Agenda item

Report of the Chief Operating Officer to provide an update on voting activities on behalf of the Fund.

The Committee and Board considered the Quarterly LAPFF Engagement Report, as presented by Oladapo Shonola, Head of Finance – Treasury and Pensions.

In relation to the voting alert issued for the Sports Direct EGM as set out in the report, the Committee and Board noted that the Fund held shares in Sports Direct as the result of its investment in indexed funds, and that the nature of funds of this type meant that there was no way to disinvest from individual holdings which may be of concern to the Committee and Board members. Concern was expressed at the potential reputational risk to the Fund arising from certain holdings, although it was noted that there were significant financial costs associated with different models of investing that provided greater control of the individual companies invested in, and that it was a requirement for the Committee and Board to act in the financial interest of the Fund as its primary consideration. The Fund had previously experienced under-performance in relation to active fund management, prior to its decision to move to index linked, passive equity holdings. It was noted that the legislation was very clear that the primary consideration for Funds had to be financial, but that other considerations (such as social and ethical impacts) could be taken into account, subsidiary to financial consideration.

The Chair noted that these were issues that the Committee and Board were concerned with, and that the decision to move into the Low Carbon Index had been an example of a decision made in order to address wider concerns, while protecting financial return. The Committee and Board also expressed an interest in exploring investment options with a positive social impact, such as the recent Pension Fund investment in social housing projects agreed by Islington. The Committee and Board requested an opportunity to look at alternative models of investment with a focus on Environmental, Social and Governance (ESG) issues as part of a training session, both in terms of ways of addressing concerns about individual holdings and whether there was the opportunity to divest from investments considered concerning from an ESG perspective, and to look at ways of actively investing to deliver positive social impact and emphasised that they were keen to take these considerations forward at the earliest opportunity.

John Raisin, independent advisor to the Fund, proposed that a report on the guidance around such issues be brought back to the next meeting for consideration.

It was noted that membership of the LAPFF was a way of mitigating against some of the reputational risks associated with certain holdings, and that engagement with companies via the LAPFF could be a more effective means of influencing behaviour than divestment. The Committee requested that voting alerts issued by the LAPFF be circulated to the Committee and Board, along with confirmation that these had been acted on, and it was agreed that this would be undertaken.

Action: Head of Finance – Treasury and Pensions / Head of Pensions

RESOLVED

That the content of the report be noted.