Agenda item

To consider the report and note any amendments to the draft Responsible Investing Policy before it is presented to the Pensions Committee.

A (draft) Responsible Investment Policy was submitted to the Pension Board for discussion and to offer observations prior to submission to the Pensions Committee for formal approval on 17 March 2022. It was noted, as a part of preparing the policy, that discussions had been held with Hymans Robertson.

It was reported that the Fund acknowledged that environmental, social and corporate governance matters could be a financial risk to stakeholders and could influence the returns and long-term reputation of the Fund. In addition, it was noted that the Fund had released two responsible investment statements in April and July 2021 and it had now formalised the beliefs within the policy.

Reference was made to the fact that the Fund intended to commit to set an objective to be net zero by 2050, supported by a commitment to assess the feasibility of the Fund to reach net zero 5, 10 or 15 years earlier, with a framework developed to support the Fund's ambitions, encompassing opportunities, engagement and monitoring and metrics. It was highlighted that the net zero target corresponded with the target of the Government and Russell Investments, and although it was difficult to set a target without considering how to reach it, it was considered that collaborating to reach the target was realistic.

Gratitude was expressed for the report

During the ensuing discussion, the following observations were made by members:

·         Accepted that it was difficult to set a target - proposed setting steps / milestones leading up to 2050 so that it was possible to monitor / report on those steps

·         Suggestion that investment monitoring steps could be used

·         Suggestion to consider drawing up a 'carbon bank' as seen in the Construction Sector, and set aims to focus the mind - no commitment but highlight the expectations

·         It would be wise not to consider a target and not commit to pressure from the press

·         From receiving guidance and metrics from the TCFD, it would be easier to take steps forward

·         Receive acknowledgement for environmental matters, but also need to consider social and corporate governance - human rights, war, bribery and corruption - suggest that this needs to be elaborated upon.

In response to a comment on setting milestones, it was noted that although it was accepted that milestones would be set in any normal plan, it would be difficult to do so in this context due to the reliance on other bodies. It was reiterated, in terms of investment steps, that they were not aware of any asset management companies that set milestones.

In response to a comment on considering aspects beyond environmental matters, it was noted that the document had been created before the Ukraine-Russia War and therefore the need to add a clause about fiduciary duty was accepted, following research into legal aspects.

The Chair of the Pensions Committee noted that discussions had been held with the Wales Pension Partnership (WPP) and that the statement regarding the fund's stance and Russian-linked investments had been drawn up very quickly. It was reiterated that a group within WPP was considering social and governance aspects and discussions entered into investment considerations.

In response to a comment about companies such as Shell, BP and Coca Cola which had links to Russia and that the governance element was relevant to this, it was noted that Robeco had been commissioned to engage with the Fund's asset managers to act on our behalf and this was considered to be a positive action.

Although a number of the comments were accepted, it was concluded that there was no need to overly adapt the document at the moment, except for adding the clause about fiduciary duty, but it would be possible to add to the document as more information came to hand about social and governance aspects.

The information was accepted.