Agenda, decisions and minutes

Venue: Remote Meeting

Contact: Janet Kelly 01352 702301  Email: janet_kelly@flintshire.gov.uk

Items
No. Item

117.

Apologies

To receive any apologies.

Decision:

Councillor Andy Rutherford (Other Scheme Employer Representative), Councillors Julian Thompson-Hill, Nigel Williams and Tim Roberts.

Minutes:

Councillor Andy Rutherford (Other Scheme Employer Representative), Councillors Julian Thompson-Hill, Nigel Williams and Tim Roberts.

118.

Declarations of Interest (Including Conflicts of Interest)

To receive any Declarations and advise Members accordingly.

Decision:

There were no declarations of interest.

Minutes:

RESOLVED:

 

There were no declarations of interest.

119.

Minutes pdf icon PDF 114 KB

To confirm as a correct record the minutes of the last meeting held on the 7 October 2020.

 

Decision:

The minutes of the meeting of the Committee held on 7 October 2020 were agreed.

 

Minutes:

RESOLVED:

 

The minutes of the meeting of the Committee held on 7 October 2020 were agreed.

 

120.

Responsible Investing and Climate Risk pdf icon PDF 108 KB

To provide Committee Members with a presentation on measuring the carbon footprint and analysing climate risk within pension fund assets, and to discuss the results for the Clwyd Pension Fund.

Decision:

The Committee noted and commented on the Carbon foot printing presentation.

 

Minutes:

Mr Buckland introduced the session by reminding the Committee that when the revised investment strategy was agreed by the Committee in February 2020, a new formulated Responsible Investment (RI) policy was also agreed. He added that the RI Policy contained a number of key areas of focus and included a statement on Climate Change. The Fund recognises the importance of addressing the financial risks associated with Climate Change through its investment strategy, and recognises it as a financial risk.

 

The RI Policy also recognised the multitude of potential areas on which to focus, and therefore agreed 5 strategic priorities for the next 3 years (2020-2023).  One of these priorities was to evaluate and manage carbon exposure. Mr Buckland finished by commenting that the session today would look at the results of the carbon foot printing exercise that Mercer had undertaken on the Fund’s equity assets. Prior to presenting the results Mr Gaston would start with an educational session, designed to aid the Committee’s understanding of the results.

 

Mr Gaston from Mercer presented a detailed training session to help the understanding of the Committee members regarding carbon foot printing. He considered the issue of Climate Change, and global warming and noted that at present the world is on track for circa + 3?C of warming before the end of the century, and so he concluded that there needs to be more work done globally to meet the ambition of the Paris Agreement. He continued to consider the practicalities of measuring a carbon footprint, and looked at the metrics on which to focus, and addressed the issue of Scope 1, 2 and 3 emissions and how these are assessed.

 

Mr Gaston then moved on to consider the results of the analysis for the Clwyd Pension Fund. To start he addressed the issue of coverage across the asset classes, and noted that at the moment the analysis was limited to public equity investments, with some information available for fixed income and property investments.

 

To put this into context Mr Buckland reminded the Committee of the current investment strategy and noted that for the carbon footprint analysis Mercer had covered listed equity (10% Global equity, 10% Emerging Markets equity) and most of the TAA/Best Ideas portfolio. Given that the Fund is diversified and has exposure to private markets, Mr Buckland emphasised the difficulty of analysing carbon foot printing in respect of this. Mr Gaston moved on to note that when the carbon footprint was analysed at 31 March 2020 18.6% of the Fund was able to be assessed, and at 30 September 2020, due to changes in asset mix, the proportion analysed had increased to 26.5% of the Fund.

 

Mr Gaston focussed on the findings on the executive summary. He mentioned that the listed equity portfolio is marginally more carbon efficient than the MSCI ACWI global benchmark. There was also a reduction in carbon intensity of c9% which was partly driven by the reduction in carbon intensity in the assets now held with  ...  view the full minutes text for item 120.

121.

Asset Pooling and WPP Annual Updates pdf icon PDF 113 KB

To provide Committee Members with the Wales Pension Partnership (WPP) Annual Report and receive a presentation from the WPP Operator and Investment Management Solution Provider including the transition of emerging market equity to the WPP for approval.

Additional documents:

Decision:

(a)       The Committee noted and discussed the presentation from the WPP Operator and Investment Manager.

(b)       The Committee ratified the decision to invest in the Wales Pension Partnership Emerging Market Equity Fund.

(c)       The Committee agreed that the assets should be transitioned and delegate the specific timing to the Clwyd Fund officers on the OWG.

(d)       The Committee noted the WPP Annual Report.

Minutes:

Mr Gough, from Link Fund Solutions introduced himself to the Committee. He started the presentation by making a number of comments:          

 

-       Despite delays and complexities, Link Fund Solutions had launched 5 fixed income sub-funds in 2020.

-       The status of the Emerging Markets sub fund launch was on hold due to the requirements to be included in the prospectus, linked to the proposed decarbonisation approach. Link Fund Solutions had aimed for a launch in Q2 2021 however this may be delayed.

 

Mr Quinn from Russell introduced himself to the Committee and noted that since the Committee last met there has been no difference in terms of managers in the global opportunities sub-fund.

 

            Mr Quinn made the following key points:

-       Despite the market meltdown in Q1 2020, the performance of the global opportunities portfolio was positive in terms of investment returns. He added that since inception, excess returns were positive (c0.5% p.a.) but this is still a relatively short period.

-       The chart on slide 8 outlined the difference in growth versus value, with growth outperforming value.

 

Mr Harkin asked how the portfolio looked going forward following the change in the US administration, given the different policies that would be adopted. Mr Fitzpatrick from Russell introduced himself and responded by noting that it would depend on the final outcome of the US election. In terms of the senate situation, it was currently believed to be more split and that republicans would retain the senate situation with Biden as president. The senate controls tax cuts (which are good for the economy and market), which Trumps administration led, therefore he believed it is likely to stay in place. Overall, a positive result given the uncertainty.

 

Mr Fitzpatrick focused on the targets for the Multi Asset Credit Funds. Since inception, the performance was positive with an outperformance of 2.8% p.a. vs a 1.1% p.a. target. Events such as the US election and COVID-19 have been good for credit assets as they fed through in credit markets.

 

He stated that the target return is SONIA + 4% p.a. The assets under management are £636 million as at 31 October 2020 for WPP as a whole.  Mr Fitzpatrick outlined from how Russell planned on achieving the performance target.

 

Mr Fitzpatrick continued to note that credit markets continue to have a role to play as part of a wider asset allocation, given it is a medium expected level of return compared to equities. In terms of tactical management, Russell take a "risk on, risk off" approach.

 

Mr Mandich spoke about the Global Opportunities Fund in which the Clwyd Fund invested. It has been planned to target a 25% lower carbon footprint than the benchmark in early 2021. This will become possible through EPI (enhanced portfolio implementation) which has been designed to give the Fund Manager more control.

 

Mr Mandich then moved onto the topic of Emerging Markets. Mr Mandich noted that the Emerging Markets sub-fund is to be launched in the next 3 to 6  ...  view the full minutes text for item 121.

122.

Funding and Investment Updates. pdf icon PDF 124 KB

To provide Committee Members with updates of the funding level, economic and market matters and performance of the Fund’s Managers, and an investment review of the AVC providers.

Additional documents:

Decision:

(a)       The Committee noted the Market and Economic update for the quarter ended 30 September 2020.

(b)       The Committee noted the Investment Strategy and Manager Performance summary for the quarter ended 30 September 2020.

(c)       The Committee noted the Funding and Risk Management Framework update and the outcomes of the annual health-check review.

(d)       The Committee noted the outcomes from the review of the Fund’s AVC provision.

 

Minutes:

Mr Harkin gave a brief investment update and noted that the latest valuation of the fund (as at 31 October) was broadly unchanged but slightly lower than the position in September 2020.

 

Mr Hibbert asked whether the Committee could have more details on the Fund’s synthetic equity strategy, collateral waterfall and other elements of the flightpath structure. Mr Harkin and Mr Middleman confirmed that Mercer could provide further information on this at planned training sessions.

 

Mr Middleman confirmed that in terms of the funding position, the Fund was broadly on track in terms of where the funding position is against the 2019 actuarial valuation. The position trending down slightly from the end of September, but to date the Fund is ahead of schedule based on estimates of where the asset values are.   However, there still remains uncertainty in outlook for future investment returns which could affect the Fund’s solvency position.

 

RESOLVED:

 

(a)       The Committee noted the Market and Economic update for the quarter ended 30 September 2020.

(b)       The Committee noted the Investment Strategy and Manager Performance summary for the quarter ended 30 September 2020.

(c)       The Committee noted the Funding and Risk Management Framework update and the outcomes of the annual health-check review.

(d)       The Committee noted the outcomes from the review of the Fund’s AVC provision.

 

123.

Regulation Changes Affecting the LGPS pdf icon PDF 124 KB

There are a number of regulatory changes progressing that impact on the LGPS, and therefore the Clwyd Pension Fund. This report provides background information for Committee members on four key areas of reform and the actions required including delegations to officers.

Additional documents:

Decision:

(a)       The Committee considered the report.

(b)       The Committee considered and agreed the recommendation for the consultation response in relation to the GMP Indexation Consultation, as outlined in paragraph 1.07, and delegated the completion of the response to the Head of the Clwyd Pension Fund.

 

Minutes:

Mr Latham noted that the work surrounding the McCloud remedy was going to plan as the Fund was in the process of gathering data from employers. However, there was a risk with delays to regulations.   The consultation on GMP indexation/equalisation was also noted along with the recommendation.

 

Information was shared from a letter from Welsh Government regarding the 95k cap. The Fund would only be impacted by this regulation if employers within the Fund had members who were leaving and fall under the relevant category.

 

Mr Everett stated that risks taken are at the risk of the employer, not the Clwyd Pension Fund.  Mr Middleman agreed and said that the separate governance and decisions by the Fund and the employer need to be clear on this.  Mr Middleman said that this was an extremely complex area and it needed to be discussed with employers to ensure the correct processes are in place.

 

Mr Everett noted the extremely challenging issue surrounding these changes. Mr Middleman agreed with the complexity and noted that a potential policy on this matter may need to be agreed for the Fund. Mrs McWilliam confirmed that the Fund can use urgency delegations to deal with this situation.

 

RESOLVED:

 

(a)       The Committee considered the report.

(b)       The Committee considered and agreed the recommendation for the consultation response in relation to the GMP Indexation Consultation, as outlined in paragraph 1.07, and delegated the completion of the response to the Head of the Clwyd Pension Fund.

 

124.

Governance Update pdf icon PDF 117 KB

To provide Committee Members with an update on governance related matters.

Additional documents:

Decision:

(a)       The Committee noted the update on governance related matters.

(b)       The Committee noted the feedback in paragraph 1.02 from the Pension Board.

 

Minutes:

Mr Latham thanked the Board for the comments in paragraph 1.02 of this agenda item. He also made the Committee aware of possible induction training sessions to be scheduled in 2021.

 

RESOLVED:

 

(a)       The Committee noted the update on governance related matters.

(b)       The Committee noted the feedback in paragraph 1.02 from the Pension Board.

 

 

The Chairman thanked everyone for their attendance and updates at the Committee meeting. The next formal Committee meeting is on 10 February 2021. The meeting finished at 12:15pm.

 

……………………………………

Chairman