Agenda and draft minutes

Virtual / MS Teams Meeting with Outside Broadcasting, Pension Fund Committee - Tuesday, 15th June, 2021 10.00 am

Venue: Virtual / MS Teams Meeting with Outside Broadcasting

Contact: David Northover  Email:


No. Item



To receive any apologies for absence.



No apologies for absence were received at the meeting.


Minutes pdf icon PDF 140 KB

To note the minutes of the meeting held on 11 March 2021.



The minutes of the meeting held on 11 March 2021 were confirmed by the Chairman.



Declarations of Interest

To disclose any pecuniary, other registrable or personal interest as set out in the adopted Code of Conduct.  In making their disclosure, councillors are asked to state the agenda item, the nature of the interest and any action they propose to take as part of their declaration.


If required, further advice should be sought from the Monitoring Officer in advance of the meeting.



No declarations of disclosable pecuniary interests were made at the meeting.



Public Participation pdf icon PDF 422 KB

To receive questions or statements on the business of the committee from town and parish councils and members of the public.


The public questions together with the responses from the Chairman of the Committee are set out in the Appendix to the minutes.


The following statement was read by the Chairman:


“We have received a large number of questions from members of the public regarding the pension fund’s approach to investments in fossil fuels and we welcome the interest in this important topic.  Written responses to each of the questions will be published alongside the minutes of this meeting but I would like to make this statement today.


This topic was discussed at length at our meeting in September 2020.  The reports, minutes and a recording of those discussions are all available on the Council’s website. 


I would 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.


The approach agreed by the Committee in September 2020 was not to divest completely from companies involved in the sourcing and refining of fossil fuels, instead we will seek 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 is effectively a transfer of ownership that does not directly lead to a reduction in either the supply or demand for fossil fuels but it does remove the opportunity to influence companies by working with them to transition to a lower carbon future.  I would like to add, however, that targeted divestment remains an option from individual companies who will not positively engage.


Significant decarbonisation has been and will continue to 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 global sustainable equities fund, which is 20% of our total equities and is the fund’s largest single investment.  All other actively managed Brunel funds are committed to a policy of a 7% year on year reduction in their carbon footprint.


Brunel’s quarterly reports considered by the Committee and publicly available include summaries of the carbon intensity and extractive exposure of all the funds we are invested in compared to industry benchmarks.  Brunel are widely recognised as a ‘market leader’ within this field and their website includes details of the underlying investments of all its funds plus a wealth of information relating to its engagement activities with companies, including voting records.


In 2022 Brunel will complete a ‘stock take’ of their approach to engagement and divestment. If this review concludes that companies are not  ...  view the full minutes text for item 99.


Questions from Members

To receive questions or statements on the business of the committee from Dorset Council elected members.



There were no questions from members.



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.



There were no urgent items.




Investment Pooling Update pdf icon PDF 3 MB

To consider the quarterly report from Brunel Pension Partnership, the pension fund’s LGPS investment pooling manager.



The Committee considered a report from David Vickers, Chief Investment Officer (CIO) of the Brunel Pension Partnership (Brunel).  He gave his thoughts on the investment context for the quarter and summarised the performance of the Brunel funds that the pension fund held investments in.


Concerns about inflation were discussed and it was agreed that the Committee would consider the opportunity to increase the pension fund’s inflation hedging at its next meeting in September 2021.


Brunel felt that it was not mutually exclusive to have a sustainable approach to investments and for the Committee to meet its fiduciary duty to scheme members and employers.  The transition away from fossil fuels was underway but there would be periods of volatility.


The Chairman noted that actual and benchmark carbon intensity and extractive exposure metrics were reported by Brunel for each individual portfolio and asked if this could be provided at aggregate level for all Dorset’s assets under Brunel’s management.


Brunel had been working with index providers to create useful ‘Paris aligned’ benchmarks and were close to agreement with FTSE Russell.  This would allow new Paris aligned passive equity funds to be offered to clients as alternatives to existing options.  The new benchmarks could also be used as secondary benchmarks for other Brunel funds.


Brunel and the other LGPS investment pooling managers were asking government to work with them to develop and offer infrastructure investment opportunities suitable for LGPS funds.  The Scheme Advisory Board could also play a part in bringing pressure to bear on this topic.


The Independent Adviser raised concerns that the benchmark for the Diversifying Returns Fund (DRF) was ‘cash’ and not ‘cash plus x%’ as had been the case with pension fund’s legacy mandate with Barings.  Brunel agreed to review this.


Cllr John Beesley, the pension fund’s representative on the Brunel Oversight Board, updated the Committee on governance matters relating to the investment pooling arrangements.  At the Annual General Meeting on 25 March 2021 the chair and other non-executive directors were reappointed.  In line with best practice, the company board now consisted of four executive directors and five non-executive directors.  The non-executive directors now spanned a very wide range of knowledge and experience.



                  i.         That Brunel provide actual and benchmark carbon intensity and extractive exposure metrics at aggregate level for all the pension fund’s assets under Brunel’s management.

                ii.         That the benchmark for Brunel’s Diversifying Returns Fund be reviewed by Brunel and clients.




Pensions Administration pdf icon PDF 98 KB

To consider the quarterly report on Pension Fund Administration.


Additional documents:


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) had been pleasing, particularly given the challenges of working from home.


The Committee were asked to approve new policies needed to reflect changes in regulations that extended flexibilities when dealing with exiting employers and the ability to review employer contribution rates in between valuations.  The Funding Strategy Statement would also need to be updated to reflect these new policies.  Officers would confirm whether time periods in the policies referred to working days or calendar days.


The most common reasons for employers to exit the pension fund were that there were no employees left in the scheme, the employer had gone into administration or ceased trading, or that the employer had been taken over by another organisation.


The administration system changes were nearing completion and were on track to ‘go live’ 28 July 2021, with the scheme employers’ portal live 30 July 2021 and the scheme members’ portal live 2 August 2021.  Relocation of the team within County Hall would be planned so that it does not impact on implementation of the new systems.


A workaround had been developed to get year-end returns from the pension fund’s Additional Voluntary Contributions (AVC) provider, Prudential, and a checking exercise will be undertake once all the information had been received.  Officers will confirm whether a review of AVC provision has been undertaken or is planned.



                  i.    That the new policies relating to increased flexibility when dealing with exiting members and the ability to review employer contribution rates in between valuations be approved, subject to confirmation that time periods are measured in working days or calendar days.

                ii.    That the Funding Strategy Statement be updated to reflect the adoption of these new policies.

              iii.     That officers confirm whether a review of AVC provision has been undertaken or is planned.




Independent Investment Adviser's Report pdf icon PDF 258 KB

To consider the quarterly report of the Pension Fund’s Independent Investment Adviser on the outlook for the pension fund’s investments.



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 key market risks.


Inflation concerns due to increases in material costs and labour shortages had unsettled markets.  There were concerns about how central banks would respond and a more cautious approach to investment decisions was recommended.


Labour shortages in the UK may be temporarily exaggerated due to the Job Retention Scheme but this was a global issue, particularly in the US.  The chief economist at the Bank of England had warned that there was not enough slack in labour markets and so wages could start to respond.


The Chairman believed it was right to focus on inflation and proposed that the Committee met with Insight, the pension fund’s Liability Driven Investment (LDI), to revisit the mandate and consider options in September 2021.  The Independent Investment Adviser noted that there was scope to increase the inflation hedge or reduce collateral to invest elsewhere.


The estimated funding ratio had fallen to 85% from 92% at the last full valuation as at March 2019.  Possible reasons were the smoothing of asset valuations by the actuary, rises in inflation expectations and/or falls in expected investment returns – as equities had shown such strong returns the actuary was now factoring in reduced returns leading to reduced discount rate and therefore higher liabilities.


Cllr John Beesley highlighted that the LGPS Scheme Advisory Board (SAB) were very aware of the risk of reduced funding levels at the next triennial valuation across the LGPS.  The Government Actuary’s Department (GAD) were looking at deficit recovery periods and other mitigation options.  He hoped to report back at the September 2021 meeting as this would be hugely influential on what Dorset’s actuary perceived to be permissible for the pension fund.



That the Committee review the Liability Driven Investment (LDI) mandate and consider increasing the pension fund’s inflation hedging position at its meeting in September 2021.




Fund Administrator's Report pdf icon PDF 196 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:


The Committee considered a report from officers on the pension fund’s funding position, asset valuation, investment performance and asset allocation as at 31 March 2021.


The value of the pension fund’s assets ended the financial year at £3.3 billion compared to £2.7 billion at the start of the financial year, approximately 10% higher than the position as at March 2019 the date of the last full valuation by the actuary and broadly in line with the estimated average annual return of 5%.


However, the funding position estimated by our actuary is that the value of the pension fund’s assets only covers 85% of the present value of our liabilities, significantly lower than the 92% it was estimated to be at the March 2019 valuation.


The actuary had made some small increases to their assumptions for pension increases (CPI) and salary increases which will increase expected liabilities but the main reason for the fall in funding level is that the actuary had revised down their expectations for asset returns from 5% at the March 2019 valuation to 4.5% now.


The investment return for the financial year was 24% above the combined benchmark by about 3%.  The last quarter of the year was below benchmark, driven by the pension fund’s reduced UK and fossil fuels exposure which did well in the quarter.  The pension fund is believed to be positioned well for longer term trends, but there will be times of underperformance over shorter periods.


Just under 30% of the pension fund’s liabilities were hedged against inflation sensitivity but using roughly 11.5% of assets to do so.  Nearly 60% of the pension fund’s assets are now under the management of Brunel.


Allocations for equities and other publicly traded assets were now broadly near the targets agreed by the Committee in September 2020.  Some further investment in the Brunel Diversifying Returns Fund (DRF) was needed to reach target, funded by cash and/or partial redemption from corporate bonds which was above target.


Achieving target allocations for private market assets, particularly private equity, remained a challenge.  There will be an opportunity to commit to the next cycle of Brunel’s private offerings in March 2022, therefore it would be useful to consider this in more depth at the September 2021 meeting.







Dates of Future Meetings

        To confirm the dates for the meetings of the Committee in 2021:


        10am Wednesday 7 September 2021 – London (tbc)

        10am Tuesday 30 November 2021 – County Hall (tbc)





That meetings be held on the following dates:


10am Wednesday 8 September 2021 – London (tbc)

10am Tuesday 30 November 2021 – County Hall, Dorchester (tbc)



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.



That under Section 100A(4) of the Local Government Act 1972, the public be excluded from the meeting for the business specified in minute 14 because it was likely that if members of the public were present there would be disclosure to them of exempt information as defined in Paragraph 3 of Part 1 of Schedule 12A to the Act and the public interest in withholding the information outweighs the public interest in disclosing that information.




Independent Investment Advice

To consider future provision of independent investment advice to the Committee.



The pension fund’s independent adviser, Alan Saunders, will be retiring from this role after the meeting of the Committee in September 2021.  A working group of officers, the Chairman and Vice Chairman reviewed the requirements for independent advice and concluded that there is still a need for a retained independent investment adviser supplemented by the use of investment consultants as and when appropriate.



That officers begin the process to procure the services of a retained independent investment adviser and that these services are supplemented by the use of investment consultants as and when appropriate.





Questions/Answers for the Pension Fund Committee - 15 June 2021


Question 1:  Julie-Ann Booker, on behalf of Dorset Action on Pensions

In considering the possibility of stranded assets, The Brunel Pension Fund Carbon Metrics report analyses its potential relationship with fossil fuel reserves both probable and proven, and then examines the potential emissions from these reserves:


“Taking the reserves exposures discussed above, we can look at an assessment of potential future emissions that may incur from these reserves being realised. This metric is not included in the WACI figure (which focuses on current intensity) and so it is an important assessment of company's potential contribution to emissions via its stockpile of fossil fuels. We have been able to assess the potential emissions associated with the proven and probable reserves for companies within our Portfolios, as well as an overall Portfolio assessment.” (Brunel Pension Partnership Carbon Metrics report).

This abstraction in the face of a climate emergency seems like madness to me.  I am no finance expert but have done some research and the Custom Benchmark appears to only relate to comparative investment funds and pays no attention to the health of the planet or to the science of climate change.

“It is crazy that our banks and our pensions are investing in fossil fuels, when these are the very things that are jeopardising the future we are saving for”.  (Sir David Attenborough, Nov 2020). 

Sir David is also not a financial expert, but is one of the most respected naturalists on the planet and his message on fossil fuels is quite clear.  Dorset Action on Pensions ( feel that Dorset Council should stop investing in fossil fuels and start investing in a greener future.

Is Dorset Council seeking investments that are both good for the planet and good for returns as demonstrated by six other local government pension funds, half of all UK Universities, and over 1,250 institutions representing over $14.5 trillion in assets who have already committed to going fossil free (Nauman, 2020).  Or is it in fact risking the threat of stranded assets, and ignoring the health of the planet and the science of climate change?

Answer 1


The Local Government Pension Scheme (LGPS) is a national pension scheme administered locally.  Dorset Council (DC) is the administering authority for the LGPS in Dorset which provides pensions and other benefits for employees of DC, other councils and a range of other organisations within the county.


DC has delegated its responsibilities as an administering authority to the Pension Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and one scheme member representative nominated by the trade unions.


The purpose of the pension fund is to pay benefits to scheme members.  The Pension Fund Committee has a duty to scheme members and their employers to ensure that their contributions to the pension fund are invested appropriately to make returns sufficient to meet those obligations. This duty overrides any other considerations.


The decarbonisation approach agreed by the Committee at its meeting  ...  view the full minutes text for item 109.