Agenda, decisions and minutes

Venue: Remote Meeting

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

Media

Items
No. Item

141.

Apologies

To receive any apologies.

Additional documents:

Decision:

Councillor Andy Rutherford (Other Scheme Employer Representative) and Gary Ferguson (Corporate Finance Manager)

 

Minutes:

Councillor Andy Rutherford (Other Scheme Employer Representative) and Gary Ferguson (Corporate Finance Manager)

 

142.

Declarations of Interest (Including Conflicts of Interest)

To receive any Declarations and advise Members accordingly.

Additional documents:

Decision:

There were no declarations of interest.

 

Minutes:

There were no declarations of interest.

 

143.

Appointment of Vice Chair

Appointment of Vice Chair and note that the Chair and Vice Chair are therefore appointed as Member and Deputy respectively of the Joint Governance Committee for the Wales Pension Partnership.

Additional documents:

Decision:

The Committee appointed Cllr Bateman as Vice Chair of the Committee.

and noted that the Chair and Vice Chair are therefore appointed as Member and Deputy respectively of the Joint Governance Committee for the Wales Pension Partnership.

Minutes:

Following nominations by Councillors Hughes and Small, the Committee appointed Cllr Bateman as Vice Chair of the Committee.

 

RESOLVED

 

The Committee appointed the Vice Chair and noted that the Chair and Vice Chair are therefore appointed as Member and Deputy respectively of the Joint Governance Committee for the Wales Pension Partnership.

144.

Minutes pdf icon PDF 91 KB

To confirm as a correct record the minutes of the last meeting held on the 23 March 2021.

 

Additional documents:

Decision:

The Committee confirmed as a correct record the minutes of the last meeting held on 23 March 2021.

 

Minutes:

            The minutes of the meeting of the Committee held on 23 March 2021 were considered by the Committee.

 

On page 9 of agenda, Mr Hibbert referred to the discussion relating to the appointment of the Scheme Member Representative on the Joint Governance Committee ('JGC'). Mr Hibbert highlighted that the job description specified that the Scheme Member Representative should represent the interest of all scheme members. He conveyed his concerns about the practicalities and potential discriminatory elements of the appointment process by the Wales Pension Partnership (‘WPP’)

 

RESOLVED:

 

The Committee confirmed as a correct record the minutes of the last meeting held on 23 March 2021.

 

145.

Clwyd Pension Fund Draft Audit Plan pdf icon PDF 80 KB

To provide Committee Members with the2020/21 draft Audit Wales plan for review.

Additional documents:

Decision:

The Committee noted the Audit wales plan.

Minutes:

            Mr Vaughan welcomed Ms Wiliam and noted that the Committee were responsible for the approval of the annual report including the accounts by the end of November. He confirmed that the draft accounts would be brought to the September Committee meeting.

 

            Ms Wiliam presented the audit plan on page 17 and highlighted the following key points:

-       The two financial audit risks were management override and the impact of COVID-19.

-       She noted that management override was a risk for all bodies and was required for all audit plans.

-       Whilst the impact of COVID-19 has increased pressures on staff resource and remote working, Ms Wiliam reassured the Committee that the impact of COVID-19 would not affect the work in respect of the audit plan.

-       The three risks in respect of the financial statements were holdings in investments, the use of external investment managers and the transfer of assets to the WPP.

-       The audit fee for 2021 on page 24 had no increase from the previous year.

-       The final audit report will be presented at the November Committee meeting.

 

Cllr Bateman asked what management override is. Ms Wiliam confirmed this was a significant risk raised for all bodies in their audit plans to respond to ISA 240. The standard work for Audit Wales was addressing this risk so no concerns need to be raised.

 

RESOLVED:

 

The Committee noted the Audit wales plan.

146.

Funding, Flight-Path and Risk Management Framework pdf icon PDF 109 KB

To update Committee Members on the funding position, and the implementation of the Flight path and risk management framework.

Additional documents:

Decision:

The Committee noted and considered the contents of the report.

Minutes:

The Chairman highlighted from the report that for the first time since Flintshire County Council became the administering authority, the Fund exceeded 100% funding level and was at 102% as per the report.

 

            Mr Latham was delighted to report the fully funded position and confirmed that the Fund had grown from £300 million in 1996 to £2.1 billion now.  He noted to the Committee that the history of the funding position was in the later investment and funding update item from Mrs Fielder.

 

He stated the following key points regarding the Fund’s road to a fully funded position:

 

-       He believed a key reason for the success was the management of the Fund via the flightpath and risk management framework that is operating as expected.

-       This has been achieved by the Fund through a diversified and lower risk portfolio.

-       The level of hedging for inflation and interest rates has benefited the Fund positively.

-       The equity protection provides an insurance, albeit this hasn't actually been needed given markets have continued to rise. 

-       By hedging the currency risk, the Fund gained £15.8 million since inception of this strategy.

-       Another positive was that a further £100 million of collateral can be released whilst maintaining the same overall risk/return. This additional funding could be used for commitments to sustainable private markets assets in the future..

 

            Mr Middleman noted that, as the funding level is over 100%, it had been agreed that consideration would be given to whether risk should be reduced further and, if so, what would be the implications for returns and ultimately the level and stability of employer contribution requirements.   Mr Middleman explained the next steps in terms of considering any actions that should be taken and this will be discussed at the next FRMG meeting. On page 31, item 1.07 outlined potential next steps and actions for consideration which included doing nothing, reducing the equity exposure and/or  increasing the hedging levels – in particular for inflation given the current uncertainty. 

 

            Mr Middleman confirmed that the funding level had continued to improve and was currently estimated to be around 103%.

 

            Mr Everett asked how typical the Fund’s financial position was against other LGPS Funds and other pension funds generally. Mr Middleman confirmed that this was linked to the strategy for each Fund.  For example, other pension funds who had a higher equity allocation, would have seen a bigger improvement in funding position and vice versa. However, the Fund will have more stability compared to other pension funds, due to the protections in place e.g. the level of hedging and equity protection strategy.  There is therefore likely to be less “boom” and “bust” type scenarios.

 

            Mr Everett believed that if the Fund remained in a fully funded position at the next triennial valuation, considerations would need to be made around whether employers' contributions could be contained or reduced given fiscal challenges for employers in balancing their budgets. Mr Middleman agreed that this is a consideration and added that  ...  view the full minutes text for item 146.

147.

Responsible Investment Roadmap pdf icon PDF 153 KB

To provide Committee Members with an update, to enable recommendations to be discussed, in respect of strengthening the Fund’s climate change commitments and the availability of a sustainable equity investment option through the Wales Pension Partnership

Additional documents:

Decision:

(a)  The Committee agreed to adopt a 2050 Net Zero ambition for the Fund’s investment strategy, noting this may be updated to an earlier date following further consideration and analysis.

(b)  The Committee agreed the high level net zero work plan or roadmap as detailed in 1.07. This roadmap laid out the next steps required to set net zero target(s) underpinned by a credible implementation plan.

(c)  The Committee agreed to formally request that the Wales Pension Partnership offer an Active Sustainable Global Equity Sub-Fund and that the necessary project to construct this Sub-Fund commences as soon as possible.

 

 

Minutes:

            Mr Latham stated that the two key responsible investment priorities that were being considered within this item of the agenda were setting and meeting climate change objectives and identifying sustainable investment opportunities. In relation to the first of these, the Committee were being asked to agree to adopt a 2050 net zero ambition for the Fund’s investment strategy, however, Mr Latham made it clear that 2050 is the latest date that they would aim to achieve this by and hoped that further analysis would allow them to set a date earlier than 2050 and the second recommendation was for the Committee to agree the road map which included this further analysis

 

In relation to the second priority, Mr Latham explained that the Fund’s investment advisor believed that sustainable global equities should form a material part of the Fund’s equity portfolio. Therefore, he outlined the recommendation for the Committee to formally request the Wales Pension Partnership to offer an Active Sustainable Global Equity Sub-Fund. Given that this would need to go through the JGC and the other Funds in the WPP, the timescale for completion is expected to be approximately 12 to 24 months.

 

            Mr Gaston summarised the progress that the Fund had already made in relation to climate change.  He explained that a net zero target referred to achieving net zero emissions by balancing carbon emissions with carbon removal. The three key reasons for an investor to adopt a net zero target are as follows:

 

-       Climate change science tells us that there are c10 years left to limit and mitigate the worst effects of climate change. Currently, we are on track for 2.9 degree warming by 2100. However, the Paris Agreement aims to limit warming to well below 2 degrees. To achieve this there needs to be an overall reduction in emissions of 45% by the year 2030 (based on 2010 levels) according to the IPCC — Intergovernmental Panel on Climate Change.

-       Secondly, momentum is growing across different stakeholders, markets and technology. For example, technology developments have led to falling costs for wind and solar energy generation, and these are increasingly outcompeting fossil fuel alternatives such as coal.

-       Lastly, it is likely we will see a form of a low carbon transition from the current economic model, which is reliant on fossil fuels, to a greener version of the economy.

 

Mr Gaston stated that TCFD stood for The Task Force on Climate-related Financial Disclosures. This is an international framework providing a number of climate change disclosure recommendations. It is expected to form the basis of the upcoming LGPS regulations that the Fund will need to adhere to.

 

Mr Gaston explained that when implementing a net zero target, the Fund would need a plan that includes credible, achievable targets as well as being able to meet financial targets. There were four steps involved in creating a plan:

 

1.    Calculate the baseline – this includes current emissions, transition capacity and green exposures.

2.    Analyse portfolio possibilities for implementing a  ...  view the full minutes text for item 147.

148.

Governance Update and Consultations pdf icon PDF 136 KB

To provide Committee Members with an update on governance related matters including an update following submission of the Fund’s response to the Pension Regulator consultation on the new Code of Practice.

Additional documents:

Decision:

The Committee considered and noted the update.

Minutes:

            On section 4.01 of the report, Mr Latham noted the current risks relating to the Fund as a whole. He added there was only one red risk across the Fund, which was an investment risk in responsible investment, but otherwise there had been a reduction in many areas risk which in his view was extremely positive given some of the recent challenges such as COVID-19.

 

            Mr Latham noted the importance of Committee and Board members attending training sessions and conferences around the UK but recognised it may still not be possible and so welcomed views from Committee and Board members on this point.

 

RESOLVED:

 

The Committee considered and noted the update.

149.

Pension Administration/Communication Update pdf icon PDF 141 KB

To provide Committee Members with an update on administration and communication matters

Additional documents:

Decision:

The Committee considered and noted the update.

Minutes:

Mrs Williams referred to the TPR New Code consultation response which had been circulated separately. She noted the majority of the report related to standard items and also highlighted the additional item, which was the satisfaction survey to employers and members requesting feedback on service delivery.

 

Mr Hibbert thanked the team for all their hard work and efforts, evidenced by the excellent results in the report.

 

RESOLVED:

 

The Committee considered and noted the update.

150.

Investment and Funding Update pdf icon PDF 123 KB

To provide Committee Members with an update of investment and funding matters for the Clwyd Pension Fund.

Additional documents:

Decision:

The Committee considered and noted the report including the update for delegated responsibilities.

Minutes:

Mrs Fielder noted the following key points about this item of the agenda:

 

-       Page 187 and 188 highlighted the key milestones of the Fund and the historic funding levels since 1989.

-       The Fund made three new investments in the Private Markets portfolio, in line with Fund requirements for sustainable private markets.

-       Within impact and local investments, the two Funds agreed were Foresight Regional Fund III and Bridges Property Fund V. The Fund had previously invested in Bridges Property Fund IV.

-       For the Private Equity portfolio, the Fund approved FSN Fund VI which had been recommended by Mercer. This investment had excellent ESG credentials and sustainable goals, which is ideal for the Clwyd Pension Fund.

-       The cashflow analysis on page 184 outlined that the net contributions/benefits remained relatively stable over 2020/21. However, income from private markets exceeded the drawdowns, which helped the Fund move to a healthy cashflow position. Therefore, the Fund could have more money to allocate to sustainable investments.

 

RESOLVED:

 

The Committee considered and noted the report including the update for delegated responsibilities.

151.

Pooling Investment in Wales pdf icon PDF 97 KB

To provide Committee Members with an update on implementation of Pooling Investments in Wales.

Additional documents:

Decision:

The Committee considered and noted the report.

Minutes:

Mr Latham stated the following key points about the pooling of the Fund's investments in WPP:

 

-       Multi Asset Credit Fund and Global Opportunities Equity Fund performed ahead of benchmark. 

-       The Global Opportunities Equity Fund reduced carbon exposure by 25% in April and the Fund will receive reports on progress going forward.

-       The transition for the Wellington Emerging Market equities will occur on 6th October 2021, which also includes a 25% carbon reduction.

-       He noted the Responsible Investment sub-group, including Mrs Fielder as the Fund's representative on that sub-group, have completed lots of work regarding Responsible Investment.

-       In addition, Fund officers have been working with WPP on a Private Markets portfolio in conjunction with Mercer, and the Committee will receive an update regarding this work at future Committee meetings.

 

RESOLVED:

 

The Committee considered and noted the report.

152.

Economic and Market Update and Investment Strategy and Manager Summary. pdf icon PDF 105 KB

To provide Committee Members with an economic and market update and performance of the Fund and Fund Managers.

Additional documents:

Decision:

The Committee noted the Economic and Market update.

Minutes:

The Committee considered the Economic and Market update.

 

RESOLVED:

 

The Committee noted the Economic and Market update.

153.

Future Meetings

Future meetings of the Clwyd Pension Fund will take place at 9.30 am on :-

 

Wednesday, 1st September 2021

Wednesday, 10th November 2021

Wednesday, 9th February 2022

Wednesday, 16th March 2022

Wednesday, 15th June 2022

 

Additional documents:

Minutes:

The Chairman thanked everyone for their attendance, updates at the Committee meeting, and hoped to see members at the upcoming training events. The next formal Committee meeting was on 1 September 2021. The meeting finished at 10:45am.

 

 

 

……………………………………

Chairman