Agenda and draft minutes

Surrey Pension Fund Committee - Friday, 12 March 2021 10.00 am

Venue: Remote via Teams

Contact: Angela Guest  Email: angela.guest@surreycc.gov.uk

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83/21

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

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    Minutes:

    Apologies were received from David Mansfield and Charlotte Morley.

84/21

MINUTES OF THE PREVIOUS MEETING [11 DECEMBER 2020] pdf icon PDF 257 KB

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    To agree the minutes as a true record of the meeting.

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    Minutes:

    The Minutes were approved as an accurate record of the previous meeting.

85/21

DECLARATIONS OF INTEREST

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    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.

86/21

QUESTIONS AND PETITIONS pdf icon PDF 558 KB

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    To receive any questions or petitions.

     

    Notes:

    1.  The deadline for Member’s questions is 12.00pm four working days before the meeting (8 March 2021).

    2.  The deadline for public questions is seven days before the meeting (5 March 2021).

    3.  The deadline for petitions was 14 days before the meeting, and no petitions have been received.

     

    Additional documents:

    Minutes:

    There were six questions from members of the public.  These and the responses were published as a supplement to the agenda.  Summary of supplementary questions included:

     

    1.    Jenifer Condit acted as representative for Simon Hallett who asked a detailed question around whether or not it was believed that external organisations were green washing or just prudent risk managers.  The Chairman stated that this was asking for his opinion which he could not give and pointed out that later in the meeting was to be a report from Border to Coast that shows that they are taking ESG very seriously. Simon was asked to email his question to the pension team for a written response.

    2.    Jenifer Condit stated that she was concerned about the Committee’s engagement policy.  One part in particular was to do with voting on a motion for Shell to disclose targets to be in line with the Paris Agreement.  In the years 2017-19 the Fund voted for the motion but in 2020, abstained from supporting it.  What was the rationale?  The pension team to give a written response.

    3.    Helena Ritter asked if the Committee were aware of the Net Zero Investment Framework and would they engage with Border to Coast to encourage them to apply to the framework?  The Strategic Finance Manager (Pensions) stated that they and Border to Coast were aware of the framework and that it was under consideration.

    4.      Pat Smith stated the BP were investing £53.2 billion in fossil fuels and renewables and gave examples of why the Committee should divest from BP, for example they were not agreeing to Paris and ignoring engagement. Therefore what more did the Committee need to instruct Border to Coast to instruct managers to divest from BP?  In response, the Chairman stated that the Committee believed in engagement rather than divesting and that divesting from any company was not the right way forward and just pushed the problem elsewhere.  The Chairman went on the say that managers would be aware of the issues she raised and that it was down to them to engage or divest.

    5.    Ian Chappell stated that as of end of December the Fund Manager Newton held £1.1m of shares in Suncore and that this was a worst in class company.  Therefore, why does the Fund continue to invest in Suncore?  The Chairman responded that the Committee did not instruct managers to invest or divest but gave them an overriding set of principles linked to the Investment Strategy and that he would arrange for a written response from the Investment Manager.

    6.    Janice Baker stated that she could not see from the response to the original question that there was any sense of urgency in getting down to this and asked what are the outcomes of the analysis and what were the target outcomes and asked for a timeframe.  The Chairman responded that the Committee were aware of stranded assets and pointed Janice to a later report on the agenda for the  ...  view the full minutes text for item 86/21

87/21

BUSINESS PLAN 2021/22 pdf icon PDF 287 KB

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    The Pension Fund Committee are asked to approve the draft Business Plan.

    Additional documents:

    Minutes:

    Speakers:

    Neil Mason, Strategic Finance Manager (Pensions)

     

    Key points raised during the discussion:

     

    1.    The Strategic Finance Manager (Pensions) introduced the Business Plan which provided the operational framework for the Pension Fund Committee to agree and deliver its strategic objectives for investment, funding, governance and delivery.  He highlighted the additions to the business plan which were laid out in paragraph eight of the report.  He also explained that the Mission Statement had been amended to make it clearer as laid out in the annex to the report.

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    1.    That the proposed amendments to the Committee’s Mission Statement was approved.

    2.    That the Business Plan 2021/22, as provided as annex 1 to the submitted report, was approved. 

     

     

     

88/21

COMPANY ENGAGEMENT AND VOTING pdf icon PDF 437 KB

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    This report is a summary of various Environmental Social & Governance (ESG) issues that the Surrey Pension 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.

    Additional documents:

    Minutes:

    Speakers:

    Mamon Zaman, Senior Pensions Finance Specialist

    Anthony Fletcher – Advisor

    Neil Mason, Strategic Finance Manager (Pensions)

     

     

    Key points raised during the discussion:

     

    1.    The Senior Pensions Finance Specialist highlighted the following paragraphs of the submitted report:

    ·         Paragraph 10 that explained Robeco had begun a new engagement programme following the introduction of the new Net Zero Company Benchmark by Climate Action 100+. 

    ·         Paragraph 19  that explained the Impact Investing Principles for Pensions are set of Principles designed to assist pension schemes navigate and respond to the significant shift in understanding of environmental, social and governance (ESG) risks and opportunities.  There were two new principles adopted which were set out in annex 1 to the report.

    ·         Paragraph 23 which explained the Say on Climate Initiative that was designed to address the issue that both investors and companies have, as of yet, not made significant enough progress to manage the low carbon transition.

    2.    In response to a question the Senior Pensions Finance Specialist stated that Team had pushed beyond capabilities, given the resources available, in order to make things happen.

    3.    The Strategic Finance Manager (Pensions) also pointed out that engagement was undertaken collaboratively with Border to Coast and therefore took a consensual position on the Pension Funds.

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    The Committee reaffirmed that ESG Factors are fundamental to the Fund’s approach, consistent with the Mission Statement through;

    ·         Continuing to enhance its own Responsible Investment Approach, its Company Engagement policy, and SDG alignment

    ·         Applauding the outcomes achieved for quarter ending 31 December 2020 by Robeco in their Active Ownership approach and the LAPFF in its Engagement with multinational companies as at 31 December 2020.

    ·         Support the Say on Climate Initiative and approve Officers to work with Fund Managers and BCPP in adopting the actions

    ·         Support the Impacting Investing Principles for Pension Schemes.

89/21

INVESTMENT CORE BELIEF IMPLEMENTATION UPDATE pdf icon PDF 249 KB

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    Surrey Pension Fund is reviewing its investment strategy with a view to ensuring that it is in line with its Mission Statement and the emphasis on environmental, social and governance (ESG) considerations, in the wider context of the United Nation’s Sustainable Development Goals (SDGs).

     

    Additional documents:

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason - Strategic Finance Manager (Pensions)

    Anthony Fletcher - Independent Advisor

     

    Key points raised during the discussion:

     

    1.    The Strategic Finance Manager (Pensions) highlighted various parts of the submitted report including:

    ·         The work to incorporate SDG metrics in selecting, monitoring and evaluating investment managers as described in paragraphs 8-13 of the submitted report. That whilst the WBA SDG 2000 benchmark was helpful in establishing a starting position, it did not currently have a sufficiently mature data set to provide a completely reliable metric for the ongoing evaluation and monitoring of investment managers across all 17 UN SDGs.

    ·         As part of its pooling commitment, the Fund had embarked on transitioning all of its actively managed listed and legacy unlisted assets to Border to Coast. In the future all assets will be managed by Border to Coast, with only indexed assets excluded from this commitment. The Fund’s current provider of indexed assets is LGIM, therefore, the work to develop SDGs into an engagement framework for companies will concentrate on LGIM and Border to Coast.

    2.    The Investment Advisor stated that companies could not remain investable unless they were moving the right direction.  Surrey had pushed to get Border to Coast moved up the agenda.

    3.    Members noted that LGIM had been long term leaders in this field and that Border to Coast had only a few years and were having to move very quickly without the resources of LGIM.

    4.    Members were also pleased that a data driven approach was being taken and of the progress made.  Thanks were extended to officers.

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    1.    That the progress against the actions agreed in the Pension Fund Committee meeting of 11 December 2020 be noted.

     

90/21

LOCAL BOARD REPORT pdf icon PDF 327 KB

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    This report provides a summary of administration and governance issues reviewed, or approved, by the Local Pension Board at its meeting that require noting or action by the Pension Fund Committee.

    Additional documents:

    Minutes:

    Speakers:

    Mr Nick Harrison, Chairman Surrey Local Pension Board

    Neil Mason, Strategic Finance Manager (Pensions)

     

    Key points raised during the discussion:

     

    1. Mr Nick Harrison introduced the Local Pension Board report that summarised administration and governance issues reviewed by the Local Pension Board at its last meeting for noting or action by the Pension Fund Committee.
    2. Some of the highlights included:

    ·         The re-procurement of the IT software platform which was won by Heywood Aquilla.

    ·         The effect of Covid on the performance of death benefit payments.

    ·         That the team had performed well with the annual benefit statements and that an audit was in progress on some elements.

    ·         The administration team were to focus on transfers in and out.

    ·         The Board were impressed with the detail and coverage of the Communications Policy and recommend that the Committee adopt it.

    ·         The Board had requested that MIFID training be incorporated into the Training Plan.

    ·         The Exit Cap had been temporarily revoked by Government which the Board were happy about.

    ·         The Board’s Terms of Reference had been amended in that the quorum was now three members, rather than four, which kept it in line with other council committees.

    3.    The Strategic Finance Manager thanked the Board for their support on the significant number of legacy issues.

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    1. That the quorum amendment to the Local Pension Board Terms of Reference be agreed.
    2. That the notes of the informal Local Pension Board meeting of 11th February 2021 were noted.
    3. That the following changes to the risk register (Shown as Annexe 3): risks (A8), Head of Pension Administration leaving, (A20) and moving out of County Hall (A22) in the Administration Risk Register (background paper) be approved.

    4.    That the conflicts between the Restriction of Public Sector Exit Payments Regulations 2020 and the Local Government Pension Scheme Regulations 2013 have, at least temporarily, been resolved. The Government has disapplied the exit cap and promised to revoke it in due course; however, it is still looking at ways of reducing exit payments be noted.

     

91/21

REVISED TRAINING POLICY pdf icon PDF 225 KB

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    This report introduces the pension fund training Policy for approval.

    Additional documents:

    Minutes:

    Speakers:

    Ayaz Malik - Pensions Finance Specialist

    Mr Nick Harrison, Chairman Surrey Local Pension Board

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised during the discussion:

    The Pensions Finance Specialist introduced the report that set out the Pension Fund training policy. 

    The Chairman of the Surrey Local Pension Board stated that he thought that the Pension Board’s comments had not been taken into consideration and would discuss this outside of the meeting.

    The Strategic Finance Manager reported that MIFID training would be incorporated.

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    1.    That the training policy, with the inclusion of MIFID training, be approved and that all members should prioritise attendance at training events wherever practicable was agreed.

    2.    That the Pension Fund Committee formally review the training policy on an annual basis noting that it could be updated at any time.

     

     

92/21

INVESTMENT PERFORMANCE AND FUNDING REPORT pdf icon PDF 1 MB

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    This report is a summary of all manager issues that need to be brought to the attention of the Pension Fund Committee, as well as an update on investment performance and the values of assets and liabilities.

     

    Annexes 2 and 3 are Part 2 papers at item 12.

    Additional documents:

    Minutes:

    Speakers:

    Mamon Zaman - Senior Pensions Finance Specialist

    Neil Mason - Strategic Finance Manager (Pensions)

    Anthony Fletcher - Independent Advisor

     

    Key points raised during the discussion:

     

    1.    The Senior Pensions Finance Specialist gave a brief introduction to the report which set out manager issues that needed to be brought to the attention of the Pension Fund Committee, as well as an update on investment performance and the values of assets and liabilities.

    2.    Members commented that the fund was fully funded which was good and that contributions were kept stable regardless of the funding position.

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    1.    That the main findings of the report in relation to the Fund’s valuation and funding level, performance returns, asset allocation and performance fees be noted.

93/21

VOTE OF THANKS

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    The Chairman thanked the Vice Chairman, the Pensions Team, Democratic Services and the Advisors for their work and support to the Committee and to him as Chairman.

     

    11.49am: The Committee adjourned for three minutes for a comfort break.

     

     

94/21

EXCLUSION OF THE PUBLIC

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    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.

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    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

95/21

INVESTMENT PERFORMANCE AND FUNDING REPORT

Minutes:

Speakers:

Anthony Fletcher - Independent Advisor

Neil Mason - Strategic Finance Manager (Pensions)

Andrew Stone, Border to Coast

 

Key points raised during the discussion:

 

  1. The Strategic Finance Manager (Pensions) introduced the Part 2 annexes of the Part 1 report that detailed manager and performance issues and highlighted the funding level.
  2. Part 2 minutes [E-6-2021].

 

Actions/ further information to be provided:

None.

 

Resolved:

 

See Minute 92/21.

 

96/21

INVESTMENT STRATEGY IMPLEMENTATION

Minutes:

Speakers:

Neil Mason - Strategic Finance Manager (Pensions)

Anthony Fletcher - Independent Advisor

Steve Turner,

Andrew Stone, Border to Coast

Sam Wereford, Border to Coast

 

Key points raised during the discussion:

 

  1. The Senior Pensions Finance Specialist introduced a Part 2 report that detailed progress on the implementation of recommendations agreed at previous meetings of the Committee.

2.    See exempt minute [E-7-2021]

 

Actions/ further information to be provided:

None.

 

Resolved:

 

See exempt minute [E-7-2021]

 

Tony Elias left the meeting at 12.23pm during discussion of this item.

 

97/21

BORDER TO COAST UPDATE

Minutes:

Speakers:

Rachel Elwell, Border to Coast

Neil Mason - Strategic Finance Manager (Pensions)

Mr Nick Harrison, Chairman Local Pension Board

 

 

Key points raised during the discussion:

 

1.    The Strategic Finance Manager (Pensions) introduced a Part 2 report.  Rachel Elwell, Border to Coast gave a slide presentation to the Committee.

2.    See Minute [E-8-21]

3.    The Strategic Finance Manager (Pensions) thanked the Chairman and Committee for their support during their term of office.

4.    The Vice Chairman thanked the Chairman for the inclusive way in which the Committee was run.  He also thanked the Strategic Finance Manager (Pensions) and the Independent Advisor.

 

Actions/ further information to be provided:

None.

 

Resolved:

 

1.    That the shareholder approval of the Border to Coast Strategic Plan 2021-24 Border to Coast Strategic Plan be noted. 

 

All external invitees left the meeting.

98/21

PROVISION OF INVESTMENT ADVICE AND CONSULTATION SERVICES

    This Part 2 report is consistent with the Fund’s investment objectives.

     

    Minutes:

    Speakers:

    Neil Mason - Strategic Finance Manager (Pensions)

     

    Key points raised during the discussion:

     

    1.    The Committee discussed this Part 2 report that set out the current arrangements for investment consultancy services and independent investment advice.  The contract for investment consultancy was due to expire in April 2021.

    2.    See Exempt Minute [E-9-21].

     

    Actions/ further information to be provided:

    None.

     

    Resolved:

     

    1.    That officers be authorised to explore the most efficient way of procuring investment consultancy and independent advice services, in consultation with the Chairman.

99/21

PUBLICITY OF PART 2 ITEMS

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    To consider whether the item considered under Part 2 of the agenda should be made available to the Press and public.

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    Minutes:

    Resolved:

     

    That no Part 2 papers be released to the public.

     

100/21

DATE OF NEXT MEETING

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    The next meeting of the Surrey Pension Fund Committee will be on [  ].

    Additional documents:

    Minutes:

    The date of the meeting was noted.