Agenda item

A key priority of the Pension Fund Committee (Committee) is to approve the Responsible Investment (RI) policy after considering the consultation feedback and set a net zero date consistent with its fiduciary responsibility of meeting pension liabilities.

Part 2 annexes 3 an 5 attached at item 19

Speakers:

Neil Mason, LGPS Senior Officer

Lloyd Whitworth, Head of Investment & Stewardship

Key points raised during the discussion:

1.    The Head of Investment & Stewardship gave a detailed precis of the submitted report which came in three sections:

·         Consultation feedback

·         Net zero date setting, and

·         Key priorities for the Responsible Investment Policy

He highlighted the following areas:

a)    There was an excellent response rate to the consultation with high agreement.  However, upon analysis it was shown that there was a more neutral response to the engagement and divestment questions.  It was thought that there may be an issue with the wording and therefore it was proposed to re-look of the divestment policy to ensure it was as clear as possible.

b)    Mercer were expected to report back to the subcommittee on 10 May with more data and information on the Fund’s investment strategy and potential dates for achieving net zero.

c)    The voting policy was out of date and a session would be arranged to consider updating it.

2.     A Member raised concerns regarding divestment as the RI policy as it stood allowed investment in companies whose principal business was the extraction of fossil fuels. He stated that the question in the consultation that was headed up as “divestment” but was actually about “engagement with consequences”. He was concerned that the public and partners had not been consulted on divestment.

3.     Another Member agreed and stated that the policy should include some reasonable common sense exclusions as a whole. And as fossil fuels only accounted for 4% of the fund he wanted to see it rewritten to include wording on when and where we will operate a policy of exclusions.

4.     There was considerable debate on what exclusions members may wish to see in the policy and one member stated that there were already some agreed exclusions, and these should be included.  A few members were uneasy about approving any change to the wording so it was agreed that the wording on engagement with consequences would be re-submitted to the Pension Fund Committee for approval but in the meantime could be discussed by the sub-committee.

5.     A change to recommendation number 2 was proposed such that the wording in the policy regarding “engagement with consequences” would be reviewed and would incorporate current investment exclusions. The Committee were split in their agreement of this and following a vote, the proposed wording change to recommendation 2, as set out below, was agreed.

6.    The proposed wording is to ensure that the escalation process is clearer and to specify the categories of investments currently excluded from the portfolio. The draft wording is to be reviewed the RI subcommittee and then brought back to the Pension Fund Committee for final approval.

Actions/ further information to be provided:

None.

Resolved:

1.    That the recommendation of the Responsible Investment Sub Committee (RISC), that the RI Policy be approved was accepted.

2.    That Officers and Consultant review the wording within the RI Policy regarding engagement with consequences to make clearer the escalation process and the categories of investments excluded from the portfolio, the proposed wording then be put to the Surrey County Council Pension Fund Committee, was approved.

3.    That the net zero brief agreed by the RISC be noted.

4.    That the decision of the RISC to appoint Mercer to answer the net zero brief be noted.

5.    That officers continue to work with the RISC, investment consultant and independent advisor to facilitate this process.

6.    That the priority elements regarding implementation of the RI Policy for 2023/4 be approved.