Agenda item

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).

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:

• There is a broad spread of Local Authority Pension Fund Forum, (LAPFF) engagement across the United Nations Sustainability Development Goals SDG’s.
• MSCI ratings had recently been updated and thousands of funds had been downgraded due to reassessment.  He explained the current rating process and how that had changed, meaning that MSCI considered their ratings as more stable and having further clarity. 

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 as fundamental significant to the Fund’s approach, consistent with the RI Policy through:”

The motion was seconded by George Potter and put to the vote. Three voted for the motion and six against.  Therefore, the motion was lost.

Actions/ further information to be provided:

that the LGPS Senior Officer consider how best to respond to the request that the Committee receives a separate report on the world’s largest fossil fuel companies, the Fund’s involvement with them and the details of engagement. 

Resolved:

1.    That the ESG Factors were reaffirmed as fundamental to the Fund’s approach, consistent with the RI Policy through:

a.    Continuing to enhance its own RI approach and SDG alignment.

b.    Acknowledging the outcomes achieved for quarter ended 30 June 2023 by LAPFF and Robeco through their engagement.

c.     That the voting by the Fund in the quarter ended 30 June 2023 be noted.