Agenda item

(This item will include a presentation by the Director of Corporate Resources. Those in attendance will have the opportunity to ask questions concerning the Annual Report and Accounts. Those unable to attend are asked to forward any questions they have to democracy@leics.gov.uk by 12 noon on Friday 8 December)

A presentation by the Director of Corporate Resources was given on the Annual Report and Accounts of the Pension Fund 2022/23. A copy of the report marked ‘Agenda Item 6’ and presentation is filed with these minutes.

Arising from the presentation the following points were highlighted:

       i.          It was explained that since March 2022, there had been an increase in the number of active contributions to the pension fund, preserved benefits and pensioners.

      ii.          There were over 100,000 members, spread over 180 employing organisations, including some private sector bodies.

    iii.          There were around 2,500 to 3,000 retirements a year, but also a lot of new members joining the scheme through auto-enrolment.

    iv.          Key Performance Indicators for business processes and customer perspectives were close to, or above target.

     v.          Looking ahead, the McCloud Sargeant judgement remained a huge exercise to implement, as it required looking back retrospectively to 2014 through to 2022. The remedy was being implemented in phases due to the size of the exercise. Thanks were given to all 180 employers who had provided the data needed as part of this work.

    vi.          A national exercise to introduce the pension Dashboard for members to view all their pension information in one place had commenced. The project would be implemented in two phases and was due to go live in 2025, with pension members being able to view their pension data in 2026.

  vii.          Annually a strategic asset allocation paper was taken to the Local Pension Committee to look at asset allocations in detail.

 viii.          The Fund considered responsible investment by incorporating environmental, social and governance (ESG) factors into its decision making and ownership practices, supported by membership of the Local Authority Pension Fund Forum, investment managers and LGPS Central. The approach looked to encourage companies the Fund might already be invested in to improve their ESG risk management or develop more sustainable business practices.

    ix.          The Fund considered climate change as a material risk, stemming from two key areas, namely the physical changes of climate change, such as the weather and how that might affect food supply and water availability, and from the transition to a low carbon economy, for example, issues with carbon tax on companies and the impact on valuations. Headline statistics showed the Fund was progressing well towards meeting its net zero targets.

In response to questions raised, the following points were noted:

     x.          It was important to report annually against carbon metrics and targets and a lot of progress had been made in reducing the Fund’s carbon intensity. However, it was clear that real world emission reductions were required, which is why the Fund supported ensuring companies aligned to net zero. As part of this it was important to address greenwashing concerns and create meaningful data which could lead to appropriate investment decisions. It was further reported that the Fund was working hard with LGPS Central, as well as gaining high-level information from investment managers on their own net zero targets. Some investment managers had already set ambitious targets, including the property portfolio, while the Fund’s forestry investments worked to remove carbon emissions from the atmosphere.

    xi.          During development of the Net Zero Climate Strategy, consultation on climate issues with pension fund members had been undertaken for the first time.  Officers had been pleased with the response rate and the thoughtful responses provided which had been helpful in developing the Strategy. As set out in the Strategy, to take account of what was a constantly changing environment, the aims and objectives set out in the Strategy would be the subject of a further engagement in 2026, noting it was important for the Fund to have a long-term view.

  xii.          A member congratulated officers on how and the speed in which they had addressed the McCloud judgement following a Court of Appeal ruling. It was questioned how the ruling would be implemented with regards to a deceased person whose estate will have been settled but might have benefitted from the remedy. In response, it was reported that people who were deceased might have had an additional element under McCloud, but it was not anticipated that there would be many of those cases.

 xiii.          A member questioned if the efforts of engagement, and withdrawal from fossil fuels would result in having stranded assets. It was acknowledged that, as had been reported earlier, by 2030 the Fund had a target to be 50% lower in terms of carbon intensity and had already made great steps to meet this. It was further noted that earlier in December 2023, another change had been made to the Fund where it had moved into a low carbon transition fund with LGIM that would further improve the Fund’s approach to climate risk and opportunities

RESOLVED:

That the contents of the Annual Report for 2022/23 and presentation be noted.