Venue: Committee Room 2, County Hall, Dorchester, DT1 1XJ. View directions
Contact: Liz Eaton 01305 225113 - Email: liz.eaton@dorsetcouncil.gov.uk
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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 27 November 2019. Minutes: The minutes of the meeting held on 27 November 2019 were confirmed and signed. |
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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. Minutes: The public questions together
with the responses from the Chairman of the Pension Fund Committee are set out
in the Appendix to the minutes. |
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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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Brunel Climate Change Policy PDF 401 KB To receive a presentation from Brunel Pension Partnership, the pension fund’s investment pooling manager, introducing its recently published Climate Change Policy. Additional documents: Minutes: The Committee
received a presentation from Faith Ward, Laura Hobbs and Catherine Dix, Brunel Pension
Partnership, the pension fund’s
LGPS investment pooling manager. The
presentation summarised Brunel’s recently launched climate change policy. Climate change presented
a systemic and material risk to the stability of every economy and country, and
therefore would impact Brunel’s clients, their beneficiaries and all portfolios
holdings. Investing to support the
Paris agreement goals that deliver a below 2C°temperature increase was
consistent with securing long-term financial returns and aligned with the best
long-term interests of their clients. To achieve a net-zero
carbon future by 2050 (or before) required systemic change in the investment
industry, and equipping and empowering investors was central to this change. Carbon was not fully
priced into the costs of goods and service, and therefore the market reaction
to these matters was distorted. It was
not just a supply side problem as 76% of emissions came from the demand side. Brunel’s policy was not
to have a blanket divestment from all fossil fuel companies but instead
“engagement with teeth” with companies was favoured. Divestment was part of their ‘toolkit’ but
only in a targeted way. Brunel would
undertake a ‘stocktake’ of their approach in 2023. Examples of
successful engagement and investor pressure were given. Blackrock, the world’s largest asset manager
and historically not very open about their approach to climate change risks,
had recently joined Climate Action 100+.
Barclays, the world’s largest financier of fossil fuels, had recently
announced changes to properly assess the climate change risks of new lending,
and to phase out lending to companies not aligned with the goals of the Paris
climate change agreement. Some fossil fuel
companies would be part of the transition to a lower/zero carbon economy. It was important to distinguish between
‘good’ companies, such as Repsol and Shell who were looking to engage and
change, and ‘bad’ companies, such as Chevron and Exxon who, to date, were not. The Independent
Adviser supported Brunel’s belief that engagement was better than blanket
divestment, and that institutional investors should persevere to deliver
change. Divestment was likely to benefit
state owned suppliers such as Saudi Arabia and Russia, who could not be
influenced in the same way as publicly owned companies. Brunel had low carbon and sustainable
investment products available and the Committee should consider these as part
of the review of the pension fund’s investment strategy. Concerns were
raised about the level of targets and the speed by which they would be
met. Brunel clarified that their aim was
to be “well below two degrees” and for this to be achieved well before
2050. They would like to do more but
they wanted to make deliverable commitments. A member did not believe that oil companies were necessarily the best option for providing renewable sources of energy and felt that often local companies would be a better option. Brunel replied that such community led solutions were not currently suitable investment opportunities for pension funds due to their lack of ... view the full minutes text for item 47. |
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Independent Adviser's Report PDF 192 KB To consider the quarterly report of the Independent Adviser on the outlook for the pension fund’s investments. Minutes: The Committee
considered a report by the Independent Adviser that gave his views on the
economic background to the pension fund’s investments, the outlook for
different asset classes and the key risks for markets. Since the report
was written markets had fallen steeply in response to the Coronavirus
pandemic. He reminded the Committee that
there had been lots of downs before from which markets had recovered. To date there had
been a supply side shock to economies but there would also be a demand side
shock if businesses and individuals reduce their spending. If the virus could be contained there should
be improvements to economies in the summer, but there would not necessarily be
a ‘catch up’ of all lost output. Central banks had
been quick to intervene but cutting interest rates may not help much. In the UK the fiscal stimulus from the recent
budget was welcome. The strategy of
borrowing to invest was appropriate and should be replicated in other
economies, such as Germany. The pension fund’s
funding level would have fallen from the results of the triennial actuarial
valuation as at 31 March 2019. The
actuary had used a demanding discount rate of 5% which needed to be taken into
account when the committee reviewed the pension fund’s investment strategy at
its next meeting. The Vice-Chairman
asked if there was an opportunity to invest whilst markets were low. The Independent Adviser noted that cash
balances were relatively high and that a return of some collateral from the
inflation hedging mandate was also expected that could be reinvested. It was agreed that up to £50m be invested in
the Brunel global equities passive portfolio in two tranches, subject to a
review of expected future cashflows by officers. In response to
concerns about the pension fund’s exposure to the retail sector it was noted
that the property portfolio was significantly ‘underweight’ its benchmark
exposure to this sector. Resolved That up to £50m be invested in the Brunel global equities passive portfolio in two tranches, subject to a review of expected future cashflows by officers. |
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Fund Administrator's Report PDF 120 KB To consider the quarterly report of the Fund Administrator. This includes an update on the funding position, the value and performance of investments, the cash position and other topical issues. Additional documents:
Minutes: The Committee
considered a report by the Fund Administrator on the pension fund’s funding
position, valuation, performance and asset allocation as at 31 December
2019. The value of the fund’s
investments at 31 December 2019 was just under £3.2 billion. Barnett Waddingham,
the pension fund’s actuary, had completed their triennial review as at 31 March
2019 and the funding level had improved from 83% at the last triennial
valuation to 92%. The Funding
Strategy Statement had consequently been updated for approval by the Committee. Markets had seen
significant falls in the last few weeks prior to the meeting and this had an
adverse impact on the value of the pension fund’s assets and its funding
position. The actuary had been
asked to carry out an indicative update on the funding position as at 31 March
2020, and thereafter on a quarterly basis until the next full triennial review. Following
the conclusion of the triennial valuation, there would be a review of the
pension fund’s investment strategy and strategic asset allocation. This was primarily to ensure that the pension
fund had the right mix of assets to give a good probability of meeting or
exceeding the discount rate of 5% used by the actuary in the valuation. Investment
consultants, Mercer, had been appointed to assist with this review. The recommendations of this review will be
discussed at the next meeting of the Committee in June 2020. If any new asset classes were proposed,
appropriate training would be made available to members. Resolved That the updated
Funding Strategy Statement (FSS) be approved for publication. |
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Investment Pooling Progress Report PDF 64 KB To consider a report by the Fund Administrator on progress to date on the investment pooling project. Additional documents: Minutes: The Committee
considered a report by the Fund Administrator on the progress to date in the
implementation of the Full Business Case (FBC) for the Brunel Pension
Partnership, as approved by the Committee on 9 January 2017. To
the date of the meeting, investments valued at approximately £1.3bn had
transferred to Brunel’s management, representing just over 40% of the pension
fund’s total assets of £3.2bn. This
included the transfer at the end of January 2020 of the remaining assets under
the management of Investec Asset Management. Laura Chappell, formerly Brunel’s Chief Compliance and Risk
Officer, was appointed as the company’s new
Chief Executive Officer (CEO), replacing Dawn Turner, who left the company at
the end of September 2019. Noted |
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Treasury Management Strategy 2020-21 PDF 69 KB To consider the annual report of the Fund Administrator on the pension fund’s Treasury Management Strategy for 2020-21. Minutes: The Committee considered a report by the Fund Administrator setting out the Treasury Management Strategy (TMS) for 2020-21. Although the pension
fund had no strategic allocation to cash, cashflows needed to be managed to
ensure there was 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 those
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 2020-21 be approved. |
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Pensions Administration PDF 85 KB To consider the quarterly report of the Fund Administrator on pension fund administration. Additional documents: Minutes: The Committee
considered a report from officers on operational and administration matters
relating to the pension fund. Discussions regarding potential remedies for the McCloud
judgement continued. The estimated
impact on funding level was likely to be relatively small, but remedies were
likely to create a very large administrative burden. Administering
authorities in the LGPS had an obligation to provide access to an in-house
Additional Voluntary Contribution (AVC) arrangement for their scheme
members. Hymans Robertson had been
appointed to conduct a review of the current arrangements. Performance against
Key Performance Indicators (KPIs) was generally good. The two exceptions both related to ‘transfers
out’. At times of high demand on the
service, performance against these two KPIs was allowed to
slip temporarily so that activities that impacted scheme members directly were
prioritised. Noted |
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Dates of future Meetings To note the dates for the meetings of the Committee in 2020: 18 June 2020 London (venue to be confirmed) 10 September 2020 County Hall, Dorchester 26 November 2020 London (venue to be confirmed) Minutes: Resolved That meetings be
held on the following dates: 18 June 2020 County Hall, Dorchester. 10 September 2020 County Hall, Dorchester 26 November 2020 London (venue to be confirmed) |
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Exempt Business 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: Decision That the Press and the Public
be excluded for item 55 in view of the likely disclosure of exempt information
within the meaning of Paragraph 3 of Part 1 of Schedule 12A to the Local
Government Act 1972 (as amended). |
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Inflation Indexation Reform To consider an exempt report by the Fund Administrator. Additional documents:
Minutes: The Committee
considered a report from officers summarising the risks to the pension fund’s
inflation hedging arrangements from proposed reforms to inflation indexation,
namely the proposed replacement of the Retail Price Index (RPI) with the
Consumer Prices Index adjusted for housing costs (CPIH). Options to mitigate those risks were discussed. Resolved That the Committee
approve the change to the Insight guidelines to reduce inflation hedging from
40% of exposure to 30% from 2030. |
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