Agenda item
Presentation from LAPFF - Engagement, Approach and Practice
Minutes:
The Board heard a presentation from Tessa Younger and Paul Hunter of PIRC, a research and engagement partner to the Local Authority Pension Fund Forum (LAPFF).
The Board was advised that LAPFF had 72 LGPS pension fund members and that the role of LAPFF was to protect the long term interests of LAPFF members by promoting high standards of corporate governance and corporate responsibility to ensure financially and environmentally sustainable returns.
LAPFF was active on a number of specific workstreams including
· Holdings engagement
· All Party parliamentary group LGPS meetings
· Reliable accounts
· Tax
· Carbon Risk
· Consultations
In respect of the engagement workstream, LAPFF had undertaken work on many areas including
· Capital market regulatory reform
· Reliable accounts
· Share buybacks
· AGM attendance
· Executive pay and employment practices
· Mergers and acquisitions
· Anti corruption
LAPPF actively communicated with affiliated members and stakeholders via e-bulletins, quarterly engagement reports, fringe events at party conferences, responding to consultation, attending seminars and networking events and social media. LAPFF also engaged in diversity on boards through a variety of mechanisms such as asking questions at AGMs, issuing voting alerts and direct company engagement.
LAPFF engaged directly with shareholders face to face (60% of this engagement was with company chairs) to encourage high standards of corporate behaviour by well run companies which deliver sustainable shareholder returns. LAPFF had been influential in encouraging companies to prioritise sustainability and lower carbon emissions and gravitate towards investment in low carbon assets and companies.
In respect of executive pay, LAPFF had called for all companies to recommend maximum annual pay levels for senior executives to be signed off by shareholders. 10 companies opposed to this recommendation had been identified and LAPFF would be issuing voting alerts for these company AGMs.
Following the presentation, the Board had a general discussion and made the following observations:
·
Did LAPFF actively encourage amalgamation of LGPS Fund Manager
Teams?
·
What were the implications of the changing relationship with Fund
Managers
·
Would Fund Managers start to invest in infrastructure schemes
following announcements made by Chancellor George Osborne in
2015?
· The LGPS current outturn was healthier following the move away from a final salary pension package
· How would the shift in foreign policy impact on LGPS investments (eg Israel/Palestine)?
·
The Board had been advised not to get involved investment decisions
and this was frustrating and disappointing given that the Board was
trying to protect the interests of the fund.
· Was there a direct dialogue with Investment Advisors and were they fully aware of the risks?
· Diversity of company boards should be extended to employee representation as well as increasing the representation of women.
In response to questions and comments from attendees, Ms Younger and Mr Hunter stated that although it was not easy to demonstrate LAPFF successes, a framework had been established to set objectives and assess outcomes. However, LAPFF had successfully engaged with LGPS fund managers on issues such as climate change through filing shareholder resolutions.
Tower Hamlets Council
was a member of LAPFF and received Quarterly reports. Pooled funds didn’t allow for segregated
voting and there were concerns that this could disenfranchise
investors. Infrastructure investments
would allow for investment in low carbon initiatives but PIRC was
unable to provide investment advice.
The Board thanked Ms Younger and Mr Hunter for attending and the presentation was noted.
The Board agreed
(1) That LAPPF be requested to examine and report back on engagement with Fund Managers on how the voting rights of LGPS Funds can be strengthened, and to continue promoting diversity on company Boards.
(2) That a presentation be made at a future meeting on how ESG risk factors can be incorporated into investment decisions (this may also be of interest to the Pensions Committee)
Supporting documents: