Agenda item

INVESTMENT STRATEGY STATEMENT

The Regulations state that the administering authority must consult on the ISS as appropriate.  The Pension Board will review the draft ISS for compliance with the regulations and a wider consultation will be done with scheme employers.

Minutes:

Councillor Martin Fodor, Bristol City Council addressed the Committee, a copy of his statement is attached as an online appendix to these minutes and a summary is set out below.

 

I’m making this statement in the light of the recent article/letter from APF setting out the Fund’s current strategy to deal with fossil fuels and the climate emergency. 

 

My own pension is in the Local Government Pension Scheme and would be back in this fund where it started, if local councillors were offered a pension, but unfortunately we are not. Mine is currently deferred, elsewhere in the Brunel Pensions Partnership family.

 

For five years I’ve been making the case for divestment and diversification of the fund to reduce exposure to ever greater risks of stranded assets, and to ensure that the money is put to work to secure an effective transition to the economy and environment we need, not the one where old assets are preventing a just transition of workers and communities.

 

We know the major local government union Unison actively supports divestment of Avon Pension Fund locally as they have supported calls for this in both 2015 and 2019. All the emerging guidance and warnings point to this action.

 

I look forward to the Fund giving an update on its climate emergency strategy later in the summer. But action is still too slow. Having slightly lighter weighted investments with a bit less fossil fuel exposure doesn’t put the money where its needed for the future. As long as the fund continues to support the fossil fuel majors they don’t need to worry about their continued investments in extracting fossil fuels.

 

The climate breakdown warnings are ever more urgent, and all the local authorities in this area have long declared a Climate Emergency. I therefore attend today to call on this fund committee to ask for an urgent review of the opportunities for positive investment, and the pace of divestment. There are ever more opportunities to put money where it’s needed, in renewables, energy efficiency, smart technologies, and energy storage. Engagement should not be an excuse for inaction; it can be achieved with minimal shareholdings not continued support for unsustainable practices.

 

The Chair thanked him for his statement on behalf of the Committee and said that a meeting of the Avon Pension Fund Committee Investment Panel was due to take place in early August where the issue would be discussed further.

 

The Group Manager for Funding, Investment & Risk introduced this item to the Committee. She stated that the Investment Strategy Statement (ISS) had been prepared in line with the statutory requirements under the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 and associated guidance.

 

She highlighted the following key changes to the ISS:

 

(i)  Updates to reflect the Fund’s approach to climate change and the resultant increase in the allocation to sustainable equities and renewable infrastructure and the setting of climate objectives aligning the investment strategy with the Paris Agreement goals.

 

(ii)   The increased strategic allocation to private market assets and the income generative and risk diversification benefits that result.

 

(iii)   Updated wording around the Fund’s risk management strategies, reflecting the extension of its equity protection strategy to encompass emerging market equities and the implementation of its low risk corporate bond strategy.

 

She added that the regulations state that the administering authority must consult on the ISS as appropriate. The Pension Board will review the draft ISS for compliance with the regulations and a wider consultation will be done with scheme employers. Consultation responses will be considered by the Committee before agreeing the final version at the September 2020 Committee meeting.

 

Councillor Manda Rigby said that she welcomed the comments made by Councillor Fodor and that she believed that many people were changing their views on how quickly this issue should be progressed. She stated that an inclusive consultation was required and that following that Brunel would need to achieve what the Committee requests.

 

The Head of Business Finance & Pensions replied that he acknowledged the sentiments that had been raised but said that returns have to be made on the investments that are carried out. He said that 2022/23 gives the Fund an opportunity to reassess its position again but was hopeful for market / Government changes to enable us to deliver a better future.

 

Councillor Rigby said that she acknowledged the limitations and regulations of the Fund but felt that this was a specific moment in time where an opportunity could be seized to act sooner if possible.

 

The Head of Business Finance & Pensions replied that consultation was about to begin and that the intention to carry this out as wide as possible and report back to the September meeting of the Committee.

 

Shirley Marsh-Hughes asked if a section of the statement could contain information on work that has been carried out so far.

 

The Group Manager for Funding, Investment & Risk that it can be difficult to include detailed information in what is a technically statutory document. She added that she could look to provide this information separately to members in due course.

 

Richard Orton acknowledged that extensive engagement had been carried out previously but now called for a wider and positive consultation that includes the Trade Unions (GMB, Unison & Unite). He also asked for information to be made available so that members of the public can understand the Fund’s view on fossil fuels.

 

The Group Manager for Funding, Investment & Risk replied that with regard to the consultation they only have a small team which is why they are mindful of its scope. She said that the Unions will be included in the consultation and would work with the team on the communications relating to this. She added that she was aware that there had been a mixed response to the latest newsletter had been issued.

 

The Committee RESOLVED to approve the draft Investment Strategy Statement for consultation, noting that:

 

(i)  The ISS has been prepared in line with the statutory requirements under

the Local Government Pension Scheme (Management and Investment of

Funds) Regulations 2016 and associated guidance.

 

(ii) The ISS has been updated to reflect changes to the Fund’s investment

strategy following the 2019/20 investment strategy review.

 

(iii) A copy of the draft Statement will be published on the Fund’s website.

Supporting documents: