Agenda and minutes

Apologies were received from Councillor Gill.

There were no declarations of substitute members.

If you have a Disclosable Pecuniary Interest* in an item of business:

·         if it is not yet on the council’s register, you must declare both the existence and details of it at the start of the meeting or when it becomes apparent;

·         you may choose to declare a Disclosable Pecuniary Interest that is already in the register in the interests of openness and transparency. 

In both the above cases, you must leave the room without participating in discussion of the item.

If you have a personal interest in an item of business and you intend to speak or vote on the item you must declare both the existence and details of it at the start of the meeting or when it becomes apparent but you may participate in the discussion and vote on the item.

*(a) Employment, etc - Any employment, office, trade, profession or vocation carried on for profit or gain.

(b)    Sponsorship - Any payment or other financial benefit in respect of your expenses in carrying out duties as a member, or of your election; including from a trade union.

(c)   Contracts - Any current contract for goods, services or works, between you or your partner (or a body in which one of you has a beneficial interest) and the council.

(d) Land - Any beneficial interest in land which is within the council’s area.

(e) Licences- Any licence to occupy land in the council’s area for a month or  longer.

(f)  Corporate tenancies - Any tenancy between the council and a body in which you or your partner have a beneficial interest.

(g) Securities - Any beneficial interest in securities of a body which has a place of business or land in the council’s area, if the total nominal value of the securities exceeds £25,000 or one hundredth of the total issued share capital of that body or of any one class of its issued share capital. 

This applies to all members present at the meeting.

There were no declarations of interest.

RESOLVED:

(a) That the membership of the Pensions Sub-Committee, appointed by the Audit Committee on 13 June 2022, its terms of reference and dates of meetings for the municipal year 2022/23, as set out at Appendix A to the report of the Corporate Director of Resources, be noted.

(b) That the membership of the Pensions Board, appointed by the Audit Committee on 13 June 2022, its terms of reference and dates of meetings for the municipal year 2022/23, as set out at Appendix A to the report, be noted.

RESOLVED:

That the minutes of the meeting held on 14 March 2022 be confirmed as an accurate record of proceedings and the Chair be authorised to sign them.

Meeting was informed that in light of the Ukraine Russia War, the combined fund performance has been negative during the last quarter, however looking over the 12 month period it is positive and ahead of the bench mark .

Members were reminded that in general the fund is doing better in comparison to previous years.

Members were informed that officers had received notification that following the takeover of BMO by Columbia Threadneedle ,there is likely to be possible merger of the BMO emerging market portfolio with a third party called Poland Capital, details which will be reported back to Committee in September.
 

On the question of whether despite 3 years of extraordinarily levels of economic instability if the Council’s mix of investment is vulnerable in comparison to other local authorities government, the meeting was advised that committee will have the opportunity to compare Islington against other local authorities when a standard report is considered at the September meeting.

In response to concerns about the BMO fund and the possibility of termination going forward, meeting was advised that there were no issues with the emerging market and frontier market but the issues were more specific to the circumstances of BMO itself and not the emerging market universe.

Karen Shackleton of MJ Hudson in summary highlighted the various performance of the fund managers as highlighted below-

In-house Passive portfolio

No performance issues, however members to note fund will be transitioning into a Paris Aligned fund over the summer as it is nearly at the end of this particular mandate

M& G- Alpha Opportunities Fund

Relatively new allocation and proceeds of equity protection strategy has gone into this fund, it is a low risk fund designed to protect capital and although it made a small loss during the quarter of -1.6 % this was due to its exposure to financial corporate bonds . Members to note that there was a mistake in the report, that the last paragraph under portfolio characteristics should be amended to read ‘ Schroders intend to remain energy positioned’ rather than defensively positioned

LCIV Global Equity Fund Newton

Chart 3 shows how managers do well in certain environments and less on others and it shows Newtons have had a long period of underperformance, followed by a much better performance in quarter 1 of 2020, however unfortunately it is beginning to tail off and presently experiencing underperformance relatively to the benchmark and certainly below their performance. Committee were advised that this is a fund manager that Islington is paying to outperform but are actually underperforming for over 3 years, that it is a defensive portfolio which is good in a time of volatility but this is something to monitor. Members were reminded that the fund manager has a thematic approach, which changes slowly over time, that their focus at the moment is Net effect impact of technology and healthy demand, affordable health care of the elderly, noting that these themes have not played out well in the last quarter.

LCIV  ...  view the full minutes text for item 240.

Committee received a presentation from David Scaybrook of Quinbrook Infrastructure. Their past performance, activities and projected cash flow position for Islington for current fund as well as pipeline projects for their next fund, the Net Zero Power Fund and some of the merits of Quinbrook as stated in the report were highlighted.


RESOLVED:

To note the presentation (exempt Appendix).

To delegate responsibility to Officers to complete the fund subscription and carry out further due diligence.

Members were advised of current activities and the CEO’s departure in March 2023. The various funds performance was discussed and agreed they need to be monitored closely and an update to be provided at the September meeting.

RESOLVED

To note the progress and activities presented at the May business update session (exempt Appendix 1)

An update to be provided at the next meeting in September

RESOLVED:

To agree Appendix A

Members were reminded that at the last meeting it was agreed to bring a progress report on this issue however nothing to report at this moment .

Meeting was informed that the agreement was to transition the in-house fund to the L&G Paris Aligned fund, that discussions has commenced and a key issues is to finalise how much income we could receive from their current fund as the in-house fund is like a federal fund.

With regard to the transition, meeting was informed that the issue is whether the council could do any in species transition which could lower the costs and that there is a timetable with L&G to carry out the transition in the middle of August.

In response to a question on the timetable when it will be operational, and in particular when assets will be moved across, meeting was advised that it is anticipated within 2 weeks by the end of the transition, the new index will be up and running.

Meeting was advised that one of the areas sought is the impact on the weighted average carbon intensity(WACI )but at the total equity portfolio level making this transition will reduce the WACI by 17.4% bearing in mind that is a 10% allocation which is very significant.

Chair stated the need to keep an eye on this especially over the month of August and that it will be essential to be ready with some public narrative that we have taken this significant step change in funds over carbon footprint

Members were reminded that Islington has a legacy in Raffi emerging market portfolio and a decisionwas t taken that to transfer that we should move to Paris Aligned and &G do not have that at the moment. Initial discussions  with  an Index Provider who have confirmed that they intend to launch a Paris aligned emerging market with L&G in July so it is something to look explore.

RESOLVED:
To note the update

Committee received an update on the progress to date on the agreed monitoring plan on the portfolio’s decarbonisation policy and to note their ESG ratings and carbon footprint of Islington’s equity and credit holdings

RESOLVED

·       To note the ESG ratings of individual portfolios and average rating of 1.8 (previous rating 2.1) for the whole Fund.

·       To note the carbon footprint of our public equities and credit

·       To note the carbon footprint of our public equities and credit

·       To note the fund has reduced its exposure to carbon intensive companies since 2016 and absolute emissions as set out in Exempt Appendix 2 (to follow).

·       To continue to engage with our portfolio managers to improve ESG ratings and achieve the targets set in 2022 and 2025 for the whole fund. 

Alex Goddard of Mercer briefed the meeting on Impact Investing, UK Social and Affordable Housing and the recent white paper on levelling up issued by the Department of Levelling Up Housing and Communities (DLUHC). Members were advised that the paper is a training document for consideration to start the process of formulating a mandate specification and risk and return parameters.

Members were reminded that as part of the March 2020 Investment strategy review, it was agreed an asset allocation which included a 5% to social and affordable housing and for the strategy to be implemented over the short to medium term, however no commitment has been made to date. 

RESOLVED

·       To note the briefing paper prepared by Mercer (Exempt Appendix 1).

·       To note the range, themes, risk and return and objectives as well as governments recent Levelling Up white paper.

·       To consider the next steps of how to progress this commitment.

Members were advised of a further update report on 2019 Actuarial review position and the targeted investment returns required to keep contributions to the fund sustainable and the investment strategy implications on asset allocation.

Members were reminded that at the December 2020 meeting a mandate specification was agreed and appointed 2 private debt managers to cover 50% of the total 10% asset allocation.

RESOLVED:

·       To consider the allocation of a further % of assets to Private debt from the outstanding 50%.

·       To note and consider the attached Exempt Appendix1.

·       To agree to delegate authority to officers and our investment advisers to conduct further due diligence and recommend who best delivers value for money and complements our existing managers and proceed to procure.

·       To consult and seek approval from the Chair of Pensions sub-committee on the final recommended manager

·       To agree to delegate to the Corporate Director of Resources, in consultation with the Director of Law and Governance, authority to negotiate and agree terms and conditions of the fund management agreement(s) with the recommended and agreed manager(s). 

Noted

Noted

Noted

Noted

Noted