Agenda and minutes

There were no declarations of interest on this occasion.

RESOLVED – That the minutes of the Meeting of the Pensions Panel held on 30 November 2021 be confirmed and signed by the Chairman.

Wednesday 8 June 2022 (2pm)

Tuesday 6 September 2022

Tuesday 6 December 2022

Tuesday 7 March 2023

All meetings are scheduled to start at 9.30am at County Buildings, Stafford unless indicated otherwise.

 RESOLVED – That the dates of future meetings of the Panel, as set out below, be noted:

·       Wednesday 8 June 2022 (2pm)

·       Tuesday 6 September 2022

·       Tuesday 6 December 2022

·       Tuesday 7 March 2023

(Note: All meetings are scheduled to start at 9.30am unless indicated otherwise). 

Report of the Director for Corporate Services and the County Treasurer (S151)

The Panel received a joint report of the Director for Corporate Services and the County Treasurer seeking approval to the Staffordshire Pension Fund’s (‘the Fund’), Annual Investment Strategy (AIS) for the investment of internally managed cash.

They were informed that, under the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016, Administering Authorities were required to include policies for how they would manage Pension Fund cash as part of their Investment Strategy Statement (ISS). However, the Fund considered it good practice to prepare a separate Annual Investment Strategy (AIS) for cash balances, with reference made to it within the ISS.

The Panel noted that the Pension Fund had a small strategic asset allocation to cash of 1%, recognising that cash balances were needed for the day-to-day management of the Pension Fund. This cash was managed by Officers in the County Council’s Treasury and Pension Fund Team, to provide liquidity and pay bills as they arose.  The management of this cash would continue to remain with the Fund and would not be transferred to LGPS Central Ltd under the LGPS pooling agenda.

The cash held increased from time to time, pending investment in other major asset classes e.g., property and private debt. The proposed AIS therefore needed to allow for such situations occurring and the Panel would need to review the strategic asset allocation benchmark to cash on a quarterly basis, together with any associated ranges.

The proposed main objectives for the AIS were to invest cash prudently, and to have regard to the security and liquidity of its investments before seeking the highest rate of return, or yield. The objective when investing cash was to strike an appropriate balance between risk and return, thereby minimising the risk of incurring losses from defaults but also taking into account the risk of receiving unsuitably low investment income.

To allow for the practical management of the treasury transactions each day, it was proposed that the change in investment limits and the choice over the investments made be delegated to the County Treasurer (S151 Officer), who chairs the County Council’s Treasury Management Panel. Outside of this, the Pensions Panel would need to assess any specific requirements and consider any changes that may be required to the AIS.

The Panel noted that DLUHC Guidance on Local Government Investments specified the types of financial instruments that local authorities could invest in. The Fund’s AIS had followed the county Council’s AIS in dividing investments between Standard and Non-Standard Investment categories.  Standard Investment categories included investments that were made with approved counterparties and did not require further approval from the County Treasurer (S151), as Chair of the Treasury Management Panel or the Pensions Panel. These investments tended to be for a period of less than a year and were the most frequently used. In the case of the Pension Fund, Standard Investments were made with the UK Government (central government or local authority, parish council or community council); short-term money market funds (MMFs); and the Fund’s  ...  view the full minutes text for item 41.

Report of the Director for Corporate Services

The Director for Corporate Services submitted a summary of the performance of the Staffordshire Pension Fund, together with a portfolio of the Fund’s investments, as at 31 December 2021.

The Panel were informed that, at 31 December 2021, the Fund had a market value of £7.0 billion, its highest reported value to date.  Over the quarter the Fund returned 5.1%, which was a marginal underperformance of 0.1% versus the Fund’s Strategic Asset Allocation benchmark return of 5.2%. The best performing asset class relative to its benchmark was Private Equity, returning 9.7% over the quarter against a benchmark return of 3.0%. Property was a detractor from performance along with the overallocation to cash during the quarter.

The Panel also noted that the Fund had outperformed its Strategic Asset Allocation benchmark return over a 3, 5 and 10-year period. Annualised returns over 10 years were 10.7% per annum, well above the investment return assumptions used by the Actuary as part of the triennial valuation.

RESOLVED - That the Pension Fund Investment performance and the portfolio of investments for the quarter ended 31 December 2021 be noted.

Report of the Director for Corporate Services

The Director for Corporate Services submitted a summary of activity during the quarter by the Fund’s investment managers, in fulfilment of their corporate governance and socially responsible investment obligations, including details of their voting activity on corporate resolutions for companies held in their portfolios.

The Panel also received the Fund’s Climate Stewardship Plan (Appendix 1); and the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report (Appendix 2). 

The Panel were informed that, in February 2022, the Pensions Committee approved the Fund’s first Climate Change Strategy (CCS) which sets out the Fund’s approach to managing the risks and opportunities presented by climate change, with the ultimate aim of achieving a net-zero carbon investment portfolio by 2050. To guide and monitor the Fund’s decarbonisation roadmap, a series of 2030 targets were included in the CCS.  A new Climate Stewardship Plan for 2022/23 was approved by the Pensions Committee, alongside the Fund’s CCS, in February 2022. Engagement activity would be reported against the new Climate Stewardship Plan, from the June 2022 Pensions Panel. 

The Panel were informed that, as the Fund appointed external investment managers, engagement with individual companies was delegated to those managers and the investment managers of pooled funds, in which the Fund also invested (e.g., LGPS Central Funds) and jointly as part of LAPFF. Information on manager engagement and voting was requested routinely as part of the quarterly reporting the Fund received from each of the managers. In Q4 2021 engagement topics included:

•       Meeting with a major online retailer to discuss human rights issues,     such as warehouse safety and controls around facial recognition.

•       A conference call with a scientific technologies company over      governance issues and human rights issues. The manager gained   reassurances that there were procedural measures in place to ensure    their products did not end up in the wrong hands.

•       Filing a shareholder proposal at a pharmaceutical companies’ AGM requesting public disclosure of how government funding was being       considered in the pricing of its Covid 19 vaccine.

•       Meeting with a multi-national bank to discuss its climate strategy.

With regard to the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report, the Director highlighted the United Nations  17 Sustainable Development Goals and the engagements which LAPFF had undertaken in respect of achieving progress towards those goals.

With regard to the Quarterly Stewardship Report from LGPS Central Limited, the Panel were informed that there was no report this quarter and that LGPS Central’s Stewardship activities for the quarter ending December 2021 would be covered within their Annual Statement of Compliance for the UK Stewardship Code, which was submitted annually in April, and would be reported to the June 2022 Pensions Panel.

The Panel raised the issue of the Russian invasion of Ukraine and enquired as to the level of exposure the Fund had to Russian markets and what instructions should be given to Fund Managers with regard to those funds.  In response, the Director indicated that exposure to those markets was less than 0.1% of  ...  view the full minutes text for item 43.

RESOLVED - That the public be excluded from the meeting for the following items of business which involve the likely disclosure of exempt information as defined in the paragraph of Part One of Schedule 12A of the Local Government Act 1972 (as amended) indicated below.

PART TWO

The Panel then proceeded to consider reports on the following issues:

(exemption paragraph 3)

(Exemption paragraph 3)

      (Exemption paragraph 3)

(Portfolio Evaluation report for the quarter ended 31 December 2021 attached for information)

(Exemption paragraph 3)

(Exemption paragraph 3)

(Exemption paragraph 3)

a)             Economic and Market Update

b)             Strategic Asset Allocation review outcome

c)             Review of Position as at 31 December 2021

(Exemption paragraph 3)

(Exemption paragraph 3)

a)             Property Portfolio Investment Strategy for 2022/23

b)             Property investment recommendations