Mr Mike O’Donnell, Chief Executive of London CIV, Ms Stephanie Aymes, Mr Jason Fletcher, and Ms Jacqueline Jackson, gave a presentation to the Board on the governance arrangements in place for the London CIV.

Mr O’Donnell explained the history of the organisation and how the London CIV’s governance framework and Investment strategy worked to ensure the best outcomes for Pension Funds who had invested with them via the collective investment vehicle. Mr Fletcher explained the investment lifecycle and the fund launch framework as well as the manager monitoring process. Ms Jackson provided an update on the London CIV’s responsible investment strategy and engagement with Funds and companies invested in.

The main points from the presentation to note were:

• London CIV was set up in December 2015 as the first UK LGPS company, with all London Borough Pension Funds, Royal Borough Pension Funds and City of London Corporation (known as the Client Fund) to add value by working collaborative to achieve economies of scale, drive collaboration and maximise impact through responsible investment.
• The purpose of the London CIV is to work in partnership with the ‘Client Fund’ to agree product pipeline and services to deliver the ‘client fund’ requirements. This includes resources and a timeline to a new funding model.
• The governance framework of the London CIV includes a Shareholder Committee, and a Board who oversee the products offered and investments made.
• As part of the governance framework, the London CIV Board interacts with various other Committees, such as the London CIV Investment Oversight Committee and the London CIV Compliance, Audit and Risk Committee and London CIV Executive Committee.
• The Investment Lifecycle for Responsible Investment, Risk and Cost Transparency were explained to include different stages such as Design, Selection RFP, Management and Termination.
• The Manager selection process also included at RAG status for monitoring performance, risk and compliance.
• The objectives of the Responsible Investment and Engagement Policy were explained to the Board, with an overview of how the policy had been designed to include different stages such as research and review, design, implementation and disclosure.
• Six priority areas had been identified as part of the Responsible Investment and engagement policy – climate policy, stewardship policy, product offering, capacity to deliver, culture and communication.
• A table showing the progress made against the priority areas was also provided in a RAG status, traffic light identifier.

In response to questions from members the following was noted:

• The Audit and Scrutiny function sits with the London CIV Compliance, Audit and Risk Committee. The independence comes from the non-executive members on the committee, the FCA and the Depository. However, going forward the London CIV will look at internal audit and how this fulfils the role of compliance.
• In response to what the London CIV viewed the role of the Pensions Board to be, in relation to the scrutiny of its performance, Mr Mike O’Donnell responded stating that this was the first Board meeting the London CIV had been invited to. He said the Board required a general assurance from the Pensions Committee that the working relationship it had with the CIV, was working well.

• ACTION: The Chair, Mr Jones suggested the London CIV may want to consider holding an annual engagement meeting with Pension Boards to update them on news from the London CIV.

• The Renumeration Committee’s independence is assured through the non-executive members of London CIV Board. The chair is a non-executive member and there is representation from the boroughs as well as the representatives of the shareholder committee. They bring a degree of independence and oversight to the committee.
• In reference to the Investment Panel, this is an internal panel which reports into the Board, ExCo and IOC Committees. The IOC has three independent members on that committee and the executive. Recommendations on fund selection are taken to the IOC committee.
• External companies are used on an ad hoc basis when expertise is required for the different asset classes in respect to manager selection.
• In reference to slide 16, Mr Fletcher clarified this was an example of a fund and did not reflect all funds. He said that this was used internally by the London CIV to pull through areas of concern, which were then transferred to the Quarterly Reviews held with fund managers.
• Mr Fletcher said he would look at producing RAG status reports reflecting different asset classes.

• ACTION: It was suggested that the London CIV publish a RAG status on its overall performance.

• Councillor Ullah asked if companies were vetted in relation to where pension fund monies are invested. He said there was concern in relation to the escalation of violence in the Middle East in particular the Palestine-Israel conflict and if any investments were linked to the illegal settlements. Mr O’Donnell stated Ms Jackson would provide an update on the work undertaken in relation to responsible investment however the CIV had released a public statement in relation to human rights and Israel and their approach was of engagement. He said the statement published a list of holdings and that this was a growing concern of many Funds who invested with them.

• ACTION: Ms Adams to circulate the press statement to the Members of the Pensions Board.

• In answer to how the London CIV prioritises which investment/fund it should focus on, Mr O’Donnell said their work was demand led. He said if there was common interest among the ‘client fund’ that was what was focused on. He said they would not launch a fund for just one client, although they have been tactical in the past where they have launched a fund knowing that interest would consolidate with some funds being the leaders for investment i.e. seed investors.
• Mr Gray said there was concern Managers were moving away from voting in line with LAPFF recommendations and said he’d like to discuss this outside of the meeting. He asked if the Tower Hamlets fund wanted to vote in a particular way at a shareholder meeting, could that happen? Ms Jackson responded saying that in principle this could happen however would not be advisable as it would water down the voice of the CIV. She said voting was largely undertaken in line with LAPFF recommendations. Ms Jackson said the only time when it would vote differently would be if there was a conflict of interest.
• Mr Thompson said the Pensions Board had tracked voting patterns and whilst voting in ‘one voice’ was advisable, there may be occasions when not all thirty-two pension funds will have the same view. He encouraged more work to be done on this issue.

The Chair Mr John Jones thanked the attendees from London CIV for their presentation.