Agenda and draft minutes

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Contact: Mark Durnford  01225 394458

Items
No. Item

23.

WELCOME & INTRODUCTIONS

Minutes:

The Chair welcomed everyone to the meeting.

24.

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

To receive any declarations from Members of the Committee and Officers of personal/prejudicial interests in respect of matters for consideration at this meeting, together with their statements on the nature of any such interest declared.

 

Minutes:

There were none.

25.

DECLARATIONS OF INTEREST

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.

Minutes:

There were none.

26.

TO ANNOUNCE ANY URGENT BUSINESS AGREED BY THE CHAIR

Minutes:

There was none.

27.

ITEMS FROM THE PUBLIC - TO RECEIVE DEPUTATIONS, STATEMENTS, PETITIONS OR QUESTIONS

Minutes:

There were none.

28.

ITEMS FROM COUNCILLORS AND CO-OPTED AND ADDED MEMBERS

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

 

Minutes:

There were none.

29.

MINUTES - 11th SEPTEMBER 2020 pdf icon PDF 123 KB

Additional documents:

Minutes:

The minutes of the meeting on 11th September 2020 were confirmed as a correct record.

 

30.

Dynamic Equity Protection: Strategy Design pdf icon PDF 115 KB

This paper considers the strategy design of a dynamic protection strategy, the performance of the strategy under various market scenarios as well as finer implementation points.

Additional documents:

Minutes:

The Investments Manager introduced this report to the Panel, a summary is set out below.

 

The main differences of a dynamic approach versus the existing static structure is that it trades ‘little and often’, seeking to limit timing risk, reduce volatility and improve overall risk-adjusted returns.

 

One of the significant challenges of implementing a dynamic structure is

measuring its success. Benchmarking a static structure is relatively simple given that it has a finite life and its value is determined on a single expiry date. With a dynamic strategy the most intuitive way of presenting performance is to show the extent to which it has either added or detracted from equity market returns and how it has served to reduce volatility over a given period of time.

 

Mercer have run a number of back-tests across different timeframes and using

various dynamic implementation approaches to arrive at a recommendation that optimises risk-adjusted returns.

 

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

 

The Panel RESOLVED to:

 

i)  Agree to implement the bank-led dynamic equity protection strategy by using a “Put Spread Calendar Collar” structure and agrees the design parameters as set out in Exempt Appendix 1.

 

ii)  Delegate the implementation of the strategy, including the appointment of a bank counterparty, to Officers and Mercer.

 

31.

Brunel Pension Partnership - Update on pooling pdf icon PDF 120 KB

This report outlines the progress on pooling of assets with specific reference to the investment activities.

 

Additional documents:

Minutes:

The Group Manager for Funding, Investment & Risk introduced this report to the Panel, a summary is set out below.

 

Assets that have transitioned now total £3.19bn (at 31/09/20). In addition, Brunel invests £109.3m in secured Income and £40.2m in Renewable Infrastructure on behalf of the Fund. The investments in private Debt have yet to commence.

 

To fund the allocation to Sustainable Global Equities in line with the strategic

allocation the Brunel UK Equity fund was sold as were the two mandates with

Jupiter. The balance was funded by the partial sale of the Brunel Global Equity

portfolio.

 

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

 

The Panel RESOLVED to:

 

i)   Note the progress made on pooling of assets.

ii)   Note the project plan for the transition of assets.

 

32.

Review of Investment Performance for Periods Ending 30 September 2020 pdf icon PDF 128 KB

This paper reports on the performance of the Fund’s investment managers and seeks to update the Panel on routine aspects of the Fund’s investments.

Additional documents:

Minutes:

The Investments Manager introduced this report to the Panel, a summary is set out below.

 

Green Sovereign Bonds – The UK government has announced it will issue its first green bonds to fund investment in tackling the climate crisis and aid the recovery from the pandemic.

 

Brunel has joined the Workforce Disclosure Initiative. The initiative calls for greater transparency on workforce policies and practices in companies’ direct operations and supply chains. They have also joined the Good Work Coalition, which engages with companies on the importance of a real living wage and living hours.

 

The Department for Work & Pensions launched a consultation in August, proposing mandatory Taskforce on Climate-related Financial Disclosures (TCFD) to be embedded within pensions Law. The public consultation, launched by the Pensions Climate Risk Industry Group, sought views on policy proposals to require trustees of larger occupational pension schemes and

authorised schemes to address climate change risks and opportunities through effective governance and risk management measures.

 

The Fund pledged its support for an engagement initiative targeting

marine microplastic pollution; a priority theme for the Fund as outlined in the

Fund’s recently published Responsible Investing Annual Report.

 

Referring to Appendix 2, Steve Turner, Mercer addressed the Panel.

 

He said that by taking a three year view on Equities (Developed, Emerging and Small Cap) this could be fairly constructive. He explained that the key reason for this was the expectation that interest rates will remain low. He added that in 2021 they were expecting to see a lot of pro-growth policies and spending from Central Banks and Governments.

 

He stated that Property remains the most challenging asset class that the Fund has exposure to, in particular those affected by Covid-19 within the hospitality and leisure industries. He added that the level of rate collection within most property funds is between 60% - 80%. He said that in the long term there was an ongoing question mark over future use of office space which Brunel were keeping under review.

 

He said in terms of Manager Performance there was still a period of transition to Brunel to be considered. He informed the Panel that a number of managers had outperformed against their benchmark.

 

He explained that a discussion had already begun with officers regarding the redesign of their performance report as a lot of elements within it should be addressed by Brunel. He added that the Mercer version would look to focus more on monitoring strategic asset allocation.

 

The Panel, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

 

The Panel RESOLVED to note the information as set out in the reports.

 

33.

Task Force on Climate-related Financial Disclosures pdf icon PDF 117 KB

The Task Force for Climate-related Financial Disclosures (TCFD) framework is considered best practice and is widely adoptable and applicable to organisations across all sectors and countries.

Additional documents:

Minutes:

The Group Manager for Funding, Investments & Risk introduced this report to the Panel, a summary is set out below.

 

It is expected that “large” pension funds will be required to provide climate-related financial disclosures in the future. For funds with assets of £5bn or more, it is expected that the reporting period would start from 1 October 2021, with the report required by late 2022. Assuming this is to become law, MHCLG would be expected to make provision for the LGPS broadly in line with DWP regulations.

 

The Task Force for Climate-related Financial Disclosures (TCFD) framework is

considered best practice and is widely adoptable and applicable to organisations across all sectors and countries. Use of this framework to improve the Fund’s disclosure was discussed as part of the Fund’s strategic review in 2019/20; it was agreed the Fund would consider adopting the TCFD’s recommendations as soon as it was practical.

 

As long-term investors with a focus on responsible investing and transparency, it is imperative that we support, where possible, initiatives that will improve the

information available for markets to effectively price climate-related risk in order

to improve investment decision making and for policy makers to address market

and policy failures.

 

Early adoption demonstrates the commitment the Fund has to addressing climate risk and capturing opportunities as well as encouraging better disclosure across the industry.

 

The Panel RESOLVED to note the intention to adopt the TCFD recommendations for the year ending 31 March 2021.

 

34.

Forward Agenda pdf icon PDF 85 KB

This report sets out the forward agenda for the Panel to end 1Q21.  It is provisional as the Panel will respond to issues as they arise and as work is delegated from the Committee. 

 

Minutes:

The Group Manager for Funding, Investments & Risk introduced this report to the Panel.

 

She informed them that in addition to the provisional agenda within the report that workshops on the Equity Portfolio Review were due to be planned for next year.

 

The Panel RESOLVED to note the forward agenda.