Report of the Director of Finance and Assurance.
The Committee received the Environmental, Social and Governance (ESG) Report. This report considered the development of ESG reporting for the London Borough of Harrow (LBH) Pension Fund.
The officer introduced the report to the Committee in brief, it was noted that:
· LBH had reached a position where 45% of its strategic asset allocation assets directly contributed to addressing climate change issues, mainly through the Low Carbon Passive Equity and LCIV Sustainable Equity Investment.
· The Social and Governance part of ESG had been addressed through the Local Authority Pension Fund Forum, of which LBH was a member. It was explained that LBH would give details of equity holdings and the Forum would lobby on behalf of public sector funds on a range of issues.
· The latest quarterly report from the LCIV on the ACS schemes outlined an ESG summary for each of their sub-funds.
· Aon had also developed an ESG dashboard.
The Committee raised a number of points and questions which were discussed by Members, Advisers and officers as followed:
· A Member of the Committee enquired how ESG compliance was scrutinised, and it was asked if a public statement had gone out to make members aware of our work on ESG. The Officer highlighted statements made within the investment strategy statement as well as the annual report were on public record. In addition, it was explained that LBH had not specifically reported on ESG to scheme members
The Member of the Committee also asked if LBH had been approached by campaigners regarding ESG, to which the Officer explained that only a Freedom of Information (FOI) request was received a few months ago in regard to climate change and fossil fuels.
· An Adviser asked Members of the Committee if they would welcome the establishment of an advisory body that would publicly show engagement and would also aid our understanding of ESG discussions.
The Chair thanked the Adviser for their comments and noted that this discussion had shown that the Committee was on the right track.
A representative from Aon acknowledged the Adviser’s comments that ESG was a growing and important subject. They noted that it was important for data to be benchmarked in order for an understanding to be gained of what the portfolio consisted of. This had been moved forward with the addition of renewable energy and low carbon in the passive equities. In addition, relevant training sessions should be continued. The Aon representative concluded that it was important for an understanding of what LBH currently had to be gained and from there it should be considered how LBH moved forward. With regard to the establishment of an advisory body, it was noted that the establishment of an advisory body would be up to the Members of the Committee.
· An Adviser agreed that ESG was an important topic and that discussions on ESG should be taken seriously. It was also pointed out that the LBH was a member of the Local Authority Pension Fund Forum (LAPFF) which had led and engaged in ESG. It had monitored ESG within the surrounding LBH area. Therefore, the Advisor suggested that their knowledge could be used to help LBH’s understanding of ESG.
· A Member of the Committee noted that in principle the establishment of an advisory board was a good suggestion and also raised how confident was the Committee and LBH on the topic of ESG. They continued to note that ESG experts on an advisory body could be commendable.
· An Adviser noted that LBH was at the early stages where ESG was involved and therefore suggested that a lot of progress could be made for relatively little input although he was not against an advisory body. However, the amount of Officer and Member time required for this should be considered.
An Aon representative added that Harrow, compared to other boroughs was further behind in terms of ESG. However, good progress had been made and he believed further progress could be gained quite quickly.
· The Chair asked if would be possible to have a report that would explore the advisory body as an option which was noted by the Officer.
RESOLVED: For the report to be noted.