The Committee reviewed and approved the draft Lewisham Pension Fund Annual Report 2023/24 for publication. It also agreed changes to the Fund's Responsible Investment Beliefs Statement, noting the findings of a recent workshop. Several items were discussed in closed session.

Transition to Net Zero

The Committee received an update on the Transition to Net Zero Policy, initially agreed in 2023. The Council's advisers, Hymans Robertson, presented their analysis, which showed a reduction in Scope 1 and 2 emissions¹ from listed equities by 84% from a 2019 baseline. The target is to reduce these emissions by 90% by 2030. The Committee agreed an action plan for 2025, which included assessing the alignment of the property mandate² and increasing data coverage for Scope 3³ emissions.

Pension Fund review of restrictions and exclusions

This topic followed on from a motion presented at the last meeting by Councillor Tauseef Anwar and seconded by Councillor Liam Shrivastava which was agreed in a revised form by the Committee:

"The Pension Investment Committee agrees to explore its proximity, exposure and investment companies involved in:

• The arms trade;
• Any company associated with or whose activities facilitate human rights abuse;
• Any companies who operate within an area considered occupied territory under international law

with a view to review and update its Responsible Investment policy, to move away from such investments and, to agree on a definition of arms trade."

The Committee had held a workshop prior to the meeting, in consultation with Hymans Robertson, to explore the issues raised in the motion and agree a way forward. Hymans Robertson presented a detailed analysis of the Fund's listed assets, focusing on the arms trade, human rights, and companies operating in occupied territories. The key finding was that the Fund had very low exposure to companies involved in these areas.

There is very low exposure to the defence sector, being two companies comprising 0.01% of the Fund, and that there is nil exposure to controversial weapons. Exposure to human rights controversies is low, with 49 companies comprising 8.7% of the total fund holdings, and that where it arises, this is related to multinational companies that form large parts of global indices... Exposures to companies misaligned with the UN global Compact is very low being two companies and 0.02% of the total Fund holdings. Exposure to companies domiciled in conflict zones is very low, including 12 companies domiciled in Israel equating to 0.11% of total Fund holdings.

The analysis also showed that most of the Fund’s listed holdings have exclusions and risk management procedures to limit exposure to controversial issues.

The Committee agreed to a change to the Fund's existing Responsible Investment Beliefs Statement:

The Fund expects asset managers to screen, monitor and where appropriate, exclude exposure to specific issues including controversial weapons, human rights abuses and any company with significant operations within an area considered occupied territory under international law. The Fund has responsibility for selecting investments that actively reduce or mitigate social risks and expects all its asset managers to be aware of how these issues could arise across their supply chains.

The Committee also agreed to include a new belief in the statement:

The Fund expects asset managers to screen and monitor companies with significant revenue from tobacco, pornography and gambling. We recognise that investments in these areas could contribute to negative social effects that can present financial risks, and therefore, expect all asset managers to report on and justify such holdings, and their engagement efforts on social risks.

Further steps that the Committee will consider include:

• Engagement with asset managers as part of the development of the Engagement Policy.
• Engagement with the London Collective Investment Vehicle (LCIV)⁴ regarding their approach to excluding companies involved in the arms trade, human rights abuses, or those operating in occupied territories.
• The use of restrictions, rather than exclusions, to limit the Fund's exposure to companies with significant revenue from the arms trade or fossil fuels, without excluding these companies altogether.
• The development of a clear policy definition of the arms trade and the levels of exposure to such activity that the Committee is willing to tolerate. This policy will also consider the practical issues associated with identifying exposure to such activities as part of the investment process.

Pension Administration Update

Officers provided an update on recent activity. This included the completion of the transfer of staff from Lewisham Homes back into the Council, which required the aggregation of pension records for all 450 employees. The team confirmed that all Annual Benefit Statements were issued by the statutory deadline of 31 August 2024 and work has begun on checking Pension Saving Statements for 2023/24.

The Committee noted that the Heywood Dashboard Integrated Service Providers (ISP) service has been purchased. This is to assist with the Council's compliance with Part 4 of the Pension Schemes Act 2021, which requires occupational pension schemes to connect to the pensions dashboard ecosystem. Work on the first phase of the project is planned to begin in November 2024.

The Committee also noted that a new data cleansing tool will soon be deployed to the live system. This will help the pensions team to check and verify member data, including addresses, dates of birth, names, and mortality data.