Agenda item

This report is a summary of various Environmental, Social & Governance (ESG) engagement and voting carried out on behalf of the Surrey Pension Fund (Fund) by Local Authority Pension Fund Forum (LAPFF), Robeco, and Border to Coast Pensions Partnership (BCPP). Also included is the direct voting record for the Fund over the period.

Speakers:

Mel Butler, Deputy Head of Investment and Stewardship

Tim Manuel, Head of Responsible Investment, BCPP

Neil Mason, Director of Pensions (LGPS Senior Officer)

Key points raised in the discussion:

1.    The Deputy Head of Investment and Stewardshipoutlined the Local Authority Pension Fund Forum (LAPFF) engagement, including engagement in the automotive industry on the transition to electric vehicles with progress in improved reporting on raw material sourcing, initiatives in education and supply chain audit, and increased accountability in mineral sourcing. Engagement with airlines resulted in long-term supply agreements and specific targets for sustainable fuel usage. Robeco’s 2025 theme is ‘Ocean Health’ and companies are expected to define climate and biodiversity ambitions with quantifiable, time-bound roadmaps. BCPP continues to monitor the pushback on Environmental, Social and Governance (ESG) integration in investment decision making. She outlined the Surrey voting activity.

2.    The Vice-Chairman noted the fiduciary duty to speak up and take action to protect Fund members’ investments, he welcomed the interventions made.

3.    A Committee member noted that the engagement with vehicle manufacturers and financial institutions in line with the RI goals demonstrated the value of successful engagement,in contrast with other sectors with unsuccessful engagement.

4.    The Head of Responsible Investment (BCPP) noted that there had been a shift in the United States (US) political landscape with President Trump’s withdrawal from the Paris Agreement, removal of pro-electric vehicle policies, freezing offshore wind development, and shift in energy policy toward fossil fuels. That had impacted on large financial institutions with ties to the US with prominent exits from climate alliances and the Net Zero Asset Manager Initiative had suspended activities to review its future direction. The US Securities and Exchange Commission issued new guidance imposing an onerous disclosure requirement if large investors actively engaged on ESG issues. BCPP was engaging with industry partners and external fund managers to understand implications and maintain long-term climate commitments.

5.    A Committee member noted that the US President was issuing presidential executive orders that contravene the constitution, for example targeting a legal firm that acted in a legal case against the US government; that firm had backtracked and offered free legal services to the US government. He noted that posed challenges as the global financial systems are entwined with the US and major financial institutions were having to choose between aligning with some parts of the world looking for stability, and on ESG strong frameworks versus the opposite. He queried whether the Fund and BCPP could act more quickly if needed regarding the impacts on investments.

6.    The Head of Responsible Investment (BCPP) noted that the Fund and BCPP benefit from being longer-term investors. There are investment market implications with tariffs and trade barriers, with investment managers making the best of opportunities and managing risks. There is a shift in attitudes towards climate risk and ESG topics. BCPP is staying close to industry partners to understand the best way to respond and avoid constantly responding to the volatile situation.

7.    The Vice-Chairman noted the risk of a serious and fast-moving event, with the US adopting similar behaviours to BRIC countries- with high global emissions. He noted the need to diversify investments and avoid investments in such countries which posed a risk on ESG performance.

8.    The Director of Pensions (LGPS Senior Officer) noted that increased volatility in the market had been anticipated, hence the additional prudence in the actuarial assumptions.

RESOLVED:

1.    Acknowledged the outcomes achieved for quarter ended 31 December 2024 by LAPFF and Robeco through their engagements.

2.    Noted the direct voting by the Fund in the quarter ended 31 December 2024.          

Actions/further information to be provided:

None.