Agenda item

The Committee received a presentation from London Collective Investment Vehicle (LCIV) representatives, Dean Bowden, Chief Executive Officer, Jacqueline Jackson, Chief Sustainability Officer and Stephanie Aymes, Client Relations Manager on responsible investment.

In considering the presentation, the Chairman welcomed the expertise that the LCIV brought to this emerging area, including for the reporting requirements of the Task Force on Climate-Related Financial Disclosures that was formed of the core elements of Governance, Strategy, Risk Management and Metrics and Targets.  The LCIV focus was very much in the area of Metrics and Targets with a view to producing consistent and audited data that would assist the Local Authority in meeting the reporting requirements for the Bromley Pension Fund.  The Chairman highlighted that the Task Force on Climate-Related Financial Disclosures was not yet a statutory requirement but that the Local Authority was taking a proactive approach in preparing to meet the new requirements.  With regard to climate analytics, a Member was surprised to note that the best performers in Net-Zero Alignment included a manufacturer of building materials whilst the worst performers included a company in the health sector which was notable as the NHS had recently set a target to reach Net Zero for direct emissions by 2040.  The Chief Sustainability Officer advised that there was increasing UK Government regulation around the sustainability agenda.  This included carbon mandatory reporting for British companies over a certain size, which had led to improvements in data collection and reporting that would help inform future investment.

Another Member noted that the LCIV had committed to achieving Net Zero GHG emissions by 2040 and asked how this would be delivered given the LCIV’s role was primarily one of stewardship.  The Chief Sustainability Officer advised that LCIV currently offered two funds that were aligned to the Paris Agreement.  It was recognised that the diverse investment funds and philosophies of its clients would have different trajectories to Net Zero and the LCIV would shortly be publishing its Net Zero 2024-30 Strategy as well as a Climate Policy that would set out its objectives and targets at each fund level.  It was crucial that LCIV did not act as a barrier to its clients in setting ambitious targets for responsible investment and would be engaging closely with its clients and individual fund managers in support of its Net Zero target, including consideration being given to split voting mechanisms.  A Member observed the difficulties inherent to fulfilling the Committee’s fiduciary responsibility to maximise investment returns for Pension Scheme members with responsible investment moving forward.

In response to a question from a Member around the LCIV’s approach to investment, the Client Relations Manager explained that the LCIV undertook extensive research on its clients, including actively seeking feedback, and also reviewed peer activity and best practice in developing its investment philosophy.  The Chairman added that the LCIV was very receptive to the views of its clients but had to take account of the beliefs of 32 London Boroughs and if this was a concern for Members, it could be considered in more depth at a future meeting of the Committee.  The Member expressed a concern that responsible investment could be too focused on avoiding risk or mitigating actions, such as investment in renewable or nature capital, and underlined the need to embrace risk and emphasise the opportunities arising from change.  The Chairman suggested that this could form part of the Committee’s future discussions with its Fund Managers around Environmental, Social and Governance.  The Member also queried the approach of LCIV to free speech and the Chief Executive Officer responded that there was no formal Free Speech Policy in place but that employees were encouraged to express themselves freely.

The Chairman thanked the representatives of the LCIV for their excellent presentation.

RESOLVED: That the presentation from LCIV be noted.