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21.1.      The Board considered a report on the proposal to publish a statement regarding the Fund’s compliance with the Financial Reporting Council’s UK Stewardship Code.

21.2.      Diana Pogson (DP) asked why the draft ESPF UK Stewardship Code Statement contained relatively few references to the ACCESS pool, of which ESPF is a member. OO explained that whilst ESPF is a member of ACCESS, stewardship codes apply only to individual Local Government Pension Schemes (LGPS) – as they are the legal administrative authorities – and not to ACCESS pool as a whole.  He added that three of the 11 ACCESS pool members are planning to adopt a stewardship code, including the ESPF.

21.3.      Angie Embury (AE) asked how ESPF can ensure that it is a responsible and engaged corporate owner, as is required in the stewardship code, if the rest of the ACCESS pool is not signed up to a similar code. OO explained that the decision regarding asset allocation remains with individual Funds and not with ACCESS. This means that whatever the ESPF agrees it wishes to invest in, it will be down to the ACCESS pool operator (in consultation with the ESPF) to find a suitable investment manager with whom the Fund can invest.

21.4.      Councillor Kevin Allen (KA) welcomed the Responsible Investment Policy and in particular its core principle to “evaluate and manage carbon exposure in order to mitigate risks to the Fund from climate change”. He agreed that personal engagement as a shareholder may get companies such as Shell to deal with bad publicity around poor governance or one-off incidents, but expressed scepticism – which he expected others would share – whether it would have the effect of fundamentally moving the company away from its core business of fossil fuel extraction.  OO said that the fund works collectively with the Local Authority Pension Fund Forum (LAPFF) to have an impact on certain companies. Councillor Richard Stogdon (RS) added that if pension funds did not engage companies through the LAPFF as shared holders then who would.

21.5.       AE asked whether there is a requirement that the eight pooled funds, including ACCESS, reduce their carbon foot print. The Chair said that the approach to addressing carbon exposure is retained by the 89 individual funds and they may choose how to address the issue. OO added that it is a requirement under the Local Government Pension Scheme Regulations 2016, that the Pension Fund Investment Strategy Statement (ISS) include a policy on how social, environmental or corporate governance considerations are taken into account; in the selection, non-selection, retention and realisation of investments. .

21.6.      Sue McHugh (SM) observed that it made sense for members of ACCESS to pool assets in order to achieve efficiencies. However, the more divergent individual funds were in their approach to ESG matters, the more sub-funds would need to be created and the less economies of scale would be realised. She said it would therefore be worth working towards having all 11 members of ACCESS adopting a responsible investment policy like the one ESPF may adopt. OO said that ACCESS members have agreed common policies on other issues such as stock lending and in the long term will be  working towards a common ESG policy.

21.7.      The Chair observed that it was particularly vital that the Fund had strong policies around corporate governance as it plays a very important role in helping to choose wise investments, for example, there is a tendency for companies in some parts of the world with weak corporate governance to offer high returns to tempt investors and the Fund should have clear policies to avoid such high risk investments. He said that LAPFF could help to improve corporate governance by encouraging LGPS to vote on pay and remuneration.

21.8.      The Board RESOLVED to endorse the adoption of the UK Stewardship Code Statement.