Agenda item

(Director of Resources) To consider the attached report (FPM-002-2017/18).

The Director of Resources presented a report on the consultation for the Essex Pension Fund Investment Strategy Statement.

The Essex County Council was the administering authority for the local government pension scheme for employers based in Essex. This function was discharged through a Pension Board, which in turn had delegated the responsibility for setting and monitoring the investment strategy to the Investment Steering Committee. The Investment Strategy Statement was reviewed every three years and as part of the review, stakeholders were consulted on the content of the Statement. The consultation period had been extended to allow formal consideration by Members.

The Director of Resources advised that the most significant changes in the draft strategy, compared to the current strategy, were that;

a)            The Government had instructed pension funds to work together to reduce the costs of administration and the fees paid to external fund managers. Essex was one of eleven funds participating in the ACCESS Pool (A Collaboration of Central, Eastern and Southern Shires), which would be put in place during 2017.

b)            The Local Government Pension Scheme Regulations 2016 had required an expansion of the section covering Environmental, Social and Governance Considerations including a new fiduciary duty of the fund; within the policy section a paragraph making it clear that investment decisions would be left to investment managers to take based on purely financial grounds; and that the Investment Steering Committee would not seek to restrict new investments or require investment managers to divest existing holdings

c)            The section on the exercise of voting rights had been expanded, with the first and third paragraphs being new. There was a new section on Engagement which set out the Fund’s expectations for the factors that investment managers would take into account in making their decisions. The section further emphasised the point that divesting should not be pursued as the Fund could more effectively influence the behaviour of big companies by remaining invested over the long term. The final addition was a section covering Ongoing Monitoring which set out how the ISC would monitor and challenge investment managers.

The Members were advised to bear in mind the effectiveness of the fund management and the most recent actuarial valuation of the fund as at March 2016 showed a funding level of 89% (89% of the liabilities were covered by the assets) which was a significant improvement from the 2013 position of an 80% funding level. The fund had also won several awards in recent years, including the Pension Administration Award in February 2017, the Public Sector Pension Scheme of the Year in September 2015 and the LGC Investment Award for Fund of the Year in February 2014.

Councillor Neville commented that he had concerns over the investments made with fossil fuel companies and that alternative sources should be considered. The Committee noted Councillor Neville comments but reflected that the main priority the scheme, was to ensure they met the funding requirements and that the Investment Steering Committee only reviewed the investment strategy, not the individual investments. The Committee noted that report also set out the social, environmental and ethical considerations in the selection, retention and realisation of investments.

Resolved:

(1)        That the responses to the draft Investment Strategy Statement be noted.

Reasons for Decisions:

To determine if the Committee agreed with the proposals set out in the draft Investment Strategy Statement.

Other Options Considered and Rejected:

Members could decide not to respond to the consultation.