Agenda item

Purpose: To provide Committee Members with an update on the Clwyd Pension Fund Responsible Investments Policy

(a)  The Committee noted and commented on the presentation, and agreed the process for the review of the Fund’s policy.

Mr Buckland highlighted that Responsible Investing has moved into the mainstream and investors are now heavily considering the Environmental, Social and Governance (ESG) risks associated with investments. He confirmed that the Fund is in a very good position in terms of responsible investing, compared to Funds who haven’t considered this in the past.  He noted that ‘The ABC of ESG’ from Mercer on page 83 is a handy reference guide in this area of investments for the Committee and officers.  Equally the Mercer report “Investing in a Time of Climate Change” was a very helpful report to consider in terms of setting an investment strategy.

The Fund policies (in particular the Investment Strategy Statement) will be reviewed this year alongside the Actuarial Valuation, as well as the overall investment strategy.

Mr Buckland emphasised the importance of the views of the Committee members, therefore over the next few weeks the Committee members will be provided with a survey in order to gather their views on a number of key areas. These views will be incorporated into the policy when it is being reviewed with the officers in the summer. The results of the survey will be brought back to the Committee in September.  An updated policy will then be presented to the Committee in November for approval and this will form part of the Investment Strategy Statement.

As previously mentioned there are three strands of ESG. The ‘E’ is focused on the environment, which is easier to measure objectively in terms of impact, for example, carbon footprint. The ‘S’ relates to the social impact which are more difficult to measure objectively. These factors include workforce relationships, employer practices and addressing social impact. Lastly, the ‘G’ relates to governance including corporate governance, audits and internal controls.

Mr Buckland explained that, as a long term investor, it is crucial to ensure that investments are sustainable. For example, at any point in time there is potential to be up to 100 years of liabilities which have accrued and which brings these factors into focus as some of the environmental factors will be very relevant in that time period. Therefore, investments need to be responsible and sustainable for the long term and meeting the fundamental objective to pay benefits when due to members.

Mr Buckland described one example approach to Responsible Investment called screening. This is where investors specifically choose not to invest in one area of the economy e.g. tobacco or fossil fuels. Fossil fuels can be a very emotive topic with climate change, but the pros/cons need to be considered in a balanced way when deciding on policy.

Following recent climate change news, Cllr Jones brought up the fact that Theresa May suggested for the UK to go carbon neutral by 2050. He wondered where that leaves the WPP asset pool in terms of investments and also if the decisions from Welsh Government differed from those of the UK Government. Mr Hibbert added that the Fund are constrained as they have to invest in line with British Government policy. Mr Everett noted these were all valid points.  However, the decisions on the policy will have to be made in the best interest of the Fund. Mrs McWilliam said that the key point always comes back to the fiduciary responsibility of the Fund i.e. to pay benefits when due which relies on sustainable long term returns. In relation to climate change, she also emphasised how valuable the variety of opportunities in the market are.

RESOLVED:

(a)  The Committee noted and commented on the presentation, and agreed the process for the review of the Fund’s policy.