Agenda item

To receive a report presented by the Head of Wiltshire Pension Fund.

Liam Robson, Pension Fund Accounting and Investment Officer, and Jennifer Devine, Head of Wiltshire Pension Fund, presented the report updating Members on responsible investment issues.

Paragraphs 9-12 were explored, and Members asked for further clarification. Officers established that during the training session conducted on 29 November 2021, Members had identified 5 Sustainable Development Goals (SDGs) out of the 17 United Nations SDGs, that they could consider prioritising as representing the strongest investment case. It was explained that to look at each of the 17 SDGs in detail through mapping the entire investment portfolios would incur significant costs and data that officers felt was unnecessary, and as such, it was officers’ intention that the 5 identified SDGs could instead inform more specific questions for investment managers without such a cost. Cllr Newbury expressed concern that it seemed as if the discussions and conclusions made in the training session, which was an informal meeting, were being drawn out and recommended for endorsement when he felt not enough detailed analysis had been given. Officers clarified that those discussions were being revisited during the Committee meeting before any actions were taken and that Members held the right to reject the recommendations if they saw fit.

Members then discussed their decision to prioritise the 5 SDGs and the Chairman moved that the statement as detailed in Paragraph 12 of the report should be approved.

A vote was undertaken, following which the motion was carried.

Cllrs Christopher Newbury, Elizabeth Threlfall and Jonathon Seed requested their votes against the motion be recorded.

Discussions were then had surrounding the fiduciary duty of the Wiltshire Pension Fund (WPF) and if setting goals such as those would impact on making safe investments, alienate investment opportunities and subsequently negatively impact returns. Reference was then made to the results of the Climate Change Modelling presented by Mercer in 2021 and how investing responsibly was shown to deliver stronger returns.

Further reference was made to the internal legal opinion sought from Elizabeth Muir, Wiltshire Council Solicitor, which was presented to the Committee in 2021 in the form of a memo. Cllr Newbury reiterated his misgivings and stressed that he felt the internal legal staff did not have the necessary expertise to answer the questions surrounding fiduciary duty, and that an external specialist legal advisor should be sought for advice. Cllr Newbury proposed that the Committee seek an external legal opinion (from leading counsel) on the lawfulness of the changes the Wiltshire Pension Fund Committee made in 2021 to the Investment Strategy Statement, in particular with regard to the aim of achieving “net zero across all portfolios” within a fixed timeframe, without the meaning of that aim having been established.

One Member of the Committee questioned the motion and sought advice from Democratic Services as to the legality of the proposal. It was confirmed by Democratic Services that the motion was just and lawful and that a vote should take place.

During the debate, Anthony Fletcher, MJ Hudson, explained how ESG considerations had impacted on investment decisions over the years, the difference in today’s world was that people were more aware of these issues and as such, focussed and spoke on them more. Other Members of the Committee echoed this but also noted that it was not in the Fund’s best interest to restrict investment managers and investment choices. Officers reaffirmed the Fund’s mission and sole purpose, which was explicitly written on the front page of the Responsible Investment Policy. It was further reiterated that officers have not made a single decision that was not focussed on returns, appropriate advice was always sought and that a lot of time and effort had gone into identifying risks and working with Mercer to produce hard figures within the modelling so that the risk (and associated financial impact) could be quantified. Additionally, it was highlighted that the WPF was a large Fund and that long term issues such as climate change would affect the investments and as such action needed to be taken on how to tackle these issues in order to protect the financial interests of the Fund.

Members are the Committee sought further clarification as to the reasoning behind the motion and why internal legal advice would not suffice. Cllr Newbury reiterated that he felt that it was an incredibly specialised area of law and felt that it would be best to seek a specialist for their advice. He further noted that he had raised this issue in 2021 with Frank Cain, Head of Legal Services, and the then Director of Legal and Governance, Ian Gibbons. Officers confirmed that Brunel’s position was exactly aligned with the WPF’s; they took the same view on climate risk and considered the matter an integral part of fiduciary duty. Concerns were raised as to the potential cost of seeking external legal advice. 

A vote was undertaken, following which the motion failed.

Cllrs Christopher Newbury, Elizabeth Threlfall and Jonathon Seed requested their votes for the motion be recorded.

After which, the recommendations as detailed in the report were proposed on block by the Chairman, following which:

Resolved

1)    The Committee agreed to use the report as a basis for monitoring the progress that is being made towards implementing responsible investment policy.

2)    The Committee noted the progress made against the Responsible Investment Plan 2021/22 actions.

3)    The Committee noted the conclusions of the SDG investigative research and agreed that this can be placed on hold until a later date/after the strategy review.

4)    The Committee adopted the statement regarding priority SDGs.