Agenda and minutes

To appoint a Chair of the Pension Fund Investment Sub-Committee for the 2023/24 municipal year.

Councillor Sarah Millar proposed that Councillor Christopher Kettle be Chair of the Sub-Committee and was seconded by Councillor Mandy Tromans.

There were no other nominations.

Resolved:

That Councillor Christopher Kettle be appointed Chair of the Pension Fund Investment Sub-Committee for the ensuing municipal year.

To appoint a Vice Chair of the Pension Fund Investment Sub-Committee for the 2023/24 municipal year.

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

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.

Apologies were received from Councillor Bill Gifford.

There was none.

To consider the minutes of the meetings held on 6 March 2023 and 16 May 2023.

Resolved:

That the minutes of the meetings held on 6 March 2023 and 16 May 2023 be approved as a correct record and signed by the Chair.

There were no matters arising.

Resolved:

That the Pension Fund Investment Sub-Committee notes the minutes of the Local Pension Board meeting of 31 January 2023.

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. The report also included details of the revised Investment Strategy Statement (ISS) which had been reviewed and updated by Hymans Robertson. The Sub-Committee was asked to consider and approve the revised ISS.

Martin Griffiths highlighted the commentary in the report relating to the Training Plan. He asked members to contact him if they had any specific training requirements that should be added to the Plan. He highlighted the ‘Fundamentals’ online training course and requested that members confirm if they had completed this training.

In response to the Chair, Martin Griffith advised that the Risk Register (appendix 5 of the report) included some formatting errors meaning that risk scores had been omitted in two categories. A revised version would be provided following the meeting.

In response to Councillor Millar, Martin Griffiths stated that Artificial Intelligence (AI) constituted an emerging risk. The Council’s Information Governance Team provided quarterly advice to the Pension Fund which included an assessment of risks associated with AI. There was an awareness of developing concerns in this area.

In response to the Chair, Victoria Moffett (Lead Commissioner – Pensions and Investment) advised that the steps taken to mitigate risk under the category of ‘long term asset values do not meet expectations’ had been judged to be sufficiently robust to warrant an impact rating of four (rather than five). The measures in place meant that it would be possible to anticipate problems prior to there being any serious impact on the Fund.

In respect of the risk category ‘short term asset values do not meet expectations’, Victoria Moffett advised that a risk likelihood rating of five had been set due to ongoing geopolitical risks and economic uncertainty. For the category of ‘liabilities cannot be met’, an impact rating of four had been determined as it was considered that robust measures to mitigate risk were in place.

The Chair expressed confidence in the risk ratings and the explanations provided by officers. He sought the Sub-Committee’s views on the updated ISS.

In response to Councillor Hammersley, Victoria Moffett advised that a triennial cycle was in place to review the Investment Strategy. However, annual reviews were also undertaken as part of this process.

Councillor Hammersley highlighted that statement within the ISS that the “Committee is aware that the Fund has a need to take investment risk to help it achieve its funding objectives”. As the Fund had performed well in recent times, he queried whether there was a need to take on additional risk.

Victoria Moffett advised that the Fund continued to accept new members which created a requirement to continue to accrue benefits to ensure that the Fund would be able to meet future obligations.

In response to the Chair, members unanimously agreed to approve the recommendations of the report.

Resolved:

That the Pension Fund Investment Sub-Committee:

     1.          Notes the items  ...  view the full minutes text for item 5.

James Glasgow (Hymans Robertson) introduced the report which provided details of the Fund’s exposure to Climate Risk. He highlighted that climate data was only available for 52% of the Fund’s assets. This was the proportion of listed or public assets. The report did not include data for private assets funds. However, it was expected that private asset funds’ reporting would improve over time. He stated that the report was based upon latest data from December 2022. However, for metrics that were only reported annually, it had been necessary to refer to data from March 2022. He advised that fund managers provided reporting data in different formats which made making a clear comparison between funds more difficult. It was expected that there would be improved consistency across managers’ reporting in future.

James Glasgow drew members’ attention to the chart on page 4 of the Hymans Robertson report which showed emissions intensity against Assets Under Management (AUM) for which reporting data was available. Emerging markets produced the highest levels of carbon emissions; however, they constituted a small proportion of the overall Fund. The largest contributor was the Legal and General Investment Management (LGIM) RAFI Fund. He suggested that decarbonisation of this fund be prioritised. The Border to Coast Pensions Partnership (BCPP) Global Equity Alpha Fund also showed high carbon emissions. However, it was noted that the manager had made good progress in reducing emissions intensity.

Referring to BCPP funds, James Glasgow highlighted the comparative data provided on page 5 of the report. It was promising that UK Listed Equity Alpha metrics showed a reduction in Weighted Average Carbon Intensity (WACI) from 81 in March 2021 to 61 in March 2022. However, there had been a 4% increase in portfolios with ties to fossil fuels. There was a need to focus on this area to achieve a reduction. For BCPP Global Equity Alpha metrics, there had been an uplift in the percentage of portfolios owning clean technology solutions, and a reduction in the percentage of portfolios with ties to fossil fuels.

James Glasgow advised that climate risk analysis for LGIM funds showed a mixed picture. Emerging Markets funds accounted for the highest WACI exposure. However, there was a need to view this proportionately across the entirety of the LGIM Fund. The LGIM UK Equity fund was found to have a higher carbon impact than its comparable benchmark. He emphasised that the benchmark data shown on page 10 of the report was for illustration only, some of the differences between the fund and the benchmark shown could be attributed to differences in underlying assets rather than a drift away from the benchmark. LGIM had been asked to provide clarification.

Councillor Millar praised the quality of the report and the work that had gone into preparing it. She emphasised that as the report covered only 52% of the Fund’s assets, there was a large proportion of the Fund for which climate data was not known. She suggested that efforts be made to apply pressure to  ...  view the full minutes text for item 6.

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 held a confidential discussion.

The Sub-Committee held a confidential discussion.

The Sub-Committee held a confidential discussion.

The Sub-Committee held a confidential discussion.

The Sub-Committee held a confidential discussion.

To consider the exempt minutes of the meeting held on 6 March 2023.

Resolved:

That the exempt minutes of the meeting held on 6 March 2023 be approved as an accurate record and signed by the Chair.

There were no matters arising.