Agenda and minutes

Apologies for absence were received from County Borough Councillor L Hooper.

To receive disclosures of personal interest from Members in accordance with the Code of Conduct

Note:

1.     Members are requested to identify the item number and subject matter that their interest relates to and signify the nature of the personal interest: and

2.   Where Members withdraw from a meeting as a consequence of the disclosure of a prejudicial interest they must notify the Chairman when they leave.

Cllr Geraint Hopkins declared a personal interest in that he was part of the Local Authority Pension Scheme.

To receive the minutes of the previous meeting of the Pensions Fund Committee held on 13^th December 2021.

It was RESOLVED to approve the minutes of the 13 December 2021 as an accurate reflection of the meeting.

To receive a presentation from LAPFF on responsible investment and engagement.

Members of the Committee received Mr K Bray and Ms T Younger who, through the aid of a PowerPoint presentation, provided Members with details of the role and structure of the LAPFF incorporating ‘responsible investing, protecting shareholder value.’ Members were provided with an overview of the role and structure of LAPFF, areas of concern with specific reference to environmental, social and governance concerns and the priorities going forward. Following the presentation Members questioned the LAPFF representatives, on how the companies were prioritised, in respect of climate engagement, as there must clearly be resource constraints.

The LAPFF representative explained one way was holdings-based engagement, with LAPFF members asked yearly for their holdings. In addition there was also a work plan, with a draft work plan already issued for the coming year. This allowed for Member input into the work plan on what areas are most effective for LAPFF to address.

Members recognised that decarbonisation would be a challenge for some sectors. The LAPFF representative explained that whilst some sectors were called hard to abate sectors she liked to point to ArcelorMittal, who had started using renewables and green hydrogen and was often given as a good example of how they had managed to reduce the time frame.

Members noted LAPFFs involvement in metrics and goals and asked for clarification. The LAPFF representative explained that the Climate Action 100+ Net Zero Company Benchmark provided a very useful set of 10 metrics to really try and simplify and to try and get a consistency of analysis of it. In effect it was having short term goals, having them science based. This was about learning along the way, in terms of science based targets, as of the 40,000 listed companies in the world, only 200 had them, so there was a lot of progress to be made on that.

Upon conclusion of the item the Chair thanked the representatives for their informative presentation to the meeting.

It was RESOLVED to note the content of the presentation.

“That the press and public be excluded from the meeting under Section 100A(4) of the Local Government Act (as amended) for the following agenda item of business - Item 5 on the grounds that it involves the likely disclosure of the exempt information as defined in paragraph 14 of Part 4 of the Schedule 12A of the Act”.

RESOLVED: Members RESOLVED “That the press and public be excluded from the meeting under Section 100A(4) of the Local Government Act (as amended) for the following item 5 of business on the grounds that it involves the likely disclosure of the exempt information as defined in paragraph 14 of Part 4 of the Schedule 12A of the Act”.

To receive a presentation from the operator and the fund manager solution provider of the Wales Pension Partnership (WPP).

Members received a presentation from representatives at Link and Russell Investments.

Upon conclusion of the presentation members RESOLVED to note the update

The Service Director – Pensions, Procurement and Transactional Services provided Members with details of the Fund Governance and Strategy documents which fell within the remit of the Committee as detailed in the terms of reference. At 4.3, Table 1 set out the documents reviewed on an annual basis. Those updated were included as Appendices 1 - 5. He noted that it was not his intention to go through them all but provide a brief update in terms of where the reports had been updated.He noted that these had been circulated across the Pension Board, who he thanked for their contributions and would ensure they were all updated accordingly. The main updates where in relation to some changes with the Department of Levelling Up, Housing and Communities (DLUHC), so some name changes within the context of all the documents.

It was RESOLVED to approve the fund governance and strategy documents and authorised officers to update accordingly.

The Director Finance and Digital Services presented the report to members which set out the key issues being addressed as delegated functions, as specified in the Pension Fund Governance Policy Statement. He referred members to the performance of the fund detailed at the table in 4.3 of the report explaining that during the quarter ending 31st December 2021, the overall value of the Fund increased from £4,744 million to £4,819 million.  In terms of the fund performance the quarter itself whilst positive in overall terms, was negative in relative terms. In terms of the fund compared to benchmark, the 3-year performance remained well ahead off the benchmark by 2.8% annualised ahead of benchmark.

He continued that in terms of the Baillie Gifford global core equity portfolio outperformed the rolling 3 year rolling benchmark achieving a return of 22.2% against a benchmark of 13.1%. This was held outside of the pool and continued to provide significant added value.  71% of the fund was currently held within pooled assets, and the asset allocation de-risking strategy and initial exposure to the infrastructure product with Black Rock was now in progress.  In terms of Carbon exposure, Baillie Gifford, had clearly transitioned there WPP portfolio to the Paris aligned. Black Rock passive equity continued to be held in the low carbon tracker and the global opportunities sub fund continued to benefit from the carbon reduction overlay which was in place. The WPP creation of the sustainable equity fund will provide further options with regard to ongoing divestment from carbon and the ongoing transition to sustainable infrastructure which will see a further reduction in equity holdings overall.  Active management along with engagement, was a positive contributor to support effective carbon transition with Managers instructed to represent the views and in this regard continue to work with Rebecco as voting and engagement partner and LAPFF.

The Service Director Pensions, Procurement and Transactional Services continued through the report starting at 5.0 and highlighting at 5.1, recent amendments to the Public Service Pensions and Judicial Officers Bill, had expanded the McCloud remedy eligibility in the LGPS. This inevitably made the application more challenging and the data collection, including individuals who had transferred to private sector funds. At 5.2 he referenced changes to legislation around the ‘Normal Minimum Pension Age’ (NMPA), changing from 55 to 57 in 2028. This impacted the scheme and the pension protection age would be adjusted accordingly.  5.3 linked to the similar theme into the exercise around the state pensionable age and when those reviews are scheduled for. The second such review had been launched and must be published by 7 May 2023. The outcome of the review would be looked at closely, because it clearly linked to the LGPS scheme in relation to people’s retirement age and clearly linked in with the liability and costs within the fund in terms of people taking their pension.

The Service Director Pensions, Procurement and Transactional Services continued at 5.4 and highlighted that it was anticipated that there would  ...  view the full minutes text for item 33.

The Service Director Finance and Improvement Services presented the report and referred members to the Risk Register attached at Appendix 1 for their consideration.  He advised members that the Pension Fund Risk Register provided an overview of the arrangements in place to manage the risk to the fund. The Risk Register was then presented to the quarterly meetings of the Investment and Administration Advisory Panel for further review, challenge, and agreement. Following agreement of the updated register, it was published on the Fund Website. The register was also reviewed by the Pension Board, as part of their role in supporting the Fund’s overall governance arrangements.

The Risk Register contained 38 risks with 1 High Risk, 16 Medium Risks and 21 Low Risks, which was unchanged since the December 2021 meeting. There has been an update to one risk score and company narrative and this was included on page 119 within the investments category and the particular risk covers the financial markets being supressed by the economic climate. So the risk description for this particular area has been updated to reflect the geopolitical instability as a result of the situation in Ukraine. Other risk impact scores had been increased to take account of this position, with the overall score being revised to 25, up from 16 that was reported in December 2021.

A Member noted the red and the comment but was not sure anyone knew how high the risk would go, as it appeared be increasing daily, so something that needed a watchful eye kept on it.

RESOLVED: Members noted the contents of the report.

The Senior Accountant Pensions and Treasury Management provided an update and progress for Members with regard to the Wales Pension Partnership (WPP) and Joint Governance Committee (JGC). She advised that the last meeting of the JGC was held on the 1st December and 3.3 of the report contained the hyperlink to access the agenda.

The Senior Accountant Pensions and Treasury Management then took Members through 3.4 of the report and provided further information in relation to several points.

Committee were provided with an update in terms of the next steps/priorities. Firstly, it was to commence development of Private Market Sub-Fund. Secondly the work on Procurement of Private Debt and Infrastructure allocators was concluding and the JGH would then approve the allocator appointments on 23rd March 2022. Those sub funds would then be developed, approved and launched, although it was unlikely this would be concluded until December 2022 because of the illiquid nature of these assets.

In terms of other key areas, virtual training sessions continued with the next session scheduled for the 22nd March 2022 which would include Board and Committee Members. The topics would include good governance and costs transparency. In addition the web continued to be updated with relevant news and publications.

The Senior Accountant Pensions and Treasury Management touched on 3.5, the sustainable equity fund and explained that work was ongoing to set out and scope the sub fund, with the help of Russell Investments. The next meeting would take place virtually, on the 23rd March 2022.

A Member referred to the Woodford case and sought reassurance in relation to Link.

The Director of Finance & Digital Services explained that the Local Authority had sought to get as much assurance directly from Link. Link were cooperating with the FCA and the Regulators on it and it needed to run its course.  Assurance had been given, irrespective of the outcome and the relationship with WPP would continue to operate as is.

The Senior Accountant Pensions and Treasury Management noted that Burges Salmon had been taken onboard as legal advisors. They were already working on these, but noted the assets were actually in WPP’s name, so Link didn’t have any control over assets registered in the WPP name, so wouldn’t be ring fenced to Link at all.

The Chair noted that this was the last meeting before the Elections and thanked Members of the Committee and the Pension Board, and all Officers, for all the hard work put in.

RESOLVED: Members noted the update.

To consider any urgent items as the Chairman feels appropriate.

None received.