Agenda item

The Board will receive a verbal update regarding this item.

The Head of Pensions addressed the Board. He stated that over the last 12 months the Fund’s performance has been -0.3% which he believed was slightly below the typical Local Authority benchmark. He added that this was mainly due to a 12% property allocation which has not performed well and gilts exposure.

He explained to the Board that the Fund has £5.4 billion worth of assets and that the funding level had improved to around 97% at 30 June 2023, as rising interest rates reduced the present value of future liabilities. Therefore, the Fund is in a strong, robust financial position.

He said that 86% of the Fund’s assets had now transferred to Brunel and that the remaining 14% was deemed difficult to transfer and were likely to be allowed to run off into Brunel over the next 3 – 4 years.

He informed the Board that the carbon intensity within the equity portfolio was 40% below the global benchmark. He added though that they were aware of resource constraints within Brunel, in particular regarding Private Markets and Local Impact Investing and that it was vital to have a structure in place to help them to attract the best talent.

He stated that in response to the Government’s consultation on pooling that they were broadly in favour of further pooling and would be presenting the Committee with three options later in the month before issuing the Fund’s formal response. He added though that the Fund was against being mandated to invest in specific asset categories and should maintain its investment freedom.

He explained that a Climate Review for the Fund was ongoing involving both Brunel and Mercer who were providing an analysis to set out options for the Fund. He added that the review would set out the trade offs to be considered, in particular, the pace of change on net zero -v- investment risk.

He said that Mercer have already advised that to attempt to achieve net zero by 2030 would mean that only 75 global stocks would be available to invest in and this would create a large concentration risk for the Fund.

He said that the analysis was due to be completed by the end of September, consultation with stakeholders would then take place during October & November, with a decision due to be taken by the Committee in December.

Alison Wyatt asked why only 75 investment options would be available to the Fund.

The Head of Pensions replied that the main reason was that if you analyse the value chain of these companies, there would only be this number that could claim to having an actual net zero impact on the planet.

Nick Weaver asked how much risk should be assigned to the Government’s consolidation proposals.

The Head of Pensions replied that he felt that there was a material risk to them mandating certain investments. He added however that he was sure that they would be receiving universal feedback that mandating in certain sectors is against the other objectives of the funds and their risk management stance. He said that he was hopeful that lobbying would mitigate this risk to some degree.

Nick Weaver asked what benefits could be gained from further consolidation.

The Head of Pensions replied that deeper pools of talent could be created and that this could enable experts to be identified in different pools to be used across the country.

The Board RESOLVED to note the update that had been provided.