The Pensions Committee was scheduled to receive presentations on shareholder voting guidance from PIRC, the Pensions & Investment Research Consultants Ltd, and on the performance of the Pension Fund from 1 January to 31 March 2024. The committee was also scheduled to receive a report from officers on the implementation of the Investment Strategy agreed at the previous meeting.

The Performance of the Pension Fund from 1 January to 31 March 2024

The committee was scheduled to note the performance of the Fund for the first quarter of 2024, and to receive an update on the performance of each fund manager.

The committee was scheduled to consider whether to ask the London CIV to assume greater monitoring of the performance of the RBC Sustainable Equity fund, a pooled fund managed by RBC Global Asset Management and benchmarked against the MSCI World Index. The report noted that, while the RBC fund had outperformed its benchmark for the quarter by 1.1%, it had underperformed its benchmark by 6.6% over the past twelve months. The report by officers recommended downgrading the monitoring status of the fund to enhanced monitoring status.

The report pack for the meeting included a presentation on the performance of the fund managers from Apex Group, the Council's independent investment advisors.

Decarbonisation Policy Monitoring

The committee was scheduled to receive a report on the Council's progress towards its decarbonisation targets. The report pack for the meeting included a confidential briefing from Mercer, the Council's Investment advisors, that provided an update on the carbon footprint of Islington’s Pension Fund assets and discussed considerations for next steps. The report from officers noted that the council had reduced the carbon intensity of its listed equities and credit portfolios by 40% since 2021. The report also included analysis of the implied temperature rise of each fund manager in the portfolio, and the percentage of the portfolio that was managed by companies with Science Based Targets initiative (SBTi) approved climate transition plans.

The officers' report asked the committee to consider adopting recommendations and metrics based on the Taskforce for Climate-Related Financial Disclosures (TCFD) framework¹ regulations.

The TCFD is a task force established by the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, to develop recommendations for more effective climate-related disclosures. The TCFD has developed a framework for disclosing climate-related risks and opportunities, and the UK government is proposing to make it mandatory for large companies and pension schemes to report on their climate-related risks and opportunities in line with the TCFD recommendations.

Investment Strategy Review

The committee was scheduled to receive an update from officers on the implementation of the Investment Strategy Review that was agreed at the previous meeting.

The report pack includes an exempt appendix summarising a review of the emerging markets portfolio conducted by Bfinance, a firm of investment consultants. The report from officers noted that officers had met with Mercer to discuss other strategies in the market and to understand their performance over the last 3 to 5 years. Officers noted that the Council's current active manager has a growth style and the passive manager is a value manager, and that style biases have been the key driver of performance since 2021.

The report also included a presentation from Mercer considering the Council's 5% impact investment target, and its commitment to private debt. The report from officers asked the committee to consider two new strategic asset allocations.

Pension Administration Performance

The committee was scheduled to receive an update on the performance of the Pension Administration team.

The report pack included a report on the administration performance of the Sunnyside Community Center. The report states that the average time taken to process retirement benefits was 10 days.

The report pack included the Pension Administration Risk Register, which is maintained in accordance with the Pensions Regulator's code of practice. The register included three risks designated as high: the failure to apply the correct pensions increase to all pensioners; the late provision of payroll reports; and loss of investment returns.

The register noted that, while testing of the Pensions Increase programme began in March 2024, a number of technical issues arose which had to be referred to the software suppliers to help resolve. The Pensions Team identified a number of pensioners that were not captured by the Pensions Increase programme. The register noted that additional hours of overtime have been approved to mitigate the risk.

The register also noted that the Pensions Office was continue to engage in discussions with the Payroll Consultant to build a new suite of pension reports. The risk register noted that the impact of late or incomplete reports can mean that Members Annual Benefits Statements could be late or inaccurate.

London CIV Update

The committee was scheduled to receive a report from officers on the London CIV, a pooled investment vehicle for local government pension funds. The report pack includes exempt appendices that contained a business update for the period from February to June 2024, and the agenda for a shareholder meeting held in June.

Pension Fund Forward Work Programme

The committee was scheduled to receive a report from officers setting out the forward work programme for the coming year. The report from officers included a training update and highlighted that the committee was due to receive training from PIRC on shareholder voting guidance, and training from Mercer on the Pensions Regulator's new General Code of Practice.