Agenda and minutes

Venue: Council Chamber - Guildhall, Bath. View directions

Contact: Mark Durnford  01225 394458

No. Item



The Chair will ask the Committee Administrator to draw attention to the emergency evacuation procedure as set out under Note 8.


The Chairman drew attention to the emergency evacuation procedure.


He also welcomed Jackie Peel as the new Independent Co-opted Member for the Avon Pension Fund Committee and Avon Pension Fund Committee Investment Panel.




Councillors Chris Dando, Toby Savage and John Goddard had all sent their apologies to the Committee.


Wendy Weston had also sent her apologies to the Committee.





At this point in the meeting declarations of interest are received from Members in any of the agenda items under consideration at the meeting. Members are asked to complete the green interest forms circulated to groups in their pre-meetings (which will be announced at the Council Meeting) to indicate:

(a) The agenda item number in which they have an interest to declare.

(b) The nature of their interest.

(c) Whether their interest is a disclosable pecuniary interest or an other interest,  (as defined in Part 2, A and B of the Code of Conduct and Rules for Registration of Interests)

Any Member who needs to clarify any matters relating to the declaration of interests is recommended to seek advice from the Council’s Monitoring Officer or a member of his staff before the meeting to expedite dealing with the item during the meeting.


There were none.




There was none.




Elaine Ashley addressed the Committee and asked the following two questions.


Are you prepared to ask Brunel for investments based on full Fossil Fuel divestments rather than engagement?


If you support the engagement policy they appear to have, at what point does the time run out to proceed with this?


Two further statements had been submitted and circulated to the Committee in writing from Jim Mayger and Charlie Bessant.


The Chair confirmed that written responses would be sent to all parties and these, along with the statements, would be attached as online appendices to these minutes.

20220923 Questions and Statements to the Avon Pension Fund Committee pdf icon PDF 85 KB

Response to Public Statements - 23 Sept 2022 Pensions Committee pdf icon PDF 103 KB



To deal with any petitions or questions from Councillors and where appropriate co-opted and added members.



There were none.


MINUTES: 24th June 2022 pdf icon PDF 441 KB

Additional documents:


The Committee RESOLVED that the minutes of the meeting on 24th June 2022 be confirmed as a correct record and signed by the Chair.



The Local Government Pension Scheme (LGPS) regulations require each administering authority to prepare and publish a Funding Strategy Statement (FSS). The Committee approved a draft FSS at its meeting on 24 June 2022 which has been circulated to the employing bodies for comment. An updated draft FSS is attached as Appendix 1 which, after consideration by Fund Officers and the Actuary, takes into account the comments received from the employing bodies following the consultation period.

Additional documents:


The Group Manager for Funding, Investment & Risk introduced the report to the Committee. She explained that approval of the Funding Strategy Statement was being sought subject to confirmation by the Pension Board which will be provided to Committee at the December meeting.


Paul Middleman, the Fund’s Actuary addressed the Committee. He said that the statement had now been updated with regard to membership numbers and figures relating to demographic analysis.


He added that they were currently monitoring the markets for any reaction to the Government’s mini budget that was announced on 23rd September and said that some adjustments could be expected due to stagflation.


He stated that he believed that the Fund had the right framework in place for the Funding Strategy Statement 2022.


Richard Orton asked for his initial thoughts on how the mini budget would affect pensions.


Paul Middleman replied he would question whether the announcements would be able to control inflation and that a lot would depend on not only the impact it may have on economic growth in the UK, but how much impact the mini budget has globally. He added that he felt that inflation would increase for a longer period than expected.


Jackie Peel asked what the timeline was regarding the 3.9% financial assumption relating to Inflation (Retail Prices Index). She also asked what the previous assumption was.


Paul Middleman replied that this related to the duration of liabilities / cash flow. He said that the average period was around 18 years. He added that the previous assumption was 2.4%.


Jackie Peel asked what the difference was between the past and future Investment Return / Discount Rates shown.


Paul Middleman replied that this was due to the different duration and mix of the liabilities.


Jackie Peel asked if the Average Employer future service contribution rate of 18.5% p.a. was the primary rate.


Paul Middleman replied that it was and that this was an average of all employers and that some would have a lower funding level. He added that the rate was 17.1% at the last valuation.


William Liew commented that the long term salary increase assumption of 4.6% could be difficult for higher education establishments.


Paul Middleman said that he felt that this was a fair assumption, but that there is a facility to enable adjustments to be made. He added that the final salary element is becoming less and less of a factor.


The Committee RESOLVED to:


(i)  Note the feedback responses received, and the proposed amendments to the FSS.


(ii)   Approve the FSS as set out in Appendix 1, subject to

(i)  the insertion of information which can only be included when the actuarial valuation is complete and


(ii)   confirmation from the Pension Board that the FSS complies with LGPS regulations and CIPFA guidance


(iii)  Delegates the refinement and finalisation of the FSS to Fund Officers, with assistance of Fund Actuary.



This report provides the Committee with a summary of the employer base of the Fund, changes, current issues and covenant work. This is to be considered in the context of employer risk.


Additional documents:


The Funding and Valuation Manager introduced the report to the Committee. She said that the primary focus of the Fund’s covenant work is to ensure employers can maintain their legal obligation and financial ability to support the LGPS now and in the future.


She added that at least once a quarter officers meet to discuss developments of employers in the Fund, any flags identified by the Covenant work and what steps are needed to address concerns and this ensures that Covenant risk is regularly reviewed and Officers are aware of affordability constraints and concerns raised by employers.


Charles Gerrish asked what impact there would be in the reduction of unguaranteed admission bodies.


The Group Manager for Funding, Investment & Risk replied that this would have no impact on the Fund and that she expected the numbers to continue to decrease.


Pauline Gordon commented in relation to the benchmarking dials on page 97 that she felt that it would be useful to show how they had moved over the year.


The Funding and Valuation Manager replied that the dials in the report are shown as an example and assured the Committee that the financial analysis that is carried out is very thorough.


The Committee RESOLVED to note the report.


Brunel Presentation - Responsible Investing

The Committee will receive a presentation on this item at the meeting.


Faith Ward, Chief Responsible Investing Officer, Brunel addressed the Committee and gave a presentation on the Brunel Stewardship and Climate Stocktake. A copy of the presentation will be available as an online appendix to these minutes and a summary is set out below.


Faith Ward commented that engagement and stewardship was undertaken by underlying investment managers and via Brunel’s appointed voting and engagement provider, Federated Hermes at EOS. Brunel also engage directly with industry / investee companies.


Jackie Peel asked how can that level of collaboration and consistency take place if Asset Managers and Hermes are having talks separately with the same companies.


Faith Ward replied that Asset Managers will have talks with companies re: engagement priorities and processes about particular topics with Hermes potentially having separate meetings. She added that these meetings are monitored and that generally a level of consistency is found.


She stated that Hermes lead talks on our behalf with regard to £60 / 70 trillion pounds worth of assets.


Faith Ward took members through the engagement hierarchy which begins with thematic engagement and follows a predetermined path which retains selective divestment as an option if material progress is not made on a particular engagement.


Pauline Gordon asked if index fund voting alignment could be explained in any further detail.


Faith Ward replied that where there are segregated funds they are able to direct the voting, but this is significantly more complex in pooled passive funds where there is less flexibility in investors ability to direct votes.


She added that an agreement is in place with Legal & General (Brunel’s passive fund provider) so that for a limited number of times per year Brunel can direct voting thereby aligning voting with Brunel’s policy.


She informed the Committee that Brunel are supporting Legal & General in piloting an exercise with Tumelo who have a role to help investors express their views on voting decisions.


Councillor Shaun Stephenson-McGall asked how often could Brunel update the Fund in relation to companies that are not as engaged in working towards the net zero by 2050 target and whether selective divestment is required. He stated that he felt that more action within this area was required.


Faith Ward replied that this was an ongoing process and that selective divestment has taken place extensively across many of Brunel’s portfolios already. She added though that there is a difficulty in ascertaining from the Asset Managers if the divestment was purely in connection to climate change.


She acknowledged that this a challenge and that a judgement is needed as to when should a decision be made to say that enough is enough. She added that on one level the risk to the portfolio can be removed, but in doing so this would not change the company concerned.


She stated that in her view divestment would be seen as a failure as they have not been able to shift the company on its decision making.


She said that there is a struggle within the sector to decide  ...  view the full minutes text for item 27.

Brunel Presentation - Stewardship Climate Stocktake Sept 2022 pdf icon PDF 2 MB


Annual Responsible Investing Report pdf icon PDF 223 KB

This year the report covers periods to March 2022. Significant RI work has been undertaken over the year including the implementation of the asset allocation changes agreed as part of the Fund’s 2021 equity review and the adoption of two new interim decarbonisation targets as part of the Fund’s climate policy.

Additional documents:


The Investments Manager introduced this report to the Committee. He informed them that the Draft TCFD (Taskforce on Climate-related Financial Disclosures) report had been prepared to the fullest extent possible and in line with regulations that currently only apply to private sector schemes. He added that guidance mandating climate disclosures for LGPS will come into force in April 2023 and the Fund will be required to submit its first report in line with the updated guidance by December 2024. He said that a DLUHC consultation on this is currently underway and that the Fund will respond in due course.


He explained that the Responsible Investing (RI) report sets out the RI and Environmental, Social and Governance (ESG) issues that have been taken into account and how these were addressed through strategic decision making. He added that the RI report explains how Brunel and its third-party providers have delivered against policy, and among other things, the report includes engagement highlights, examples of policy advocacy work that Brunel has either led or participated in and voting data generated by EOS at Federated Hermes.


Charles Gerrish commented that a further recommendation for the report would be required so that officers could finalise the report with the relevant links that were yet to be inserted.


Jackie Peel stated that she felt that the numbering and layout of the TCFD report was slightly confusing as the roman numerals were repeated within separate sections.


The Investments Manager replied that prior to publication the report would go through a final design process with the Communications Team so that it is user friendly.


Charles Gerrish proposed the recommendations within the report at 2.1 and 2.2 with the addition of the following as 2.3.


·  Delegate the refinement and finalisation of the Annual RI report to Fund officers.


The Committee RESOLVED to:


i)  Approve the Draft Annual Responsible Investment Report for publication and agrees the 2022/23 RI priorities listed in Section 6 of the Draft Report.


ii)  Approve the Draft Taskforce on Climate-related Financial Disclosures (TCFD) Report for publication.


iii)  Delegate the refinement and finalisation of the Annual RI report to Fund officers.



INVESTMENT STRATEGY AND BRUNEL UPDATE (for periods ending 30 June 2022) pdf icon PDF 282 KB

This paper reports on the investment performance of the Fund and seeks to update the Committee on routine strategic aspects of the Fund’s investments and funding level, policy and operational aspects of the Fund.

Additional documents:


The Investments Manager introduced the report to the Committee. He said that the amber ratings seen within the report for this quarter relate to negative investment performance which Mercer could talk about further.


He explained that the Investment Panel were due to discuss the Risk Management Framework Review for Periods Ending 30 June 2022 at their meeting on 30th September and would feedback to the Committee on any issues.


Steve Turner, Mercer addressed the Committee and referred them to page 129 of the agenda pack. He explained that the chart shows the attribution performance of the Fund for 12 months to June 2022.


He said that it has been a challenging period for investment markets due to the high rise in inflation. He added that as a result in the rise of bond yields this has seen a negative performance in equity markets.


He explained that the Fund has 40% of its assets in listed equities and therefore these are down between 5% - 15% for the year. He explained that the Fund has 40% of its assets in listed equities and therefore these are down between 5% - 15% for the year. He drew the Committees attention to the fact the Fund’s ESG approach had detracted from returns over a 1 year period. A tilt toward ESG and growth companies within the listed equity portfolios were the main drivers of underperformance given the market had rewarded cyclical companies (which the Fund has a lower exposure to) in light of the fact interest rates and energy costs had been rising.


He said that the Dynamic Equity Protection Strategy remains a positive initiative for the Fund as although since implementation equity markets have gone down around 10%, this is only 8% in real terms.


Pauline Gordon asked if a comparison had been made between the Dynamic Strategy and the previous Static Equity Protection Strategy as to which was better for the Fund over this period.


Steve Turner said that without specifically analysing it he would expect the Dynamic Strategy to have done better because it evolves more as markets move up and down.


He stated that non-traditional asset classes such as Property, Private Debt, Infrastructure and Secured Income really have done well. He added that property really had been a strong performer over the last 12 – 18 months and that this was something they would look to follow up with officers and the Investment Panel.


He said that over this period Liability Hedging had been able to be increased in some capacity resulting in a benefit to the Fund and that Currency Hedging had detracted due to the sterling weakness.


The Committee RESOLVED to note the information set out in the report and appendices.






Update on Legislation pdf icon PDF 241 KB

The purpose of this report is to update the Pension Fund Committee on the latest position concerning the Local Government Pension Scheme [LGPS] and any proposed regulatory matters that could affect scheme administration.


The Digital Services Project Manager introduced the report to the Committee and highlighted the following areas.


The report provides a summary of the main regulatory updates since the last meeting covering McCloud, Cost Management, Pension Dashboards and Responsible Investment.


McCloud Judgment


The Fund continues to work on collating/analysing data from employers in relation to implementing the remedy. A scoping group has been established to take forward discussions on how LGPS Funds can implement the remedy when data from employers isn’t available with a view to centralised guidance being issued in due course. An officer from the Fund will be part of this group.


Pension Dashboard


The latest consultations and guidance issued will aim to provide clarity on the requirements for administering authorities (and software providers) and also how the Dashboard itself may look to members and be used in practice.


The Fund will continue its preparations towards meeting the necessary Pensions Dashboard requirements and welcomes the decision to delay the staging date 5 months given the current burden on administration teams (e.g. implementing the McCloud remedy etc.).


Responsible Investment


Whilst no immediate impact on the administration team, this consultation has been long-awaited and its release may signal movement on other outstanding matters, which may impact on the team. The Fund expects to issue its own response to this consultation in due course.


The Committee RESOLVED to note the current position regarding the developments that could affect the administration of the fund.


Work Plans pdf icon PDF 157 KB

Attached to this report is the work plan for the Committee (Appendix 1) and a separate one for the Investment Panel (Appendix 2) which set out provisional agendas for forthcoming meetings.  The dates for future Committee and Panel meetings are also included.


Additional documents:


The Group Manager for Funding, Investment & Risk introduced the report to the Committee. She reminded members that their Annual Report had been circulated for comments, with a deadline of the end of September for them to be received.


She added that the Annual Report was due to be presented to Council at their meeting on November 17th.


She stated that the Brunel Investor Day was due to take place on September 28th at the Marriott Hotel, Bristol.


The Committee RESOLVED to note the Committee & Investment Panel workplans and training programme plus the Service Plan Monitoring report for the relevant period.