved that the meeting continue beyond three hours’ duration. Councillor Gifford seconded the motion.

The motion was unanimously accepted.

The Sub-Committee received a confidential briefing.

To consider the exempt minutes of the meeting held on 7 March 2022.

Resolved:

That the exempt minutes of the meeting held on 7 March 2022 be confirmed as a true and accurate record and signed by the Chair.

There were no matters arising.

The meeting rose at 13:30.