Venue: Council Chamber, County Hall, Dorchester, DT1 1XJ
Contact: David Northover Email: david.northover@dorsetcouncil.gov.uk
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Apologies To receive any apologies for absence. Minutes: No apologies for absence were received at the meeting. |
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Declarations of Interest To receive any declarations of interest. Minutes: No declarations of disclosable pecuniary interests were made at the meeting. |
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To confirm the minutes of the meeting held on 26 November 2020. Minutes: The minutes of the meeting held on 26 November 2020 were confirmed and would be signed at the earliest opportunity. |
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Public Participation To receive questions or statements on the business of the committee from town and parish councils and members of the public. The deadline for submission of the full text of a question or statement is 8.30 am on Monday, 8 March 2021. Minutes: The public questions together with the responses
from the Chairman of the Committee are set out in the Appendix to the minutes. Prior to answering each question, the following
statement was read by the Chairman: “We have received a number of questions from
members of the public and from councillors regarding the pension fund’s
approach to investments in fossil fuels. We will answer each of the questions in turn
but before we do so I would like to remind everyone that this topic was
discussed at length at our meeting in September and that that the reports,
minutes and a recording of those discussions are all available on the Council’s
website. I would also like to remind everyone that the
purpose of the pension fund is to pay benefits to scheme members and that the
committee has a duty to scheme members and their employers to ensure that their
contributions to the fund are invested appropriately to make returns sufficient
to meet those obligations. This duty overrides any other considerations.” |
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Questions from Members Minutes: Councillor Dr Kelvin Clayton asked the following question: “No one
seriously doubts the contribution the fossil fuel industry has made to a
potentially catastrophic rise in global temperatures. As a result, many people now regard
investment in this industry as not only unethical, but, because its days are
numbered, as financially unsound. Nationally, six local councils, 86 universities
and the UK’s biggest pension (NEST) have all committed to divest from the
fossil fuel industry. Last
September this committee agreed a new decarbonisation strategy. According to
the chair of this committee these changes ‘will deliver significant reductions
in our carbon footprint.’ Will these
‘significant reductions’ include an actual end to all fossil fuel
investments? If yes, by what date? If no, how do you justify any continued
investment?” The Chairman responded to the question as
follows: “This topic was discussed in some detail at
the meeting of the Committee in September 2020 and the reports, minutes and a
recording of the discussions are publicly available. The approach agreed by the Committee then
does not include a commitment to divest completely from companies involved in
the sourcing and refining of fossil fuels.
Instead it seeks to reduce investment in all high carbon emitting
companies and to influence the demand for fossil fuels and their financing, not
just their supply. The decision was based upon evidence
presented to the Committee by independent investment consultants, Mercer, that
a strategy of decarbonisation can deliver significantly greater reductions in
the ‘carbon footprint’ of investments than can be achieved by divestment. Divestment also removes the opportunity to
influence companies by working with them to transition to a lower carbon
future. Targeted divestment remains an
option from individual companies who will not positively engage. Significant decarbonisation will be achieved
through the transition of assets to the management of Brunel Pension
Partnership, the pension fund’s LGPS investment pooling manager. 10% of the pension fund’s assets are now
invested in Brunel’s sustainable equities fund, which is 20% of our total
equities and is the fund’s largest single investment. All other Brunel funds are committed to a
policy of a 7% year on year reduction in their carbon footprint. In 2022 Brunel
will be undertaking a ‘stock take’ of their approach to engagement and
divestment. If this review concludes
that companies are not taking appropriate action and sufficient steps to manage
climate risks and to enable alignment with the Paris Climate Agreement then the
Pension Fund Committee will need to reconsider its approach too.” Cllr Clayton thanked the Chairman for his response but asked why just
two approaches were considered and if decarbonisation and divestment were
mutually exclusive? The Chairman replied that the Committee had listened to advice from
experts and debated that advice at length at its meeting in September. It seemed to the Committee that
decarbonisation was the more effective route but he was sure this conclusion
would be reviewed again in the future. |
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Urgent items To consider any items of business which the Chairman has had
prior notification and considers to be urgent pursuant to section 100B (4) b)
of the Local Government Act 1972. The reason for the urgency shall be recorded
in the minutes. Minutes: There were no urgent items. |
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Pensions Administration PDF 107 KB To consider the quarterly report on pension fund administration. Additional documents:
Minutes: The Committee considered a report from officers on operational and
administration matters relating to the pension fund. Performance as measured by the Key Performance Indicators (KPIs) was
fine. Working from home was not ideal
but the administration team had kept on top of key areas. The Chairman thanked the administration team
for their work in what had been a very difficult year. The system change was going well and would ‘go live’ in July 2021. The Risks, Assumptions, Issues and Dependencies
(RAID) log would be shared with committee members. The Public Sector Exit Payments Regulations had been revoked. The regulations had caused a lot of work for
the administering authority and for scheme employers. Whilst no scheme members had been directly
impacted it had led to the delay of decisions by a number of
scheme employers. Officers would undertake a ‘stock take’ of the pension fund’s current
position against the good governance recommendations published by the Local
Government Pension Scheme (LGPS) Scheme Advisory Board. As a member of the Scheme Advisory Board,
Cllr Beesley offered his support for this review which was accepted by
officers. Resolved
i.
That the systems implementation project Risks, Assumptions, Issues and
Dependencies (RAID) log be shared with
Committee members.
ii.
That there is a stock take of the pension fund’s current position against the
LGPS Scheme Advisory Board good governance recommendations. |
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Investment Pooling Update PDF 3 MB To consider the quarterly report from Brunel Pension Partnership, the pension fund’s LGPS investment pooling manager. Minutes: The Committee considered a report from David Vickers, Chief Investment
Officer (CIO) of the Brunel Pension Partnership (Brunel) who had taken up post
in January 2021. He gave a brief summary of his background, his thoughts on the
investment context to quarter 4 2020, and summarised the performance of the
Brunel funds that the pension fund held investments in. Brunel was widely acknowledged as a leader in responsible investment and
engagement. All active funds were below
benchmark for emissions and committed to year on year reductions in ‘carbon
footprint’. In relation to passive
investments, Brunel were engaging with the major market index providers to
create indexes that are aligned with the targets of the Paris Climate
Agreement. There was a project underway to ensure that Brunel’s client funds
received the right level of information needed to discharge their duties and
provide assurance, including more detail on the performance of the underlying
managers in Brunel’s funds. Noted |
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Annual Governance Review PDF 167 KB To consider the annual report of the pension fund’s independent governance adviser. Minutes: The Committee received the annual update on governance compliance from the Independent Governance Adviser. He was satisfied that good standards of governance, including the role
of the Local Pension Board, had been maintained since his last report in
November 2019. There had been enormous challenges but the pension fund had been well managed and
performance had held up. The conclusions of the good governance review commissioned by the LGPS
Scheme Advisory Board were highlighted and referred back
to the resolution for a ‘stock take’ agreed earlier in the meeting under
Pensions Administration. Minutes of the meetings of the Pension Fund Committee are shared with
the Local Pension Board. It was agreed
that minutes of the Local Pension Board should also be reported to the
Committee Officers informed the Committee that the report of the external auditors
regarding the pension fund financial statements for 2019/20 had not been
received at the date of the meeting. No
significant findings had been reported by the auditor to officers and the
reasons for the delay were believed to be due to resourcing of the work by the
auditor. Resolved That minutes of the Local Pension Board will
be reported to the Pension Fund Committee in future. |
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Independent Adviser's Report PDF 220 KB To consider the quarterly report of the pension fund’s independent investment adviser on the outlook for the pension fund’s investments. Minutes: The Committee considered a report from Alan Saunders, the pension fund’s
Independent Investment Adviser, that gave his views on the economic background
to the pension fund’s investments, the outlook for different asset classes and
the key market risks. The size of the stimulus package recently agreed in the US was
equivalent to approximately 8% of Gross Domestic Product (GDP), compared to
approximately 3% in the UK. Whilst the
stimulus was good news its size did heighten the risk of inflation. Markets had see a ‘W’
shaped recovery. Technology stocks
looked highly valued but this was not so evident in
other sectors. Bond yields had seen big
rises which meant falls in value. Little
recovery in the capital values of properties was expected in the medium term. The proposals to replace the Retail Prices Index (RPI) with the Consumer
Prices Index including housing costs (CPIH) had been approved by
government. There would be no
compensation for the holders of index linked assets such as the pension
fund. There had been surprisingly little
negative reaction to this because the impact on the price of inflation linked
assets had been offset by an increased risk of inflation. The Independent Investment Adviser announced his intention to retire and
that the Committee’s meeting in September 2021 would be his last. The Chairman and Vice-Chairman thanked the Independent Investment
Adviser for his valued advice to the Committee over many years. The Chairman, Vice-Chairman and officers
would review what independent advice was needed and present options back to the
Committee. Resolved That officers, the Chairman and Vice Chairman
review the pension fund’s requirements for independent investment advice and present
options back to the Committee. |
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Fund Administrator's Report PDF 144 KB To consider the quarterly report of the Fund Administrator including an update on the funding position, the value and performance of investments, and other topical issues. Additional documents:
Minutes: The Committee considered a report from officers on the pension fund’s
funding position, valuation, performance and asset
allocation as at 31 December 2020. The value of the pension fund’s investments had recovered to just over
£3.3 billion. Assets
were estimated to be 85% of the value needed to pay expected benefits accrued
to date compared to the funding level of 92% calculated by the actuary
following their full assessment as at 31 March 2019. The changes to equity allocations agreed at the September
2020 meeting of the Committee had been implemented over two stages. The first stage, actioned in December 2020,
implemented the reduction in the UK specific target allocation. The second stage in February 2021 fully divested
from Wellington Management, the pension fund’s last remaining legacy global
equities manager, and invested the proceeds in Brunel’s sustainable equities,
smaller companies and emerging markets funds. The Chairman, Independent Investment Adviser and officers
will be meeting with Brunel and their transition manager, Macquarie, to discuss
the transitions and their costs, and will report back to the Committee. Officers believed that the transitions had
been very well facilitated by Brunel and actioned by Macquarie. The speed at which these changes had been
implemented would not have been achievable pre-pooling. Indications were that the transition had been
managed well and costs kept to a relatively small amount. The Chairman thanked officers and Brunel for the transitions
which all seem to have gone smoothly.
The pension fund’s performance last year was very strong, in absolute
and relative terms, particularly given that these large transitions had been
taking place. The very good performance
of Wellington as an investment manager for the pension fund was also
acknowledged. Four topics for training were agreed to be covered over the
next few meetings - (1) property/housing, (2) inflation hedging, (3) smart beta
equities, and (4) private debt. Cllr Beesley, as the pension fund’s representative on the
Brunel oversight board, updated the Committee on governance matters relating to
Brunel. The oversight’s board had been
on agreeing the strategic business plan.
The performance of Brunel’s funds had generally been good
but it was too early to reach a definite conclusion. Resolved
i.
That a summary of the costs of the transitions to
Brunel funds be reported back to Committee.
ii.
That a training plan is developed to cover (1) property/housing, (2)
inflation hedging, (3) smart beta equities, and (4) private debt. |
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Treasury Management Strategy 2021-22 PDF 87 KB To approve the Treasury Management Strategy 2021-22. Minutes: The Committee considered a report by officers setting out the Treasury
Management Strategy (TMS) for 2021-22. Although the pension fund has no strategic allocation to cash, cashflows
needed to be managed to ensure there is sufficient liquidity to meet
liabilities as they fell due and to invest any surplus
balances appropriately. The TMS provided
the framework within which officers must manage these cashflows and ‘treasury’
investments. The TMS for the pension fund broadly followed the TMS for Dorset
Council, the administering authority for the pension fund, where applicable. Resolved That the Treasury Management Strategy for 2021-22 be approved. |
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Dates of Future Meetings To confirm the dates for the meetings of the Committee in 2021: 10am Tuesday 15 June 2021 – Microsoft
Teams / County Hall (tbc) 10am Wednesday 7 September 2021 –
London (tbc) 10am Tuesday 30 November 2021 – County
Hall (tbc) Minutes: Resolved That meetings be held on the following dates: 10am Tuesday 15 June 2021 –
Microsoft Teams / County Hall (tbc) 10am Wednesday 7 September 2021 – London
(tbc) 10am Tuesday 30 November 2021 – County
Hall (tbc) |
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Public Questions To move the exclusion of the press and the public for the following item
in view of the likely disclosure of exempt information within the meaning of
paragraph 3 of schedule 12 A to the Local Government Act 1972 (as amended). The public and the press will be asked to leave the meeting whilst the
item of business is considered. Minutes: QUESTIONS
FROM MEMBERS OF THE PUBLIC FOR DORSET COUNCIL PENSIONS COMMITTEE 11 MARCH 2021 From: Darrell Minards, on behalf of South West Action on Pensions
(SWAP): Q1) Councillor Beesley stated that he was confident
Dorset / BCP had a measurable set of goals for decarbonisation vs
divestment. Given this confidence will this now be included in each
councils Climate Emergency Plan on Carbon neutrality as part of your Climate
Emergency Declaration and if not why not given the carbon footprint of the
pension plan as a part of Dorset/BCPs impact? Answer Responsibility for all matters relating to the
administration of the Local Government Pension Scheme (LGPS) in Dorset is
delegated to the Pension Fund Committee which comprises five Dorset Council
councillors, three BCP Council councillors and one scheme member representative
nominated by the trade unions. Whilst the Committee are fully supportive of the climate
and ecological emergency declarations by a number of scheme employers,
including Dorset Council and BCP Council, we believe that it is more
informative to consider the carbon emissions’ consequences of the pension
fund’s investments separately from those of its scheme employers. Q2) Secondly its been stated by Councillor Beesley and
also Drew Mellow that the strategy is to influence the fossil fuel companies
towards decarbonisation. Exactly what specific steps has this committee
taken either via voting in shareholder meetings or raising questions at
shareholder meetings in the six months since the September meeting?
Please provide the specific meeting details as a matter of record. Answer As part of the government’s requirement for Local
Government Pension Scheme (LGPS) funds to pool investments the Dorset County
Pension Fund no longer holds direct investments in companies. Instead, the vast majority of its equity
investments are now in pooled investment vehicles managed by the Brunel Pension
Partnership, the LGPS investment pooling manager set up and fully owned by the
administering authorities of ten LGPS funds including Dorset. All voting and engagement with companies is now
undertaken by Brunel on behalf of the ten shareholder funds. Brunel’s website documents its Stewardship
Policy and Voting Guidelines, as well as its voting and company engagement
records. https://www.brunelpensionpartnership.org/stewardship/ Dorset County Pension Fund is also a member of the Local
Authority Pension Fund Forum (LAPFF) which represents the majority of LGPS
funds and LGPS investment pooling managers.
LAPFF engages with hundreds of companies every year to promote the
highest standards of corporate governance and responsibility, including
aligning their business models with the Paris Climate Agreement. Full details of the work of the LAPFF, including its
quarterly company engagement reports, can be found on its website. From: Julie-Ann Booker, on behalf of Dorset Action
on Pensions We know that to stop
catastrophic climate change we have to keep fossil fuels in the ground and
transition quickly towards a clean renewable economy. The
fossil fuel industry has spent decades spreading lies about the climate to
protect their profits at the expense of people and planet. It’s imperative that all councils and pension funds break ties ... view the full minutes text for item 95. |