Victoria Moffett, Lead Commissioner Pensions and Investment presented this report which set out the Business Plan for 2021/22, as approved by the Pension Fund Investment Sub-Committee in March 2021. The business plan included a Single Action Plan for the Fund as an appendix which simplified the business planning and monitoring arrangements. The Investment Strategy Statement was also a key planning document for the Fund and had been updated at the March 2021 Pension Fund Investment Sub Committee. It set out the Fund’s approach to investing, including the strategic asset allocation, investment mandates, the expected returns, investment risk, and investment governance. The covering report detailed the key changes. Chris Norton, Strategy and Commissioning Manager (Treasury, Pensions, Audit, Insurance, and Risk), noted that there was an error on page 16 of the report and the figures for members with a preserved benefit and retired or dependant members had been transposed: this would be corrected by the next publication.
In response to a question from the Chair, Victoria Moffett confirmed that approximately one-third of the fund’s value was invested through Border to Coast. Two thirds of the portfolio is expected to transfer to the Pool (with only passive equities and bonds remaining with Legal and General Investment Management (LGIM)). With regard to investment activity and the increase in mandates since 2005/06 from 6 to 19, the Chair commented on the challenges of having a greater number of fund managers. Victoria Moffett explained that several mandates had transferred to Border to Coast which had simplified the number of fund managers in one respect but that alternatives managers would stay in place for 7-10 years of the fund life and this would create some overlap in the portfolio with more than one manager.
Mike Snow asked about work to manage the expectations of employers that had declared a climate emergency and Victoria Moffett advised that there was a two phased approach in place. Firstly, employers would be surveyed by the end of April and the results would feed into the second phase which was to offer investment beliefs training to the Pension Fund Investment Sub-Committee in May which would seek to form a set of beliefs for the fund and explore whether there was an appetite to progress this agenda. Victoria Moffett noted that there was a need to strike a balance with the fund’s fiduciary duties but academic research suggested there was improved returns to be gained from ESG tilting although it was always difficult to assess how much carbon a company produced. The Chair commented further on how environmental, social and corporate governance (ESG) considerations should be taken into account in the selection, non-selection, retention and realisation of investments, quoting guidance from the MHCLG, and commented on the remit of the Board to keep a watching brief on the topic but that it could not give investment advice. Chris Norton, Strategy and Commissioning Manager (Treasury, Pensions, Audit, Insurance, and Risk), noted that the Board would be considering a report later in the meeting which addressed good governance developments including the potential representation of employers and members on the Pension Fund Investment Sub-Committee. With respect to climate change, he indicated that there should be congruence with the objectives of the fund and that some investment decisions could improve the Fund’s climate risk profile and/or also contribute to reducing climate change.
Resolved – that the Local Pension Board noted the Business Plan appended to the report at Appendix 1 and noted the Investment Strategy Statement appended Appendix 2 to the report.