Agenda item

Report of Director of Finance

Members received an introduction to the report from an officer he explained that following the workshop on 12 October 2022, it was agreed that Aon would carry out a survey of the Committee members’ investment beliefs (from an RI perspective) and to use these to draw up a Responsible Investment Policy for the Committee to consider and approve.

The representative from Aon presented the survey findings and the contents of the proposed policy.

She informed members that following completion of the survey by the majority of Committee members, Aon have reviewed the responses provided and produced the following summary of  the key views expressed by the Committee:

·                 Environmental, social and governance (ESG) factors were financially material; taking them into account was consistent with the Committee's fiduciary duty to members of the Fund.

·                 The Fund was a long term investor, and the Committee would invest in a manner that was consistent with that long-term outlook.

·                 Taking ESG considerations into account may lead to better risk-adjusted returns, and it was therefore important that the Fund's appointed managers incorporate these matters into their decision making on asset selection, realisation, and retention.

·                 While risk and return considerations were important, Members believed that the fund managers’ approach to engagement and stewardship of assets was a relevant factor in decision-making.

·                 Members would consider investments which sought to deliver positive impacts on societal/environmental issues, as well as those which integrated ESG risk and opportunities, or ‘tilted’ towards certain investments.

·                 Climate change is a key risk factor to the Fund.  This risk should be assessed and understood in order to protect the Fund and capture opportunities arising as a result of the transition over time to a low-carbon economy.  However, you also believe that issues of social justice and broader consideration of nature-related outcomes are relevant to decision-making.

·                 Acting as responsible stewards of capital is important, and the Committee believed in the value of engagement.  To that end, the Committee expects that the Fund's voting rights are exercised to the fullest extent possible, and that the Fund's managers will actively engage with underlying assets to encourage continued development of sustainable business practices, transparency, and inform their decision making on investment selection, realisation, and retention.

The policy outlined important procedures to follow in committee decision making, ESG risk monitoring and assessment, expectations and monitoring of investment managers, implementation and training to ensure the investment strategy is aligned with the council’s beliefs and principles toward RI.

The policy also covered these areas:

·                 Stewardship – voting and engagement

·                 Initiatives and industry collaboration

·                 Evolving the approach

·                 Disclosure and reporting

Councillor David Ashton, the Chair of the committee expressed confusion and concern at the number of survey responses received.  As Members confirmed that they had all responded to the survey and since it was anonymous, there was no way of finding out what had happened.

He further explained that due to the low level of response, the survey results though informative were statistically challenging as it was difficult to draw a clear conclusion from a small sample size.

An Advisor expressed concern that some sections of the draft policy were easy to understand and implement such as the section on stewardship on page 62, of the Supplemental Agenda but the section on Environmental and Social Governance (ESG) was confusing.  He expressed a preference for a brief, clear, simple, and understandable policy.

It was proposed that a Word version of the policy be circulated to Members for their input and presented back to the committee for further comments.

The Chair explained that the committee was not rejecting the draft policy but rather commencing a sensible process of input.

RESOLVED:  That

(1)            the draft Responsible Investment Policy (RI) be noted;

(2)            a Word version of the draft policy be circulated to Members for comments.

(3)            the amended copy of the draft policy be presented to the committee for further consideration and comments.