Agenda and minutes

There were none.

There were none.

To confirm the minutes of the meeting held on 13 June 2022.

Resolved:

That the minutes of the meeting held on 13 June 2022 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 meetings of 2 February 2022 and 26 April 2022.

Victoria Moffett (Lead Commissioner – Pensions and Investment) introduced the report which provided updated governance information relating to Warwickshire Pension Fund’s forward plan, risk monitoring, training, and policy. She highlighted the changes that had been made to the Risk Monitoring Chart, including an increased climate change risk. This had been upgraded following discussion at the previous meeting of the Sub-Committee, and in recognition that climate change was moving at an accelerated pace.

In respect of climate change risk, Councillor Millar queried the statement that “the Fund on its own can have limited impact on what happens globally.” She emphasised the symbolic value of divestment, which had been a subject of many letters and emails from members of the public.

Victoria Moffett advised that the highest category of risk had been allocated to climate change. It would not be possible to upgrade the risk status; however, the wording could be amended to reflect this point.

Councillor Gifford stated that he had also received a high number of letters and emails calling for divestment from carbon-intense companies. He emphasised that this was a reasonable request; however, it was debatable whether divestment would lead to a better outcome than engagement with investment managers. By engaging, the Pension Fund was able to exert influence. If a company failed to engage or meet agreed targets, the Fund could withdraw its investment.

The Chair stated that he had received a high amount of correspondence relating to divestment. He would draft a statement in response emphasising the advantages of engagement and share this document with members of the Sub-Committee. He highlighted that relatively few companies were responsible for the highest proportion of emissions globally. However, a much larger number of companies made use of their services.

Councillor Gifford highlighted the importance of seeking a commitment from companies to achieve net zero carbon. This was not restricted to big fossil fuel companies, but any company that used fossil fuels to some extent. He suggested that the Chair’s statement include reference to the Fund’s commitment to investing in renewable energy.

Councillor Millar emphasised the actions that the Pension Fund could take to hasten the end of the fossil fuel era. As an activist shareholder, the Pension Fund could seek to mitigate the harm caused by climate change. She emphasised that for many people, the effects of climate change would result in uncomfortable conditions for retirement.

In response to the Chair, Andy Felton (Assistant Director, Finance) advised that the proposed Responsible Investment Policy reflected the principle that divestment was not purposeful if there was scope to exert influence to reduce carbon impacts. To do so, it would be necessary to secure a measurable commitment for carbon reduction. He advised that there were other investors willing to step in if the Pension Fund chose to divest and these investors would not seek to challenge companies on their environmental practices.

Councillor Millar emphasised the importance of maintaining a strong focus on engagement with investment managers to ensure that the Responsible Investment Policy  ...  view the full minutes text for item 3.

Bob Swarup (Independent Advisor to the Sub-Committee) presented this report which provided a six-monthly update on factors influencing the Pension Fund from a macroeconomic perspective. He advised that the report had been produced for the postponed 12 September 2022 meeting. Therefore, it did not include details of recent economic turbulence.

Bob Swarup advised that:

·       Rising inflation would impact on households; mortgage rates had doubled and were likely to remain high. The impact of inflation was difficult to predict, leading to increased volatility. This would affect growth.

·       The geopolitical landscape was unsettled. Geopolitical divides were evident between western nations, Russia and China, and nations that had chosen not to introduce sanctions against Russia in response to the invasion of Ukraine. This would impact upon supply chains, potentially leading to increased costs and higher inflation.

·       The Pension Fund was an ‘All Weather Fund’, capable of withstanding unfavourable economic and market conditions.

·       In the S&P 500, valuations were highly reliant on intangible assets.

·       In the USA, there was evidence of increased political polarisation on Environmental, Social, and Governance (ESG) investment principles.

In response to the Chair, Bob Swarup advised that the threat of war was high compared to the relatively benign conditions of recent times. The Fund was capable of withstanding unfavourable economic conditions, but it would be important to understand geopolitical dynamics to make informed investment choices.

In response to the Chair, Bob Swarup advised that consistency in cashflow provided protection for the Pension Fund. This would be a focus of the next update.

Anthony Fletcher (Independent Advisor to the Sub-Committee) advised that the government’s use of Liability Driven Investment (LDI) strategies had introduced volatility, leading to pressure on pension funds. In time, this would impact upon the types of assets that pension funds chose to hold.

Resolved:

That the Pension Fund Investment Sub-Committee notes the report.

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.

To confirm the exempt minutes of the meeting held on 13 June 2022.

Resolved:

That the exempt minutes of the meeting held on 13 June 2022 be confirmed as an accurate record and signed by the Chair.

There were no matters arising.