Agenda item

To receive a report requesting the approval of the document and highlighting the changes made.

Jennifer Devine, Head of Pension Fund Investments, introduced the report which explained the process in place to update the Investment Strategy Statement (ISS) for consideration and approval.

Officers explained that the report was a minor update to the 2020 version following on from a full assessment of climate change risk. It was confirmed that after suggestions by Committee members to consult on the changes with employers ahead of the meeting, officers had received 6 responses to the consultation with an analysis of those responses attached to the agenda pack. Elizabeth Muir, a Wiltshire Council Solicitor and the designated contact for the WPF, was introduced, her role was explained, and reference was made to her memo that was attached to the agenda pack.

Cllr Christopher Newbury referred to his concerns over the fiduciary duty of the Fund when considering the direction of travel towards a more sustainable asset allocation. Cllr Newbury described apprehensions with regard to approving the revised ISS; namely, limiting the range of investment options open to the Fund and the lack of detail surrounding how the Fund could achieve a net-zero target and what this meant. Cllr Newbury further noted the consultation that had been conducted with employers and questioned if the consultation was lawful in view of the information provided at the time. Officers and advisors clarified that there was no obligation to consult, but that it was regarded as best practice, and had been done for two reasons: openness and transparency, and to help provide a full picture to assist Committee members in their decision making on the amended ISS.

Officers clarified that the difficulty in defining a precise practical meaning with regard to the net-zero target was explained by Mercer when their climate change modelling was presented to members. Officers reiterated that, although the path would become clearer as progress was made, this should not prevent the Fund committing to the target of net-zero by 2050. Reference was made to the Paris Agreement and the UK Government goals and the member sought further clarification as to their relevance to the Fund’s Investment Strategy Statement. Officers explained that a net-zero target for pension funds specifically was not set out as a requirement by the Paris Agreement or by the UK Government, but that a target of net-zero by 2050 was consistent with the general targets set out by both. Officers highlighted how other Funds/companies making these types of commitments were becoming even more common, and that a majority of other Funds within the Brunel pool had made or were imminently seeking to make such commitments.

Elizabeth Muir then addressed some of the points that the member of the Committee had sent via email to officers ahead of the meeting. Reference was made to the memo that was attached to the agenda pack, particularly in respect of the section under ‘Fiduciary Duties’. It was reiterated that the commitments and targets being discussed were commonplace within the industry. Anthony Fletcher, MJ Hudson, noted that that the UK Government were moving towards this direction and therefore the WPF were aligning themselves with the general legislations of the Country and more broadly with many other Countries across the world. He stated that members need not worry with regard to professional indemnity as in the event of a challenge, members need only to demonstrate that they acted in a reasonable way based on the information that was available at the time. He referred to a statement that his colleague, Peter Scales, had provided which noted that he found nothing that suggested that the WPF were not being compliant, applauded the memo and stated that he did not feel that anything Fund officers were doing could be held up for reproach. Cllr Newbury further stressed that he felt that the internal legal staff did not have the necessary expertise to answer the questions posed, and that a specialist legal advisor should be sought for advice on the subject. He further asked that Elizabeth Muir investigate the lawfulness of the consultation that had been conducted. Officers emphasised that advice had been sought from well respected organisations such as Mercer and Hymans-Robertson, whose research and advice reinforced the other’s and clearly outlined the need to move towards this direction and how by not doing so, the Fund would be materially disadvantaged.

On the point of diversification, it was explained that in practice, the amended ISS would lead the Fund to invest in a way that would increase diversification rather than reduce it. Examples given were the sustainable equities portfolio which was currently under consideration and would add exposure to small-cap quote equities, and the increasing opportunity set within private markets to invest at an early stage in the development of renewable assets and electric vehicle charging infrastructure. It was further reiterated that the Fund did not currently have a policy of excluding fossil fuel companies, but favoured a policy of engagement, and through this means could influence companies to prepare for a transition to a low-carbon economy. It was highlighted that companies will have to reduce their emissions, and that the Fund would benefit from investing in those companies who were best positioned to do this.

Other members of the Committee then gave their opinions and acknowledged the amount of work undertaken by officers. Reference was made to the Wiltshire Council net-zero target of 2030, and the consultation responses which requested that the target date be moved forward to 2030, and members were asked if they would like to amend the current 2050 target to be line with these. Members noted that 2050 seemed a more realistic target as a commitment to 2030 would require significant changes to the asset allocation which officers and advisors cautioned may not be in the Fund’s best interest.

Members then voted upon each recommendation separately, following which it was:

Resolved

1)    The Committee approved the revised ISS.

2)    The Committee approved that Wiltshire signs up to the IIGCC framework, to support the net-zero by 2050 target.

3)    The Committee approved that the new investment belief in the ISS, and the action of signing up to the IIGCC framework, are communicated to the wider public via a press release.

Councillor Christopher Newbury requested that his vote against Resolution 1 be recorded.