Agenda and minutes
PDF 361 KBVenue: Council Chamber, Woodhatch Place, 11 Cockshot Hill, Reigate, Surrey, RH2 8EF
Contact: Angela Guest Email: angela.guest@surreycc.gov.uk
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APOLOGIES FOR ABSENCE AND SUBSTITUTIONS
Additional documents: Minutes: An apology was received from Duncan Eastoe.
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VOTE OF THANKS
Additional documents: Minutes: The Chairman informed the Committee that Phil Walker had stood down as the employee representative Member of the Committee and had been replaced earlier that week by Duncan Eastoe. The Committee thanked Phil Walker for his contributions to the work of the Committee over the years.
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MINUTES OF THE PREVIOUS MEETING - 16 JUNE 2023
To agree the minutes as a true record of the meeting. Additional documents: Minutes: The Minutes were approved as an accurate record of the previous meeting. |
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DECLARATIONS OF INTEREST
All Members present are required to declare, at this point in the meeting or as soon as possible thereafter (i) Any disclosable pecuniary interests and / or (ii) Other interests arising under the Code of Conduct in respect of any item(s) of business being considered at this meeting NOTES: · Members are reminded that they must not participate in any item where they have a disclosable pecuniary interest · As well as an interest of the Member, this includes any interest, of which the Member is aware, that relates to the Member’s spouse or civil partner (or any person with whom the Member is living as a spouse or civil partner) · Members with a significant personal interest may participate in the discussion and vote on that matter unless that interest could be reasonably regarded as prejudicial. Additional documents: Minutes: There were none. |
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QUESTIONS AND PETITIONS
To receive any questions or petitions.
Notes: 1. The deadline for Member’s questions is 12.00pm four working days before the meeting (4 September 2023). 2. The deadline for public questions is seven days before the meeting (1 September 2023). 3. The deadline for petitions was 14 days before the meeting, and no petitions have been received.
Additional documents: Minutes: There were no petitions.
There were four public questions submitted. These and the responses were published as a supplement to the agenda.
There were three supplementary questions:
1. Kevin Clarke asked on behalf of Jennifer Condit: - What has been the effect, if any, of the voting against BP and Shell? The LGPS Senior Officer stated that engagement takes place over a long period of time and in line with the Responsible Investment (RI) Policy.
2. Kevin Clarke stated that the reply to his question failed to acknowledge the action by the banks which he referred to as greenwashing. What was the evidence that engagement was effective? The LGPS Senior Officer stated that the engagement process is laid out in the RI Policy and any consequences would be reviewed in due course.
3. Lucianna Cole asked in relation to the net zero target if there was any scope to change the approach or to review interim targets? The Chairman stated that the target had only just been agreed by the Committee but would review annually.
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GLOSSARY, ACTION TRACKING AND WORKPLAN
An action tracker is attached, detailing actions from previous meetings. The Committee is asked to review progress on the item listed. Additional documents: Minutes: Resolved: That the Committee workplan and the action tracker be noted.
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CHANGE PROGRAMME UPDATE - QUARTER 2
This paper details the Change Team Quarterly Report for the period April – June 2023. Previously this update was included in the Service Delivery report for historical reasons. Given the extended scope of the Team this is now presented separately.
Additional documents: Minutes: Speakers: Nicole Russell, Head of Change Management Neil Mason, LGPS Senior Officer
Key points raised during the discussion:
1. The Head of Change Management introduced her submitted report and outlined the details of the one-team dashboard. 2. Members thought that the dashboard was a useful tool and thanked the Head of Change Management for the work and effort put into it.
Actions/ further information to be provided: None.
Resolved:
That the report be noted.
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SUMMARY OF THE LOCAL PENSION BOARD REPORT
This report provides a summary of administration and governance issues reviewed by the Local Pension Board (the Board) at its last meeting (28 July 2023) for noting or actioning by the Pension Fund Committee (the Committee). Additional documents: Minutes: Speakers: Tim Evans, Chairman of Local Pension Board Tom Lewis, Head of Service Delivery Neil Mason, LGPS Senior Officer
Key points raised during the discussion:
1. The Chairman of the Local Pension Board introduced the report of the Board and focussed on the implementation of MySurrey, the dashboard and cyber security. 2. A Member asked about the new financial system and the impact it was having on the Pension Service. The Head of Service Delivery explained that the MySurrey issues had led to member data, including pay data, not having been received since June 2023, when the May data was supplied (inline with the iConnect monthly data capture process). Whilst we had received leaver information, which was combined using 2 systems to produce the final years pay, this was not always on time and there was not 100% confidence all members employed by SCC and SCC Maintained Schools was being received. The launch of MySurrey had also meant new joiner information, opt outs or personal detail changes since its launch was not received. Work was being undertaken on a final solution for data coming across and to remove the need for Surrey payroll to use two systems to combine the information. A timescale of when this would be complete was not available at this time. 3. In addition to this, SCC has made the decision to stop its provision of payroll services to external schools or academies. This has led to over 100 employers, consisting of 6000 members moving to approx. 10 different payroll providers. Work was being undertaken with these employers and pay providers to make the transition smooth and ensure where possible, those currently providing monthly iConnect data continue to do so with their new provider. 4. A Member stated that the Resources and Performance Select Committee were looking at this issue and it had not had this level of information from the Pension Team and requested that it did. The Select Committee were already working with payroll. The LGPS Senior Officer pointed out that this was identified as a key risk in the report. 5. The Chairman of the Board requested a more in-depth report to the next Board meeting on the schools’ payroll issue.
Actions/ further information to be provided: That further information regarding the financial systems transformation be provided to the Resources and Performance Committee.
Resolved:
1. That the Local Pension Board be requested to progress the next steps in the cybersecurity and business continuity review. 2. That the Committee expressed their concern regarding the financial systems transformation and further updates be provided to the Chairman of the Committee and the Local Pension Board as soon as possible. 3. That the report be noted.
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APPOINTMENT OF AN INDEPENDENT CHAIR OF THE LOCAL PENSION BOARD
This report provides a summary of the steps taken to appoint the Independent Chair of the Local Pension Board. Additional documents: Minutes: Speakers: Nick Harrison, Chairman
Key points raised during the discussion:
1. The Chairman reported that Tim Evans had been appointed as Independent Chairman of the Local Pension Board for a period of four years.
Actions/ further information to be provided: None.
Resolved:
That the report be noted.
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INVESTMENT MANAGER PERFORMANCE AND ASSET/LIABILITIES UPDATE
This report is a summary of manager issues for the attention of the Pension Fund Committee (Committee), as well as an update on investment performance and the values of assets and liabilities.
Additional documents: Minutes: Speakers: Lloyd Whitworth, Head of Investment & Stewardship
Key points raised during the discussion:
1. The Head of Investment & Stewardship highlighted a few areas of the submitted report: · That the funding ratio was 138%. Members were reminded to consider that this could change rapidly both with investment returns and also changes with the discount rate impacting liabilities. · The most recent activity that had taken place was nearly £270m switched from LGIM passive funds to the Border to Coast Emerging Markets Equity Alpha offering. 2. In response to a Member question the Head of Investment & Stewardship explained how private market assets were valued and the limitations of benchmarks.
Actions/ further information to be provided: None.
Resolved:
That the main findings of the report in relation to the Fund’s valuation and funding level, performance returns and asset allocation be noted.
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DRAFT ANNUAL REPORT 2022/23
This report provides an update to the production of the 2022/23 Pension Fund Annual Report.
Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer
Key points raised during the discussion:
1. The LGPS Senior Officer gave a brief introduction to the draft Annual Report. He explained that CIPFA requirements made the report extensive, and officers continued to work within the guidance. 2. The Committee recognised the amount of work gone into the production of the report and thanked the staff.
Actions/ further information to be provided: None.
Resolved:
That the content of the draft Annual Report be noted and approval of the final version of the report be delegated to the Chairman, subject to an unqualified audit.
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INVESTMENT BENCHMARKING
The Fund’s investment returns and associated costs should be considered in relation to other pension funds, both private and Local Government Pension Schemes (LGPS).
Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer Fleur Dubbelboer and Joao Barata, representatives from CEM Rachel Elwell, Border to Coast Lloyd Whitworth, Head of Investment & Stewardship
Key points raised during the discussion:
1. CEM representatives presented their slide pack to the Committee. CEM Benchmarking are the Fund’s investment benchmarking consultant and have comparative data stretching back a number of years. The overall investment fees for the Fund were slightly higher than the peer group when adjusted for asset mix. The relatively high asset allocation to private markets within the Fund drives costs up as these products carry significantly higher fees compared to listed equities, but there is mitigation from the exposure to low fee passive products from Legal and General Investment Management (LGIM). However, the Fund pays less than peers for like for like assets. 2. There was discussion around private markets and that the Fund was paying higher fees than its peers for funds subscribed to in the past. Border to Coast explained that scaling of investments through pooling can give benefits in relation to fees. 3. CEM also reported that from March 2023 they would be looking more specifically at value generated and would be working with Border to Coast and other pools for analysis.
Actions/ further information to be provided: None.
Resolved:
That the report by CEM Benchmarking be noted.
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COMPANY ENGAGEMENT & VOTING
This report is a summary of various Environmental, Social & Governance (ESG) engagement and voting issues that the Surrey Pension Fund (the Fund), Local Authority Pension Fund Forum (LAPFF), Robeco, and Border to Coast Pensions Partnership (BCPP) have been involved in, for the attention of the Pension Fund Committee (Committee).
Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer Lloyd Whitworth, Head of Investment & Stewardship Rachel Elwell, Border to Coast
Key points raised during the discussion:
1. The Head of Investment & Stewardship gave a precis of the submitted report and highlighted the following points: 2. A Member stated that he noted the engagement with Shell and other fossil fuel companies in the report. With regard to the recent announcement from Church of England stating that they were divesting from fossil fuel companies that were not aligned with the Paris Agreement he asked if the Surrey Fund should be looking specifically at the fossil fuel sector and reporting separately on that. Both the Head of Investment & Stewardship and Border to Coast stated that the fossil fuel sector was definitely the focus of attention, and that engagement was key. Border to Coast were confident that engagement would lead to change. 3. A Member asked what was to happen at the end of Robeco’s human rights engagement programme and that it would be useful if the outcome be reported to the Pension Committee. Border to Coast explained the engagement process being conducted by Robeco and that at the end of three years if the engagement was not successful that did not automatically mean divestment. 4. A Member spoke about several companies listed in the report that appeared to be not taking steps to be Paris aligned. He questioned whether it was just tokenism to keep engaging and having no action from those companies. Border to Coast noted the comments made and would provide feedback to the LAPFF. 5. Further to this another Member spoke about obviation, delay and greenwashing, reflecting that if we were in a climate emergency then greater action should be taken. He claimed that none of the top 25 fossil fuel companies were Paris aligned. He requested that those that were greenwashing be reported on an individual basis in the portfolio so that Members could make a decision about future investment. 6. Following a detailed discussion about climate change, fossil fuel companies, processes etc a Member requested that the Committee receive a separate report on the world’s largest fossil fuel companies, the Fund’s involvement with them and the level of engagement. The LGPS Senior Officer stated that he would need to take that away and consider what was required. 7. In response to a Member question about what the LAPFF do, the Chairman responded that the LAPFF had been invited to attend the Annual Engagement in November to answer questions. 8. Steve Williams suggested a wording change to recommendation 1 with ‘significant’ replacing ‘fundamental’ as below: “That the ESG Factors were reaffirmed ... view the full minutes text for item 58/22 |
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ASSET CLASS FOCUS - UK REAL ESTATE & LISTED ALTERNATIVES
As part of good governance, the Committee periodically reviews the performance of the Fund’s investments. There is a further focused review of different asset classes. This paper concentrates on Real Estate. Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer Lloyd Whitworth, Head of Investment & Stewardship Anthony Fletcher, Independent Advisor, MJ Hudson
Key points raised during the discussion:
1. The Independent Advisor gave a precis of his submitted report. He was confident that CBRE were performing satisfactorily. He had also reviewed Border to Coast’s global property proposition and had come to the conclusion that there was not an exceptional investment to recommend transferring CBRE to Border to Coast. However, he was happy to support the transfer, reflecting the regulatory mandate and the Committee’s aim to move real estate investments into the pool.
Actions/ further information to be provided: That the Listed Alternative part of the report be brought to the next meeting for consideration.
Resolved:
That the Fund’s Real Estate holdings, respective funds’ investment performance and review from the Fund’s independent investment adviser be noted.
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RESPONSIBLE INVESTMENT UPDATE
The Fund continues to implement the agreed priorities of the Pension Fund Committee (Committee) in relation to the Responsible Investment (RI) policy, one of which was to analyse the equity fund manager’s current compliance and alignment with the policy. The Fund also continues to produce an annual Task Force on Climate-related Financial Disclosures, (TCFD), report ahead of mandated requirement.
Additional documents: Minutes: Speakers: Lloyd Whitworth, Head of Investment & Stewardship
Key points raised during the discussion:
1. The Head of Investment & Stewardship gave a brief precis of the submitted report. He emphasised the four committee priorities 1) setting a net zero date, 2) updating the voting policy, 3) comparing the Responsible Investment (RI) policy with those of the equity managers and 4) application of the UK Stewardship Code. The first two were complete and the report focussed on comparing and contrasting the RI Policy with that of equity managers. Overall, there was alignment with most of the beliefs except in the use of SDGs to underpin. The Stewardship Code was a huge piece of work that was progressing well. The second section of the report covered the Fund’s Report against the requirements of the Taskforce for Climate Related Financial Disclosures (TCFD). 2. One Member raised an issue with the introduction of the TCFD report in that it focussed on a comparison of the 2023 carbon intensity with the baseline 2018 figures. He pointed out that the 2023 figures were up on 2022. The Chairman stated that the matter is discussed in the body of the report, but he would look at the introduction to the report again with officers as part of the delegated authority to issue the final report. 3. There was some discussion about the metrics (Weighted Average Carbon Intensity WACI) used in the report Members queried if other metrics could also be used in order to have more comparators. The Head of Investment & Stewardship explained that there were issues with all metrics but felt that additional metrics would be included in the future.
Actions/ further information to be provided: None.
Resolved: 1. That the alignment of Border to Coast Pension Partnership (BCPP), Legal & General Investment Management (LGIM) and Newton Investment Management to the Fund’s RI policy be noted.
2. That the Draft TCFD 2022/3 report be noted and approve the delegation of authority to the Chair of the Pension Fund Committee to issue the final report.
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LGPS UPDATE (BACKGROUND PAPER)
This report considers recent developments in the Local Government Pension Scheme (LGPS).
Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer
Key points raised during the discussion:
1. The LGPS Senior Officer highlighted that a response had been sent to a further McCloud consultation.
Actions/ further information to be provided: None.
Resolved:
That the report be noted.
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EXCLUSION OF THE PUBLIC
Recommendation: That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of Part 1 of Schedule 12A of the Act. Additional documents: Minutes: Resolved: That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of Part 1 of Schedule 12A of the Act.
PART TWO – IN PRIVATE |
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INVESTMENT MANAGER PERFORMANCE AND ASSET/LIABILITIES UPDATE
Part 2 Annexe for item 9 attached.
Confidential: Not for publication under Paragraph 3 Information relating to the financial or business affairs of any particular person (including the authority holding that information)
Additional documents: Minutes: Resolved:
That the Part 2 annex to item 9 on the agenda (Minute 55/23) be noted.
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INVESTMENT BENCHMARKING
Part 2 Annexe for item 11 attached.
Confidential: Not for publication under Paragraph 3 Information relating to the financial or business affairs of any particular person (including the authority holding that information)
Additional documents: Minutes: Resolved:
That the Part 2 annex to item 11 on the agenda (Minute 57/23) be noted.
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INVESTMENT STRATEGY REVIEW - GILT INVESTMENT
The Pension Fund is reviewing its Investment Strategy in accordance with the 2022 valuation, taking into account its investment core beliefs and in line with the asset offerings of Border to Coast Pensions Partnership (BCPP). This paper presents analysis on the gilts exposure within the Fund.
Confidential: Not for publication under Paragraph 3 Information relating to the financial or business affairs of any particular person (including the authority holding that information)
Additional documents: Minutes: Speakers: Lloyd Whitworth, Head of Investment & Stewardship Steve Turner, Mercer
Key points raised during the discussion:
1. The Committee considered a Part 2 report whichpresented analysis on the gilts exposure within the Fund and proposals from Mercer.
Actions/ further information to be provided: None.
Resolved:
1. That the switch of the current gilt exposure, which is obtained through investment in individual gilts, into the Legal and General Investment Management (LGIM) Over 15 Year Gilts Index Fund, with a resultant weighting to align with the Investment Strategy Statement (ISS) be approved. 2. That the automated switch from the LGIM Over 15 Year Gilts Index Fund to the LGIM All Stocks Index-Linked Gilts Index Fund when the pre-defined conditions as laid out in the Mercer report are satisfied and therefore market pricing is more favourable be approved. 3. That the following switch criteria be approved:
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RESPONSE TO CONSULTATION ON THE FUTURE FOR INVESTING
To provide details of the Department for Levelling Up, Housing & Communities (DLUHC) consultation on the Next Steps for Investments for the Local Government Pension Scheme (LGPS) and the draft response from Surrey.
Confidential: Not for publication under Paragraph 3 Information relating to the financial or business affairs of any particular person (including the authority holding that information)
Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer
Key points raised during the discussion:
1. The Committee considered a Part 2 report which provided details of the Department for Levelling Up, Housing & Communities (DLUHC) consultation on the Next Steps for Investments for the Local Government Pension Scheme (LGPS) and the draft response from Surrey. 2. The LGPS Senior Officer referenced the training provided to committee members that morning and that he would speak with non-attendees outside of the meeting. 3. The Chairman highlighted the wording of the response to the consultation with regards to an opposition to the imposed consolidation of pools from the Government and asked the committee to approve that he work with the LGPS Senior Officer to strengthen that wording.
Actions/ further information to be provided: That the Chairman work with the LGPS Senior Officer to further strengthen the wording of the response.
Resolved: That the report be noted.
David Harmer left the room for two minutes at 1.56pm.
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BORDER TO COAST PENSIONS PARTNERSHIP UPDATE
Border to Coast Pensions Partnership (BCPP) is now an established fully regulated asset management company when the authorised contractual scheme (ACS) went “live” on 26 July 2018. The Surrey Pension Fund started transitioning assets in quarter four of 2018 and continues this through 2023. This paper provides the Pension Fund Committee (Committee) with an update of current activity being undertaken by BCPP.
Confidential: Not for publication under Paragraph 3 Information relating to the financial or business affairs of any particular person (including the authority holding that information)
Additional documents: Minutes: Speakers: Neil Mason, LGPS Senior Officer Rachel Elwell, Border to Coast Chris Hitchen, Chair, Border to Coast
Key points raised during the discussion:
1. The Committee considered a Part 2 report which gave an update of current activity being undertaken by the Border to Coast Pensions Partnership (BCPP). 2. The Chairman of Border to Coast stated that they were moving to a different stage of the pooling journey and now was the time to consider the future.
Actions/ further information to be provided: None
Resolved:
That the Committee noted the background and progress of BCPP activity, including details of the following:
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PUBLICITY OF PART 2 ITEMS
To consider whether the item considered under Part 2 of the agenda should be made available to the Press and public. Additional documents: Minutes: Resolved: That items considered under Part 2 of the agenda should not be made available to the Press and public.
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DATE OF NEXT MEETING
The next meeting of the Surrey Pension Fund Committee will be on 15 December 2023. Additional documents: Minutes: The next meeting of the Surrey Pension Fund Committee will be on 15 December 2023.
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