Agenda item

Report for the Director of Finance

The Director of Finance submitted the Responsible Investment and Engagement Report to the Panel, which included the Climate Stewardship Plan for 2022/23 and the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report.

The Panel heard that Fund officers had been working towards finalising the UK Stewardship Code Compliance Statement. This was to be presented for approval at the Pensions Committee meeting due to be held on the 31 March 2023, with a view to submitting the final document to the Financial Reporting Council (FRC) once approval had been received.

The Panel was informed that the quarterly report normally received from LGPS Central would be included as part of their own submission of the UK Stewardship Code Compliance Statement to the FRC and this would be brought to the Pensions Panel meeting due to take place in June 2023.

As part of the annual Climate Stewardship Plan work, officers were tasked with engaging with nine companies that were identified as being responsible for the majority of the Fund’s climate related risk. To date eight of the nine companies had been engaged with and details of the engagement that had been carried out was presented in Appendix 1 to the report. Efforts continued to be made to engage with the outstanding company and more details would be brought back to a future Pensions Panel meeting. Similar work had been undertaken with the Portfolio Managers, but it was explained why it was more difficult to engage with certain managers although efforts were still being made to do so. Members heard that a meeting had been scheduled to take place between the Fund and several of its equity managers in May 2023, where climate risk would be discussed.

The Director presented the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report. Key areas highlighted included the engagement around Human Rights and the complexities experienced, specifically when attempting to engage with various large organisations, most notably BHP and Vale. Reference was also made to the article relating to Drax Group plc, which ran the UK’s largest power plant, specifically around its business model where, instead of coal, the plant burns imported wood pellets, creating concerns about sustainability flow and the removal of a near-term living carbon sink. This example was cited in contrast to the use of pellets made from waste products, used by a company in which one of the Fund’s sustainable infrastructure managers had recently invested. Pensions Panel Members were encouraged to read the report as it highlighted the good work LAPFF continues to do in engaging with organisations on behalf of its members.

The Panel noted the value of the co-ordination of organisations such as LGPS Central and LAPFF, as the influence that could be generated by a larger voice was considered very useful. It was noted that LAPFF focussed on the themes of Human Rights and Climate Change, and it was suggested that some influence could be put on LGPS Central to concentrate on themes that are important to the Fund. The Panel was informed that LGPS Central already included Climate Change and Human Rights in its stewardship themes prioritised for engagement. It was explained that LGPS Central engaged with its Partner Funds when deciding upon future themes and it was confirmed that Panel members could be asked to provide input to this request in the future.

The Chair gave a brief update on the annual Responsible Investment Conference which took place in Bournemouth. This covered a wide range of ESG topics but had a particular focus on Human Rights and Climate Change. It was suggested that this was a worthwhile and engaging conference, which included some interesting panel debates.

Resolved: That the content of the Responsible Investment and Engagement report, including the Climate Stewardship Plan for 2022/23 (Appendix 1) and the Local Authority Pension Fund Forum (LAPFF) Quarterly Engagement Report (Appendix 2), be noted.