Agenda item

(a)          The Committee considered and noted the update.

(b)          The Committee approved the “Governance and reporting of climate change risks” draft consultation response.

Mrs Fielder noted the following key points:

-          Regarding the business plan, the investment strategy review had been delayed due to the difficult economic environment. This would be brought to the next Committee in February 2023.

-          The climate change report and TCFD requirements were also slightly delayed. Work was continuing and a training session was due to be held for Committee members on 1 February 2023.

-          The Stewardship Code was submitted by the 31 October 2022 deadline after a draft submission was presented at the August Committee meeting. The Fund will not know the outcome until March 2023. If any members wished to see the final submission, they could contact Mrs Fielder.

-          The Fund had expected various consultations regarding LGPS investment related developments but only the one relating to governance and reporting on climate risk has been issued.

-          As outlined in paragraph 1.02, the Department for Levelling Up, Housing and Communities (“DLUHC”) published a consultation, which closed on 24 November 2022, on proposals to require LGPS administering authorities to report on climate change risks. The consultation was in line with recommendations made by the Taskforce on Climate Related Financial Disclosures (“TCFD”). Mrs Fielder explained that in 2017, a set of recommendations were published with the aim of improving financial related risks. In November 2020 it was announced that TCFD disclosures would become mandatory in the UK by 2025. DLUHC’s view is that the requirement for LGPS should be set as high a standard as for private pension schemes. The private pension schemes were the starting point for the proposals but did not take into account the unique features of the LGPS including local administration and democratic accountability. Mrs Fielder highlighted the draft Fund’s consultation response in Appendix 2. Overall, the Fund was supportive of DLUHC’s proposals in the consultation. A significant amount of the proposals surround scenario analysis and metrics, and the Fund had already undertaken modelling and would be doing so again as part of the Fund’s investment strategy review. The Fund’s response to the consultation summarises how climate change was already embedded into the Fund’s governance, investment and funding strategies. This provided further evidence of the Fund being committed to best practice in this area, and the Fund intended to carry out their own TCFD reporting early in 2023, before the Government deadline. This adhered to the principles laid out in the consultation document. Mrs Fielder highlighted that the Committee were being asked to approve the draft consultation response.

-          Paragraph 1.04 outlined the Additional Voluntary Contribution (“AVC”) review that the Fund were currently undergoing with AVC providers, Prudential and Utmost through Mercer. Under the LGPS regulations, all administering authorities were required to provide members with details and access to an AVC provider. Mercer had not raised any specific issues as part of the review but made a recommendation that the Fund should communicate with members to remind them to regularly review their AVC investments and also to confirm their retirement ages.

-          The Fund conducted a transition of assets in October and November 2022 as noted in paragraph 1.15. There was a redemption of £125 million from the Blackrock Global ESG Equity Fund and £90 million from the Wales Pension Partnership Emerging Market Equity Fund. This reduced the Fund’s physical equity exposure from 20% to 10%.

-          For the private market allocation a further two commitments to investments within the private equity portfolio were made, including £20 million to ECI12 (which the Fund had invested with since 1998) and £11 million to Activate Capital II.

-          There were a number of changes to the risk register including the update regarding the valuation to risk F4 and the funding level reducing to risk F2, both of which reduced from significant likelihood to low.

RESOLVED:

(a)          The Committee considered and noted the update.

(b)          The Committee approved the “Governance and reporting of climate change risks” draft consultation response.