Agenda item

The Assistant Investments Manager presented the report.

Sarah Wilson presented the Manifest Monitoring Review of Shareholder Voting 2015 for the Avon Pension Fund. She reported that the number of meetings voted at by the Fund’s managers in 2015 was 905, down from 1,166 in 2014, comprising a total of 13,532 resolutions (compared with 17,711 in 2014). The bulk of the meetings took place in the period April-June. The Fund’s managers supported 96.25% of the recommendations of company management. She drew attention to the comparison of manager voting patterns in section 5.1 of the report (agenda pages 267-269).

[Councillor Mike Drew joined the meeting.]

A Member said that he was concerned that some companies might be overvaluing their assets, which might include stranded assets, and that they should be challenged to demonstrate that the asset values they were claiming were justified. Ms Wilson said this was an important issue, but it should be remembered that accounting standards were set by independent organisations, such as the International Accounting Standards Board. Therefore, the first thing on which to seek assurance was that companies were properly audited and that they were complying with accounting standards. As far as stranded assets were concerned, it should be noted that these were not covered by current accounting standards, which relate only to financial assets. There were initiatives to encourage companies to address the issue of stranded assets. The Member said that he thought that the important influence on companies was the bottom line, and that investors should keep probing and not let companies think they were going to forget about this issue.

A Member asked how companies could be encouraged to address the challenges and opportunities arising from environmental change. The Assistant Investments Manager said this would be taken into account in the review of responsible investing; there would be two more meetings on the review with the outcome reported to the Committee in December. The Member asked whether the fact that Jupiter was fossil free at the time the report was written was due to accident or design. The Assistant Investments Manager replied that it was by design; the Jupiter mandate was the only mandate that had exclusions. It should be noted, however, that while Jupiter had achieved their performance targets over the recent period, because of the exclusions they have in the UK index  they have had volatile performance versus the benchmark over time; this will be taken into account in the review. Ms Wilson pointed out that under Regulations issued in 2013 under the Companies Act 2006 all companies now have to report their greenhouse gas emissions, so that is possible to calculate the carbon impact of portfolios.

A Member asked whether it was acceptable that there was such a wide variation in managers’ voting against the Template for Management and that so many managers did not publish how they had voted. Ms Wilson replied that Manifest did not expect all managers to follow best practice 100%; they had to exercise their individual judgments. As far as disclosure of their voting was concerned, they might not do this in public, but they did disclose to the Fund.

In conclusion Ms Wilson said that in the UK constructive dialogue with company boards was encouraging them to be more open, whereas in the United States, where companies had faced an aggressive environment, legislation was going through the House to prevent discussion of company failings and shortcomings. It should be remembered that some fund managers had no training in ESG and SRI issues and were on a learning curve.

RESOLVED:

1. To approve the annual Responsible Investing Report for 2015/16;

2. To approve the Fund’s Statement of Compliance with the Stewardship Code in section 3 of Appendix 1.