Issue - meetings

The Committee considered, discussed, and noted the TCFD and ACT reports covering periods to the end of March 2022.

            The Chair noted that TCFD and climate analytics were discussed in detail at the recent Essential Training session held on 1 February, and given the report was for noting only, requested that questions/comments be limited to clarification of information within the report and areas of understanding.

             Mr Gaston of Mercer summarised the key points of the Fund’s proposed inaugural Taskforce on Climate-Related Financial Disclosures (TCFD) Report, and the analysis from the Analytics for Climate Transition tool. He noted that the Fund’s approach to climate change was well documented in the Fund’s Investment Strategy in terms of beliefs, processes and Carbon Footprint monitoring, alongside investments in climate-aware investment solutions. There has been a consultation on TCFD reporting for the LGPS but the requirements are not yet finalised. The Fund has produced its first report a year early, with the intention to refine the approach and bring it in line with LGPS regulations once they had been made.

            With respect to the TCFD report, Mr Gaston highlighted:

-       TCFD reporting is aimed at companies, asset managers and asset owners (including pension funds). The Fund viewed this as a best practice framework encouraging proper disclosures, informing good decision making around climate change, and encouraging standardisation across the market allowing investors to identify, assess and manage the risks & opportunities.

-       The four pillars upholding the framework are Governance, Strategy, Risk Management, and Metrics and Targets. The draft report was structured on this basis.

            Mr Gaston then went on to provide a summary of these four pillars as outlined in the report.

            Mr Hibbert commented that the assessment provided did not include the Fund’s Tactical Asset Allocation (TAA). He noted that a previous assessment had shown that the Tactical portfolio had a higher carbon intensity per pound invested than most, if not all, other asset classes. Mr Hibbert asked why this allocation had been excluded from the present assessment. Mr Gaston clarified that the TAA had been included in the assessment within various metrics to the extent available, and these were noted within the appendices. Those results showed that a number of those holdings were more carbon intensive than the rest of the portfolio. The Fund had yet to set formal guidelines and targets around those holdings and this had been identified as a next step in terms of expanding the target-setting beyond the Listed Equities to the wider portfolio.

            Mr Hibbert referred to a statement on Page 37, “The Fund has a commitment to actively exercising the ownership rights attached to its investments”, and asked who was dealing with this with regards to stocks and fund managers in the TAA. Mr Gaston explained that the day-to-day engagement is delegated to the investment managers of the underlying funds making up the TAA and these managers would have responsibility to engage with the invested companies and hold them to account, as well as voting.

            Mr Hibbert asked if there is any evidence that the managers were doing this, as he did not note any reports of  ...  view the full minutes text for item 37