Agenda and minutes

Members are asked to declare any interest and the nature of that interest which they may have in any of the items under consideration at this meeting.

Rob Austin and Peter Borley-Cox declared personal interests as members of LGPS. Councillor Lloyd Bunday disclosed a personal interest as he and his wife are deferred members of LGPS. Councillors Phil Bignell and Graham Lawman disclosed pecuniary interests as their wives are deferred members of LGPS. Councillor Graham Lawman declared a personal interest as a school governor.

To confirm the Minutes of the meeting of the Committee held on 29 June 2022.

The public minutes of the previous meeting held on 29 June 2022 were agreed as a true and accurate record of the meeting.

To receive communications from the Chair.

The Chair welcomed everyone to the meeting and expressed that he was happy there was a full meeting room with members present. He reiterated the point of timing for the meeting, keeping to 2 hours to keep members focussed and engaged.

RESOLVED: That the Pension Fund Committee noted the action log.

The Funding and Investment Manager presented the report and explained that the statement of accounts is approved by the Audit Committee, but the Pension Fund Committee were asked to review and give feedback. The report was produced in line with CIPFA guidance and had received good feedback from the Executive Director Finance and the external auditor Grant Thornton.

The Funding and Investment Manager highlighted page 89 of the report which detailed that the pension contributions and benefits had gone up in line with the membership numbers. As well as the management expenses and net assets of the scheme in line with good performance. The closing net assets of the Fund was noted as £3.4bn. The investment liabilities had gone up due to timing of a creditor not paid before year end, the current assets and current liabilities remained unchanged.

The Funding and Investment Manager thanked the Pension Services Financial Manager for her hard work on the substantial report. The Chair also passed on his thanks on behalf of the Committee.

Members questioned the information on page 91 regarding to the number of employees in the administering authority as there were more people than before reform. Officers agreed to investigate the figures outside of the meeting.

Members asked a question regarding the management fees as detailed on page 45 of the report. The Funding and Investment Manager explained that there would be an explanation on the investment manager fees later in the meeting presented by Mercer.

RESOLVED: That the Pensions Committee:

a) Noted the Draft Annual Report and Draft Statement of Accounts of the Pension Fund for the 2021-22 financial year.

At the Chair’s invitation, David Rowley Audit Manager from Grant Thornton introduced himself to the committee and delivered a presentation on the Northamptonshire Pension Fund and audit plan.

Members discussed the presentation and the audit fees as detailed in the report.

RESOLVED: That the Pensions Fund Committee:

a) Noted the Audit Plan 2021-22 and the presentation by Grant Thornton.

The Head of Pensions presented the forward plan and highlighted that normally internal audit would be presented at the annual meeting in July, but the report had only just been agreed so will be presented at the October Pensions Fund Committee as detailed in the plan.

RESOLVED: That the Pension Fund Committee noted the Northamptonshire Pension Fund Committee Forward Agenda Plan.

The following report(s) contain exempt information as defined in the following paragraph(s) of Part 1, Schedule 12A of Local Government Act 1972.

*DELETE AS APPROPRIATE*

Paragraph 1 – Information relating to any individual.

Paragraph 2 – Information which is likely to reveal the identity of an individual.

Paragraph 3 – Information relating to the financial or business affairs of any particular person (including the authority holding that information).

Paragraph 4 – Information relating to any consultations or negotiations, or contemplated consultations or negotiations, in connection with any labour relations matter arising between the authority or a Minister of the Crown and employees of, or office holders under, the authority.

Paragraph 5 – Information in respect of which a claim to legal professional privilege could be maintained in legal proceedings.

Paragraph 6 – Information which reveals that the authority proposes;

a)    To give under any enactment a notice under or by virtue of which requirements are imposed on a person; or

b)    To make an order or direction under any enactment

Paragraph 7 – Information relating to any action taken or to be taken in connection with the prevention, investigation or prosecution of crime.

Members are reminded that whilst the following item(s) have been marked as exempt, it is for the meeting to decide whether or not to consider each of them in private or in public. In making the decision, members should balance the interests of individuals or the Council itself in having access to the information. In considering their discretion members should also be mindful of the advice of Council Officers.

Should Members decide not to make a decision in public, they are recommended to resolve as follows:

“That under Section 100A of the Local Government Act 1972, the public and press be excluded from the meeting for the following item(s) of business on the grounds that, if the public and press were present, it would be likely that exempt information falling under the provisions of Schedule 12A, Part I, Paragraph(s) XXXXX would be disclosed to them, and that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.”

The Chair moved that the remainder of the meeting be held in private:

That under Section 100A of the Local Government Act 1972, the public and press be excluded from the meeting for the following item(s) of business on the grounds that, if the public and press were present, it would be likely that exempt information falling under the provisions of Schedule 12A, Part I, Paragraph(s) 3 would be disclosed to them, and that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

RESOLVED: Members agreed that the public and press were excluded from the remainder of the meeting and the Pensions Committee moved into private session.

To approve the private minutes of the Pensions Fund Committee held on 29 June 2022.

The private minutes of the previous meeting held on 29 June 2022 were agreed as a true and accurate record of the meeting.

The Head of Pensions introduced the report and summarised that prudent work was ongoing at the Investment Sub-Committee to analyse the funds climate position. He explained that the Pension Fund Committee was responsible for setting the strategic allocation to each asset class and agreeing the responsible investment policy, including support for the Paris agreement. The Investment Sub-Committee had been working in these parameters to review climate action and decarbonisation of the Fund. He highlighted the climate action plan contained on page 143 of the report and explained that the plan showed the agreed decarbonisation pathway to deliver a sustainable portfolio. The Head of Pensions stated that the fund was in communication with active managers and that the passive portfolio work could be implemented reasonably quickly. Currently, there was no legal requirement for LGPS funds to report climate related financial disclosures, but a government consultation was expected shortly, and an update would follow later in the year. The Head of Pensions explained that it was in their interests to report to members and scheme employers and keep them updated. Information and dashboards had been published on the Pension Fund website to enable the Fund to be upfront and transparent. Most of the work done so far was around equities and next the fund would move onto the other asset classes.

The Chair thanked the Head of Pensions and explained to members that the discussion at the last Investment Sub-Committee was that the fund would go forward with the climate action but would be careful not to affect the Fund detrimentally.

Members felt the presentation was really accessible and asked a question regarding the graph on page 145 which showed the fund with a position 41% less carbon intensive from the start of the benchmarking period. The Head of Pensions responded that this was the Fund’s position relative to the market and had been achieved because most active investment managers had already undertaken some work themselves to reduce their carbon footprint. Members asked why the report was exempt and requested that a fact sheet be produced for other councillors, admitted and scheduled bodies to give assurance to members that work is being done.

The Head of Pensions explained that the fund is providing regular updates on its website and the report was exempt due to containing details of Mercer’s methodology.

RESOLVED: That the Pension Committee noted the Responsible Investment update and Climate Action Plan.

At the Chair’s invitation, the Funding and Investment Manager introduced the report and highlighted the executive summary. He explained that Mercer were present at the meeting to deliver the presentation and explain how they calculated their ESG rating as requested, 1 was the highest score and 4 being the lowest. The Funding and Investment Manager explained that the ratings were normally presented at the Investment Sub Committee in the quarterly manager performance report, but this report additionally shows a comparison between managers and different assets over the year.

The Funding and Investment Manager then passed over to Mercer. Chris West, Mercer then delivered the presentation on Northampton Pension Fund ESG Monitoring.

Members discussed the presentation and questioned if there was a correlation between asset managers performance and relative rating. Mercer responded that it was a good question, and they would like to do some analysis and share outside of meeting.

RESOLVED: That the Pension Fund Committee noted the Mercer Presentation on ESG Monitoring.

At the Chair’s invitation the Funding and Investments Manager introduced the annual investment performance review. He explained that the presentation included fee analysis, a question previously received by the Pension Fund Committee, and passed over to Mercer to deliver their presentation.

Chris West, Mercer delivered the presentation on the Annual Pension Committee Review. James Thurgood, Mercer gave a handout to members on Investment Manager Fees.

Members asked a question regarding an agonistic investment style. Mercer responded that it related to the way equity managers worked their portfolio, they would adopt a number of different investment styles (e.g., growth, value, quality) instead of one investment style. Members asked if political changes and change of Prime Minister in the UK would have an effect on investments. Mercer confirmed that it wouldn’t affect the Fund hugely as the Fund is a global investor, it would also depend on the approach the new Prime Minister would take to address net zero specifically as there would be lots of change with government policy. He discussed the different approaches, there could be a government that would push forward and accelerate the climate agenda, but similarly could have a government that would decelerate the process. Members asked for a point of clarification regarding UBS ESG score and if they had over £1b of the £3.3bn Pension Fund. Mercer clarified that the UBS ESG score was 2 and they did have this amount of funding.

The Chair thanked Mercer for their comprehensive presentation and shared that the figures for the last year had been very good.

The Chair then invited James Thurgood, Mercer to present the Investment Manager Fees.

Members discussed the management fees. The Chair asked the Funding and Investments Manager to circulate an explanation of the fees to members outside of the meeting.

RESOLVED: That the Pension Committee noted the Mercer presentation Annual Pension Committee Review.

The Chairman to advise whether they have agreed to any items of urgent business being admitted to the agenda.

There were no items of urgent business.