Agenda item
Report update & Pensions Committee discussion on- Fund recommendations and update on ESG, Fossil Fuels and Low Carbon Approach
- Meeting of Pensions Committee, Thursday, 16th March, 2017 7.00 p.m. (Item 6.1)
- View the background to item 6.1
Minutes:
Bola Tobun (Investment & Treasury Manager) presented the update. The purpose of the report was to give an update on meetings held in December 2016 and February 2017 to facilitate discussion on the formulation of a cost effective Fund Ethical, Social and Governance Policy. The Committee were reminded that at the meeting of the Committee in December 2016, the Committee were invited to consider the following recommendations:
A. To Commit to the UK Stewardship Code.
B. Develop a policy statement regarding the London Borough of Tower Hamlets’ approach to fossil fuel investment with a view to inclusion as a section within the new Investment Strategy Statement (ISS), which is the new name for the current Statement of Investment Principles.
C. To review options for switching some of the UK passive mandate into a low carbon target index fund.
D. To Consider options for an initial active investment of approximately 5% of the Fund in a sustainability/low carbon or clean energy fund(s). Given the right risk/return profile, investment in such a fund would demonstrate the Fund’s commitment to invest in clean and sustainable companies.
E. To Monitor carbon risk within the London Borough of Tower Hamlets Pension Fund and to appoint a specialist contractor to conduct a carbon footprint review of the Fund at an estimated cost of between of £5k to £20k.
F. To continue engagement activities with the Fund’s investment managers on their approach to fossil fuel and to promote consideration of climate change issues with managers when making investment decisions.
G To maintain an active approach to climate change issues with investee companies and look for further opportunities to work with others on issues of ESG importance.
The meeting received a presentation from Divest Tower Hamlets about the merits of divesting from Fossil Fuels. They also heard from Paul Spedding of Carbon Tracker Indicative about the valuation implications of climate change and Clifford Sims of Squire Patton Boggs on fiduciary duty.
At its meeting on the 14 February 2017 the Committee heard from RBC – Nuts and Bolts of Sustainable Equity and Low Carbon Global Equities and FTSE Future World ex CW Climate Balance Factor Index.
Ms Tobun provided an update on the above recommendations. In relation to the first recommendation, Officers had drafted a code for inclusion as part of the new Investment Strategy following the receipts of documents. In relation to the third recommendation, further consideration would need to be given to this following the appointment of the investment consultant to make an informed decision. In relation to recommendation E, it was noted that information on the true costs had now been received. This should help inform the pending review. Recommendations F and G and would be completed in accordance with the relevant requirements.
In response to questions, Members recalled that at the last meeting they requested that a scoping exercise be carried out and for the options to be looked at. No decision had been taken at that meeting.
Overall, Members welcomed the update and specifically expressed a wish for further information in respect of fossil fuels, specific asks especially around mapping, carbon foot print issues and the financial implications of the issues. They also asked for further information on passive and active mandates. Officers confirmed that these issues would be examined in detail as part of the forthcoming review and covered in the new strategy. The timescale for the appointment of the consultants was detailed under minute item 6.8. The consultants were due to commence work on the strategy in April.
RESOLVED:
1 To Commit to the UK Stewardship Code.
2 Develop a policy statement regarding the London Borough of Tower Hamlets’ approach to fossil fuel investment with a view to inclusion as a section within the new Investment Strategy Statement (ISS), which is the new name for the current Statement of Investment Principles.
3 To review options for switching some of the UK passive mandate into a low carbon target index fund.
4 To Consider options for an initial active investment of approximately 5% of the Fund in a sustainability/low carbon or clean energy fund(s). Given the right risk/return profile, investment in such a fund would demonstrate the Fund’s commitment to invest in clean and sustainable companies.
5 To Monitor carbon risk within the London Borough of Tower Hamlets Pension Fund and to appoint a specialist contractor to conduct a carbon footprint review of the Fund at an estimated cost of between of £5k to £20k.
6 To continue engagement activities with the Fund’s investment managers on their approach to fossil fuel and to promote consideration of climate change issues with managers when making investment decisions.
7 To maintain an active approach to climate change issues with investee companies and look for further opportunities to work with others on issues of ESG importance.
Supporting documents: