Issue - meetings

30.1     The Committee considered a report containing an updated draft of the East Sussex Pension Fund’s Statement of Investment Beliefs.

30.2     The Committee RESOLVED to:

1) note the report; and

2) request that a revised Statement of Investment Beliefs is considered at a future meeting.

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37.1.      The Board considered an update on the ESPF’s stance on Environmental, Social and Governance (ESG) investments.

37.2.      OO explained that the Pension Committee has been taking ESG issues very seriously. This included signing up to the UK Stewardship Code on responsible investment;  discussions with an organisation True Cost about carbon exposure of ESPF’s investments; investing 10% of passive equity into UBS’s carbon related investment tracker; and working with 71 other funds through the Local Authority Pension Fund Forum (LAPFF) to influence companies’ behaviour. He added that elected members who are asked by campaign groups about disinvestment have been provided with a response that sets out the position of the ESPF.

37.3.      AE observed that local authorities have a duty to reduce their carbon footprint, for example, by installing double glazing in their buildings, and it is important that this commitment is replicated through ESPF investments.

37.4.      KA said that he applauded the Pension Committee for taking the subject seriously. He asked that future reports on ESG reflect that BHCC, Eastbourne Borough Council and Hastings Borough Council (who are all members of the ESPF) have all passed motions to disinvest from fossil fuel investments and that BHCC is sceptical about the influence shareholders can have on a company’s behaviour.

37.5.      The Chair wondered whether the considerable size of the eight pooled LGPSs would allow them to engage directly with companies to influence their behaviour, rather than through intermediaries.  KA said that there also needs to be active divestment in fossil fuels not just directing companies’ behaviour.

37.6.      SO observed that the key message of the ESPF is to receive a return on investment for pensioners and employers in line with their fiduciary duty and that there was not a clear commitment to disinvestment if it affected these returns. AE said that the mood amongst in BHCC members appears to be in favour of disinvestment.

37.7.      The Board RESOLVED to note the report.

21.1     The Committee considered a report on Environmental, Social and Governance (ESG) issues based on research by the Fund’s Investment Adviser, Hymans Robertson.

21.2     The Committee RESOLVED to:

1) include within  the Pension Fund Investment Beliefs,  the following statements relating to  ESG investment subject to refinement from Hymans Robertson:

·         Climate change presents a financial risk to the future investment returns from the Fund.

·          Close engagement with - and challenge to - the investment managers will improve understanding of these risks.

·          Individual stock selection decisions will be delegated to active managers but the Fund will retain the right to sell holdings in exceptional circumstances.

·         The Fund will aim to collaborate with other investors where this is expected to have a positive impact

·         The nature of the underlying benchmark is an important consideration, most notably for passive mandates.

2) agree that the East Sussex Pension Fund should sign up to the UK Stewardship Code; and

3) request an analysis of the Fund’s exposure to carbon risk within its equity holdings.

4) request that Hymans Robertson provide a report on whether there is a viable low carbon equity fund that could achieve the same or better rate of return compared to other passively managed equity funds.