Agenda item

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23.1.      The Board considered a report on Environmental, Social and Governance (ESG) matters.

23.2.      The Chair asked when the specification for an investment consultant’s advice on ESG investments would be put out to tender.

23.3.      Michelle King (MK) explained that the specification would need to be agreed by the Pension Committee first and would go out to tender after it had been agreed. It was clear that this specialist advice would be needed to produce a quality report, but it was not clear what companies were available on the market and there was no one company who officers had in mind to take on the role. 

23.4.      DP agreed that it was a good idea to seek the advice of a consultant and it sent a clear message that the Fund was taking the matter seriously. She suggested the service specification could include a requirement to advise the Fund how best to communicate its approach to ESG matters.

23.5.      The Chair of the Pension Committee explained that he had recently met with Divest East Sussex to provide them with an update on what the Fund was doing in relation to ESG matters. He spoke about the difficulties inherent with ensuring the Fund is performing well in relation to ESG matters, including that there is inconsistent and varying quality of data held by investment managers, or available from companies in which they invest; and the definition of what constituted ‘good’ in relation to ESG standards continues to change. ESG considerations would also need to be balanced against the fiduciary duty of the Fund to make a sustainable return on investment. He said that the Fund’s statement of investment beliefs in relation to ESG should not be too prescriptive, to avoid needing to be amended regularly, but clear to investment managers with regards to how the Fund expects its assets to be invested.

23.6.      LW welcomed the Pension Committee Chair’s presentation at the Full Council on 15 October – in response to a debate on fossil fuel disinvestment triggered by a petition of over 5,000 signatures – as a helpful and concise way of setting out how the Fund is one of the leading LGPS in terms of its action on climate change. She said ESG was an important and emotive subject that was increasingly attracting the interest of scheme members, their unions, and local councillors. It is therefore important that information is made available to scheme members so that they can both recognise the importance of ESG issues, but also the fact that the Fund is investing money in order to provide for their pensions and needs to be kept in a healthy and sustainable state.

23.7.      The Chair of the Pension Committee thanked IG and MK for their assistance in drafting the speech he made at Full Council.

23.8.      Stephen Osborn (SO) asked whether the 5,000+ signatures were from ESPF members.

23.9.      LW explained that they were collected from the wider public. The Chair of the Pension Committee added that pressure to change ESG policy appeared to be coming more from the general public than scheme members specifically. He added that the petition had been a helpful exercise that enabled the Fund to reflect on whether it was doing the right thing with regards to its approach towards ESG. The Fund had also been discussing with Local Authority Pension Fund Forum (LAPFF) about the possibility of instructing investment managers to vote as shareholders of companies to require that 15% of executive pay is determined by the ESG activities of the company.

23.10.   SO asked how scheme members could be best informed about what the Fund was doing with regards to ESG.

23.11.   The Chair suggested that the annual report to members would be a good place to include such information. MK said the purpose of the draft report attached as appendix 2 was to explicitly set out the effectiveness of the Fund’s approach to climate change. This would be published online once agreed by the Committee and had already been shared with ACCESS members.  IG added that the Committee Chair’s speech attached as appendix 1 set out clearly a list of actions to date by the Fund and that this could be used more widely.

23.12.   The Board RESOLVED to note the report.