Agenda item
Update and Implementation Plan for Tower Hamlets Pension Fund Sustainable Investment and ESG Considerations
- Meeting of Pensions Committee, Wednesday, 13th March, 2019 6.30 p.m. (Item 6.3)
- View the background to item 6.3
Minutes:
Bola Tobun, Investment & Treasury Manager presented the report that outlined the Funds current position on responsible investments, and considers the Environmental, Social and Governance (ESG) issues currently dominating Pension Fund investment debate. The report also considered what other LGPS funds are doing and recommends alternative ways in which the London Borough of Tower Hamlets Pension Fund can further promote the integration of ESG issues into its investment decision making and reduce carbon intensity of the fund.
It was noted that the Committee has a fiduciary duty to act in the best long-term interest of the fund members and for the Committee to do it properly, they need to recognise governance issues which the Committee had been doing for the past two years. This will could an impact on the financial performance on the Fund, and the Council are not the only employer in the fund. Therefore, whatever decision the Committee makes, some of the other employers like the academies might consider that their deficit contribution is too high and must this must be taken into consideration when considering the return from investment and is very important on balancing the liabilities, in order for LBTH to have a sustainable fund to pay the pensioners.
The following recommendations were noted:
- To continue being a member of LAPFF.
- To look at alternative ways as outlined on page 225 of the report.
- At the previous meeting, the Committee had discussed about going forward with the LCIV’s infrastructure fund. However, it was noted that this a broadly diversified fund, with a minimum target to be 25% invested in Renewable Energy. The Committee noted that it may prefer for a potential allocation to Infrastructure to be fully focused on Renewable Energy
In response to the Committee questions:
· It was noted that it would take 3 to 4 years to build up a target allocation to Infrastructure;
· There is a new guidance on LGPS asset pooling on page 246 of the report. Points to think about being how much choice you would have within the CIV, as this guidance is also statutory;
· In response to understanding the process, and whether the Fund has no choice but to invest within the CIV, the Committee was informed that in order to get the right products from the CIV, the Committee needs to know its own direction and strategy and if not investing in the CIV, then the Committee is ignoring statutory government guidance. The best way to do this is within the CIV by convincing the CIV to make available funds that suit its long-term strategy.
RESOLVED:
- The Committee needs to properly review and consider its long-term investment strategy, and consider the timings then on when to make the changes. Need to review the Fund’s Investment Strategy Statement along with the Actuarial Valuation at the Committee in September; and
- To adopt a move to increase the allocation to low carbon equities (from 15% to 20% of total assets) and give further consideration to the merits of investing in Renewable Energy and how this could be achieved.
Supporting documents:
- Update and Further Implementation Considerations for Sustainable and Low Carbon Investments for Tower Hamlets Pension Fund, item 6.3 PDF 254 KB
- Appendix 1 - Past Activities on Climate Change Issue, item 6.3 PDF 81 KB