Issue - meetings

47.1     The Committee considered a report providing an update on the investment activities undertaken by the East Sussex Pension Fund (ESPF).

47.2     The Committee’s discussion included the following key issues:

• Passive equity funds are the source of around 75% of the Fund’s exposure to fossil fuels. The recent equity changes are expected to reduce holdings in fossil fuel companies from 4% to 2% of the value of the Fund.
• The ESPF retains 10% of its assets, or 25% of its holdings in equities, in several passive regional equity funds managed by UBS. These are standard market index tracking funds and so are not weighted against fossil fuel companies, unlike the majority of the ESPF’s equity funds. Discussions about what to do with these remaining assets will take place with the new investment adviser, ISIO, once they are appointed in February 2021.
• Any decision about divestment from index tracking funds needs to account for the loss of cash to the Fund from divestment in established fossil fuel companies that tend to pay dividends to shareholders.
• The Fund’s active managers – Newton and Ruffer – are members of the Institutional Investors’ Group on Climate Change (IIGCC), which pushes companies to align with the Paris Agreement. The IIGCC encourages its members to submit motions at shareholder meetings for action on climate change and has been very aggressive in this regard (investment managers are shareholders on behalf of the ESPF). Most Environmental, Social and Governance (ESG) consultants are in favour of this approach rather than blanket divestment from a sector.

47.3     The Committee RESOLVED  to:

1) note the Action Log and Investment Workplan (Appendix 1);

2) note the Quarterly Investment Report from the Investment Advisor, Hymans Robertson (Appendix 2);

3) agree the revised Investment Strategy Statement (Appendix 4); and

4) note the content of this report

5) Agree to ask the new investment advisors to review the remaining 10% of assets held in regional index equities.