Councillors and committees

Agenda and minutes

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

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Items
No. Item

42/22

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

    Additional documents:

    Minutes:

    Apologies were received from Phillip Walker.

     

    Tim Evans, Chairman of the Surrey Local Pension Board, attended the meeting.

     

     

43/22

MINUTES OF THE PREVIOUS MEETING [17 June 2022] pdf icon PDF 348 KB

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

    Additional documents:

    Minutes:

    The Assistant Director – Local Government Pension Scheme (LGPS) Senior Officer highlighted to members that the People, Performance and Development Committee had approved the appointment of the Independent Chairman of the Local Pension Board.

     

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

44/22

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.

45/22

QUESTIONS AND PETITIONS pdf icon PDF 379 KB

    To receive any questions or petitions.

     

    Notes:

    1.  The deadline for Member’s questions is 12.00pm four working days before the meeting (05/09/2022).

    2.  The deadline for public questions is seven days before the meeting (02/09/2022).

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

     

    Additional documents:

    Minutes:

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

     

    1.    Jennifer Condit asked on behalf of Lucianna Cole: was it the council’s intention to publish all of the replies, including replies that were supplemental to filling out the questionnaire.

     

    The Chairman responded that it was normal practice to publish the replies received including the supplementary replies provided in the free-format box and additional letters or emails. The LGPS Senior Officer stated that detail would be confirmed on how the responses could be accessed. 

     

    In regard to the consultation questionnaire, Cllr Williams stated that various points of concern had been raised on the consultation process during discussion at the previous meeting on the timing, nature of the consultation and the possibility of one of more public consultation events. When reading the consultation questions, Cllr Williams stated that he had come to the view that the consultation was a sham and should be restarted. There were also two questions that had been raised and discussed at committee which were not included on the consultation form. This included 1. Do you believe that the Surrey Pension Fund should take immediate steps to divest from fossil fuels? And 2. At what point should the Surrey Pension Fund aim to become a net-zero carbon fund. Should it be 2030, 2035, 2040 or 2050. Cllr Williams stressed that these questions should be included and that the consultation process should be stopped and restarted.

     

    The Chairman confirmed that, following comments made by members of the committee, and as the consultation had already begun, item 16 would be discussed in public. Cllr Potter was concerned that the item was originally due to be held in private, and stressed that he did not agreed with the decision to launch the consultation prior to approval from the Committee, and furthermore, that the consultation was not delayed due to the death of Her Majesty The Queen.

     

    2.    Jennifer Condit asked on behalf of Kevin Clarke: Mole Valley was not any employee but rather one of the 11 district and borough councils and as an employer it contributed over £2 million to the scheme last year and employees contributed over £600,000 and therefore the district council’s view should have some weight, rather than just referring them to the public consultation on the policy. Furthermore, the fact that the policy did not specify a net-zero carbon date would mean that they would not find an answer within the consultation that aligned with their view.

     

    The Chairman responded that they were asking all employers for input and that all feedback was important. All feedback would be taken into account and a response would be provided following the end of the consultation.

     

    Cllr Williams reiterated the need to restart the consultation and also stated that there could be a need for a specific consultation between the district and boroughs within Surrey.

     

    Cllr Potter raised concern that an  ...  view the full minutes text for item 45/22

46/22

FORWARD PLAN AND ACTION TRACKING pdf icon PDF 120 KB

    An action tracker is attached, detailing actions from previous meetings. The Committee is asked to review progress on the items listed. 

    Additional documents:

    Minutes:

    Speakers:

    Neil Mason, LGPS Senior Officer

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer highlighted that the forward plan was currently showing only the next two meetings as the items included were reliant on the approval of the 2023/24 business plan.

    2.    In regard to A8/21, Cllr Potter stated that they would prefer that year-on-year progress regarding responsible investments (RI) was still included within future annual reports, however noted that it may not be possible to provide details within this year’s annual report as development of the RI policy was ongoing. The LGPS Senior Officer stated that this would be explored as part of the implementation of the RI policy.

     

    Resolved:

     

    The Committee noted the report.

     

47/22

LOCAL PENSION BOARD REPORT pdf icon PDF 420 KB

    This report provides a summary of administration and governance issues reviewed by the Local Pension Board (the Board) at its last meeting for noting or action by the Pension Fund Committee.

    Additional documents:

    Minutes:

    Witnesses:

    Tim Evans, Independent Chairman of the Local Pension Board

     

    Key points raised during the discussion:

     

    1.    The Independent Chairman introduced the report and stated that the board continued to be assiduous in its questioning of officers regarding the governance and administration of funds. Attention was drawn to the revisions of the risk register, and completion of the turnaround programme.

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Committee accepted the changes to the risk register.

     

48/22

INVESTMENT MANAGER PERFORMANCE AND ASSET/LIABILITIES UPDATE pdf icon PDF 777 KB

    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.

     

    NB: Part 2 annex at item 13

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer introduced the report and provided a brief overview. 

    2.    Cllr Harmer asked how the discount rate was managed in the current circumstances. The LGPS Senior Officer confirmed that the evaluation had considered the long-term interest rate and inflationary elements. In addition, the investment strategy review, investment consultants and actuaries were working towards cashflows in light of current inflationary pressures.

    3.    Cllr Williams asked, in view of the rapidly changing economic environment, when the current algorithm for trends in long term interest rates was set and whether there was an intention to reset it. The LGPS Senior Officer said this information would form part of the update and evaluation report once the evaluation was approved by the committee.

    4.    Cllr Potter said there was no room for complacency in the current climate.

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Pension Fund Committee noted the main findings of the report in relation to the Fund’s valuation and funding level, performance returns and asset allocation.

49/22

COMPANY ENGAGEMENT & VOTING pdf icon PDF 417 KB

    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.

     

    NB: Part 2 annexes 4 and 5 at item 14

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

    Lloyd Whitworth, Head of Investment & Stewardship

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer and Head of Investment & Stewardship introduced the report and provided a brief overview. The report could be found from page 59 of the agenda.

    2.    The Committee thanked officers for the comprehensive report.

    3.    In regard to engagement, Cllr Potter asked whether there were any cases where engagement had concluded and escalation was being carried out. The Head of Investment & Stewardship said that they could ask Border to Coast whether there were any specific areas on this. Legal and General did have a list of companies where they take exclusion and it was believed that there were 13 companies who would claim to be in that position. Furthermore, Members noted that, during the last annual review, Legal and General had excluded one additional company.

    4.    The Chairman highlighted that Legal and General’s website included information on companies that had been excluded and the reasons why.

    5.    Cllr Williams asked for more information on the Corporate Action resolution category. The Head of Investment & Stewardship agreed to provide information outside the meeting.

     

    Actions/ further information to be provided:

     

    Action A4/22 - In regard to engagement, Cllr Potter asked whether there were any cases where engagement had concluded and escalation was being carried out. The Head of Investment & Stewardship said that they could ask Border to Coast whether there were any specific areas on this.

     

    Action A5/22 - Cllr Williams asked for more information on the Corporate Action resolution category. The Head of Investment & Stewardship agreed to provide information outside the meeting.

     

    Resolved:

     

    The Pension Fund Committee:

    1.    Reaffirmed that ESG Factors were fundamental to the Fund’s approach, consistent with the Mission Statement through:

    a)    Continuing to enhance its own Responsible Investment approach, its Company Engagement policy, and SDG alignment.

    b)    Acknowledging the outcomes achieved for quarter ending 30 June 2022 by Robeco in their Active Ownership approach and the LAPFF in its Engagement with multinational companies as at 30 June 2022.

    c)   Noting of the vote by the Surrey Pension Fund in the quarter ended 30 June 2022.

     

50/22

ANNUAL REPORT 2021/22 pdf icon PDF 111 KB

    This report provides an update to the production of the 2021/22 Pension Fund Annual Report.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer introduced the report and provided a brief summary. Members noted that the report provided an update to the production of the 2021/22 Pension Fund Annual Report.

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Pension Fund Committee noted the content of the draft Annual Report, shown as Annex 1, and that the final version of the report was to be completed in consultation with the Chair.

     

     

51/22

2022 VALUATION pdf icon PDF 230 KB

    This report provides an update to the 2022 triennial valuation including a report from the Fund actuary, Hymans Robertson.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer introduced the report and provided a brief summary. Members noted that the valuation was on track and that a meeting was scheduled with larger employers to discuss early results which included Boroughs, Districts, the Police and Surrey County Council.

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Pension Fund Committee noted the report from Hymans Robertson, on the approach to the revisions to the Funding Strategy Statement, included as Annex 1 of the report.

     

     

52/22

LGPS UPDATE (BACKGROUND PAPER) pdf icon PDF 301 KB

    This report considers recent developments in the LGPS.

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer introduced the report and provided a brief summary. Members noted that Government had launched the consultation on TCFD for the Local Government Pension Scheme (LGPS) and that a response would be provided and shared with the Chairman of the Committee.

    2.    The LGPS Senior Officer stated that training courses on Fundamentals, and a government seminar run by the Scheme Advisory Board, were recommended for members of the Committee and also members of the Local Pension Board. Members were asked to contract the pension team for more information. 

    3.    The Chairman stated he had requested officers include a summary of key points for attention within future reports.

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Pension Fund Committee noted the report.

     

    Chairmans comments on agenda order

     

    The Chairman informed the Committee that, following comments made by Members, Items 15, 16, 17 and 20 would be considered in public.

     

    Cllr Potter raised concerns with the reasoning behind initially deciding to consider items 15, 16, 17 and 20 in private and requested clarification on the category selected to describe the reason for considering the information exempt. The Member went on to stress the democratic importance for marking information exempt only when necessary. The Chairman confirmed that the information had been marked exempt under Paragraph 3, which was for information relating to the financial or business affairs of any particular person (including the authority holding that information). The Member further stated that Part 2, Paragraph 8 of Schedule 12A of the Local Government Act 1972 gave exemptions to Paragraph 3 (exempt information category) and that the council was possibility acting unlawfully by considering the item’s cover reports as exempt information. The LGPS Senior Officer stated that he would speak with Legal and Democratic Services to discuss reasons for report publishing exemptions going forward.

     

    Cllr Williams felt it was unfortunate that the public had not been able to access the previously exempt reports prior to the meeting, and requested that future exempt reports were provided with clear justification for their exemption. The Chairman stated that going forward justifications would be provided, and that the unrestricted reports from the meeting would be published within a supplementary agenda.

53/22

ASSET CLASS FOCUS - REAL ESTATE pdf icon PDF 210 KB

    As part of good governance, the Committee periodically reviews the performance of the Fund’s investments.

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

    Lloyd Whitworth, Head of Investment & Stewardship

    Anthony Fletcher, Independent Advisor

     

    Key points raised during the discussion:

     

    1.    The Head of Investment & Stewardship introduced the report and provided a brief summary. Officers stated CBRE were doing well and, this year, their presentation was better than in the previous year. Officers however stated that CBRE had presented the Global Fund as of the end of March 2022, and the UK Fund as of the end of June 2022, which made comparison difficult with the volatility of Sterling through recent years. It was felt that for future reporting periods it would be helpful if CBRE could report on the same 12 month period. In regard to Board to Coast, officers started there is a proposal to offer a global solution, similar to CPRE’s approach, and a UK solution, which was considered attractive by officers, however there was still work to do to ensure it was a lower cost solution.

    2.    In regard to the proposed property fund, a Cllr Potter asked whether there would be the right balance of Global property investments and UK property investments and whether the Fund would have an input into the decision. The LGPS Senior Officer confirmed there was currently a 50% allocation to the UK and a 50% allocation to Global and that this was being reviewed as part of the Investment Strategy. Furthermore the Funds officers and advisors would be involved in the process and one of the conditions prior to any transition would be to receive a suitability report from, the investment consultant, Mercer. Members further noted a formal decision would be brought to a future Committee meeting on how much to allocate.  

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Committee noted the Fund’s Real Estate holdings, respective funds’ investment performance and review from the Fund’s independent investment adviser.

     

     

54/22

RESPONSIBLE INVESTMENT POLICY UPDATE pdf icon PDF 218 KB

    This paper provides details of the progress made in developing the Surrey Pension Fund’s (the Fund’s) standalone Responsible Investment (RI) Policy.

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

    Lloyd Whitworth, Head of Investment & Stewardship

    Mel Butler, Investment Strategy Manager

    Amanda Jupp, Communications and Training Manager

     

    Key points raised during the discussion:

     

    1.    The Head of Investment & Stewardship introduced the report and provided a brief summary. Officers noted the consultation had started in the previous week and would run for six weeks and complete on 23 October 2022. Around 110,000 people were being engaged by email. Full details would be found in the supplementary agenda published on 24 September 2022.

    2.    Members noted that the Responsible Investment Policy was approved at the Pension Fund Committee meeting of 17 June 2022, subject to consultation.

    3.    Cllr Wlliams stated the launch of the consultation was inappropriate as it should have been brought to the Committee prior to launch. The Member further stated there were a number of points related to the process, and the questions being asked within the consultation needed to be raised, and further stressed the consultation had started without the approval of the Committee.

    4.    In regard to the report’s recommendations, Cllr Potter said they believed the recommendations had been changed from when the report was previously published prior to the original meeting being postponed.

    5.    A Member of the Committee said that the committee had previously approved the Responsible Investment Policy of 17 June 2022, subject to consultation, however the format of the consultation was not approved.

    6.    Cllr Hughes stated they felt the consultation should be constructed by experts rather than Members of the Committee and officers had carried out the consultation as previously agreed by the Committee.

    7.    Cllr Potter said it was good practice for the relevant committee to receive a copy of a consultation prior to publication.

    8.    Cllr Potter sated it was inappropriate that internal email updates had been paused out of respect for the death of Her Majesty The Queen, however the consultation still continued to be published during the period of mourning. The Member suggested that the consultation be paused to allow the committee to discuss it properly. The Chairman responded there was pressure to publish the consultation and it was understood that, during the period of mourning, certain business-as-usual should continue.

    9.    Cllr Williams said that the Committee had previously agreed the nature of the Responsible Investment Policy to be consulted on, not the consultation itself, and it was assumed that the consultation process would still be approved by the Committee. The Member further stated that they believed the consultation should be paused to allow for further discussion.

    10.  The Chairman stated that he felt the consultation had been published in line with what was previously agreed. Officers had also consulted with and gained approval from the Chair and Vice-Chair regarding the consultation process, further to receiving expert advice from their engagement advisors, Minerva, and the Council’s internal team changed with ensuring that consultations are carried out effectively and compliantly.

    11.  The LGPS Senior Officer explained that the Chairman was consulted and advice  ...  view the full minutes text for item 54/22

55/22

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) REPORT pdf icon PDF 191 KB

    The Surrey Pension Fund Committee has committed to publishing a Task Force on Climate-related Financial Disclosures (TCFD) report annually.

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

    Lloyd Whitworth, Head of Investment & Stewardship

    Steve Turner, Mercer

     

    Key points raised during the discussion:

     

    1.    The LGPS Senior Officer introduced the report and provided a brief summary. The Committee were reminded that the consultation on TCFD from the Government had recently been issued and that a response would be provided. The representative from Mercer explained that they would support issuing the TCFD report as is, subject to any suggested changes. Looking ahead, officers stated that there were in a good position to provide reports in the future. 

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    It was agreed that the Committee approve the Surrey Pension Fund TCFD report for the financial year 2021-22.

     

56/22

NET ZERO CONSIDERATIONS pdf icon PDF 212 KB

    This paper provides an update on analysis by Mercer in consideration of the Surrey Pension Fund’s desired date for achieving net-zero.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

    Lloyd Whitworth, Head of Investment & Stewardship

    Steve Turner, Mercer

     

    Key points raised during the discussion:

     

     

    1.    The representative from Mercer introduced the report and provided a brief summary of the presentation annexed to the cover report. The presentation noted by Members was published in a supplementary agenda on 24 September 2022.

    2.    Cllr Harmer said that they believed it was difficult to assess and conclude which areas to invest in and asked whether there was any documentation which assessed what life would look like in 2030, 2040 and 2050 to aid decision making. The representative from Mercer said they did not have the information available however, when conducting research, an approach was taken that having real world change was about changing behaviours of individual companies, as all would have an impact on global warming.

    3.    Cllr Williams asked whether views on net zero considerations were based on the current or future prospects. Officers explained that it was challenging to predict which companies would have the greatest impact on reducing the global carbon footprint. Members noted that officers would expect the investable universe of companies targeting 1.5c / 1.4c, for example, to increase overtime. However it was difficult to predict which specific companies would set a target and how it would be implemented.

    4.    Cllr Potter highlighted that the report provided information on an example portfolio made up of 1.5c aligned and net zero investments, however, the Member stated that the detail actually needed was information on the pathway which needed to be followed to become 1.5c aligned and net zero. In regard to the recommendation 1, the Member said that there was no analysis on the pathway to carbon net zero to consider. In regard to recommendation 2, the Member said that it was uninformed by advice or evidence and that they would be against confirming a net zero target date without consideration of the appropriate analysis on the implications. In response, the representative from Mercer explained that it was extremely difficult to provide the requested analysis and Mercer were unlikely to be in a position to provide it, and that the analysis circulated was provided to give the Committee a feel of the potential risk implications of targeting very ambitious timeframes for net zero earlier than 2050.  

    5.    Following discussion, the Chairman proposed that the Committee move forward by noting the analysis provided but to withdraw Recommendation 2 for the time being. This proposal was agreed by the Committee.

    6.    Cllr Potter asked for detail on how the list of companies to be aligned with 1.5c had expanded within the last two and five years. Officers stated that they would expect the universe of companies aligned to expand and that the level of expansion would be greater than it was previously. Officers agreed to provide a response outside the meeting.

    7.    Cllr Williams said that they would welcome further analysis of how the investment universe of companies aligned with 1.5c or below would  ...  view the full minutes text for item 56/22

57/22

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

58/22

INVESTMENT MANAGER PERFORMANCE AND ASSET/LIABILITIES UPDATE

    This is the Part 2 annex to item 7

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

     

    Key points raised during the discussion:

     

    1.    The Committee considered a Part 2 report that provided an investment manager performance and asset/liabilities update.  

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    The Committee noted the report.

     

     

     

     

59/22

COMPANY ENGAGEMENT & VOTING

Minutes:

Witnesses:

Neil Mason, LGPS Senior Officer

Lloyd Whitworth, Head of Investment & Stewardship

 

Key points raised during the discussion:

 

1.    The Committee considered a Part 2 report that provided an update on company engagement and voting.

 

Actions/ further information to be provided:

 

None.

 

Resolved:

 

See Exempt minute - E-26-22

 

 

 

 

 

60/22

BORDER TO COAST PENSIONS PARTNERSHIP UPDATE

    This paper provides the Pension Fund Committee (Committee) with an update of current activity being undertaken by the Border to Coast Pensions Partnership (BCPP).

    Minutes:

    Witnesses:

    Neil Mason, LGPS Senior Officer

    Lloyd Whitworth, Head of Investment & Stewardship

     

    Key points raised during the discussion:

     

    1.    The Committee considered a Part 2 report that provided an update on the Border to Coast Pensions Partnership. 

     

    Actions/ further information to be provided:

     

    None.

     

    Resolved:

     

    See exempt minute – E-27-22

     

     

     

     

     

     

61/22

BORDER TO COAST PENSIONS PARTNERSHIP PATHWAY TO NET ZERO

    This paper provides details of the progress made by Border to Coast Pensions Partnership (BCPP) towards measuring and monitoring carbon emissions within the portfolios and how target reductions will be set with reference to a net zero pathway to 2050 or sooner.

     

Minutes:

Witnesses:

Neil Mason, LGPS Senior Officer

Lloyd Whitworth, Head of Investment & Stewardship

 

Key points raised during the discussion:

 

1.    The Committee considered a Part 2 report that provided an update on the Border to Coast  Pensions Partnership Pathway to Net Zero.

 

Actions/ further information to be provided:

 

None.

 

Resolved:

 

See Exempt minute - E-28-22

 

 

 

 

 

 

62/22

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:

    The Chairman informed the Committee that, following comments made by Members, Items 15, 16, 17 and 20 would be considered in public and papers published on the public website.

     

63/22

DATE OF NEXT MEETING

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

    Additional documents:

    Minutes:

    The date of the meeting was noted.