Agenda item
PRESENTATION LONDON CIV - GOVERNANCE ARRANGEMENT UPDATE
- Meeting of Pension Board, Thursday, 19th July, 2018 10.00 a.m. (Item 7.)
- View the background to item 7.
Minutes:
Kevin Cullen, Client Relations Director, London CIV gave a presentation which detailed the works of the London CIV since November 2017. The Board was reminded that Mr Cullen had attended their meeting in November. The following was noted during a question and answer session.
• The LCIV has £16bn AUM and this total includes passive assets. A total of £7bn is based on the ACS Platform and is insulated; £9bn is with passive Managers (LGIM, Blackrock etc.). The Board was advised that beneficial rates were obtained and that the large Investment life vehicles were prevented from being part of the ACS due to legal reasons.
• That 30 London Boroughs (LBs) had pooled and an additional LB was to join at the end of July and that the City of London was to make their first Investment.
• At present over 40% of London’s assets are now pooled and that the London Boroughs of Merton, Hackney, Waltham Forest and Croydon had agreed to pool for the first time. The Board was advised that it would be beneficial for the Fund if all the London Boroughs pooled.
• Three new sub fund were launched in 2018 and this included Equity Fund Strategy and MAC. The First Fixed Income Fund was launched on 1 June 2018. Members were advised that a Working Group was set up before the Fund was launched and that the Group was used to gauge the views of Fund Members on what type of products were preferred.
• LCIV was currently considering their future targets and were viewing markets and vehicles. There will be meetings to ensure that the rights products are chosen. Infrastructure is currently being reviewed.
• That the cost of administrating the LCIV was lower than the gains derived from the AUM and that an increase in the latter would help to further reduce levies.
• That LCIV was seeking to obtain inflation protection for investments. The Board queried whether the above should also be undertaken for ESGs and were advised that this was dependent on the requirements and that it would involve reviewing funding strategies.
• Members noted that they had expressed concerns over the governance arrangement of LCIV in particular with the lack of independence of the Remuneration Committee and the Audit Committee and questioned whether this issue had been raised. Mr Cullen advised that the LCIV will be approached about the above topic and that the Board will be advised of the response.
• The LCIV was undergoing a staff restructure and that there had been a number of appointments made. It was anticipated that current vacancies will be filled in the autumn. The Board noted that the Chief Investment Officer Post remained vacant and was advised that this work area was currently being covered by the Chief Executive. A permanent appointment to the Chief Executive post will be made after autumn.
• Members raised concerns over the lack of BME representation on the Shareholders Committee and commented that the Body should be reflective of the community that they serve and asked that this be communicated to the LCIV.
• That the Shareholders Committee membership included a Trade Union Observer and that the individual had ‘spoken rights’. The Board commented that it would be preferential if this committee member was given a more active role on the Committee.
• That Fund Managers were required to provide reasons for not following the LAPF Guidelines on Voting. The Board commented that the Guidelines should be widely circulated and requested they be provided a copy of the procedure
• That Share Action was currently working on the Workforce Disclosure Initiative’ and the scheme aim was to encourage Large Investors Companies to disclose their ‘work-chains and their ‘workforce practises’. The Board noted that Individual Managers could be approached on the above topic.
• Members noted that Ruffer was underperforming and asked that the recovery measures to address the above be disclosed at a future Board. The Board was advised that quarterly meetings are held with each Fund Managers and reports are placed on the Client Portal. There is also constant tracking and monitoring of performances. The Funding Pools determines how Fund Managers should be managed.
• That the LCIV had devised a Responsible Investment Policy and the protocol was to be ratified at the Shareholder meeting. A copy of the draft Policy will be circulated to the Board.
• The LCIV has become an UN PRI signatory.
• That the LBTH Pensions Fund was committed to reducing their ‘carbon footprint’ and disinvesting in companies who have a high carbon output. This has led to disinvestment from £30m to £15m in such companies. Members commented whether they could completely disinvest from such companies and was advised that this would affect their passive funds. The Board requested that they receive a presentation on the disinvestments at a future meeting and commented that the same policy should also be extended to companies that have poor labour practise in developing countries.
Members thanked Mr Cullen for his presentation. Mr Cullen advised the Board that he will share the recommendations made by Members to the LCIV.
RESOLVED
1. The LCIV is approached about their Governance arrangements in particular with the lack of independence and representation on the Remuneration Committee and the Compliance/ Audit/ Risk Committees.
2. The LCIV is requested to ensure that the Shareholders Committee members are reflective of the community that they serve and that it is proposed that the Trade Union Observer on the Committee is given a more active role.
3. That the LAPF Guidelines on Voting be circulated to Pensions Board Members.
4. That the LCIV Responsible Investment Policy be circulated to Pensions Board Members and.
5. That the Pensions Board receives a presentation on TH LGPS Carbon footprint and its disinvestment in companies who have a high carbon output.