This meeting of the Pensions Committee was scheduled to receive updates on the performance of the Islington Pension Fund and the London Collective Investment Vehicle (CIV), as well as to discuss an interim funding review, progress on the implementation of the Investment Strategy and the restructuring of the passive equity portfolio.

Restructuring of the Passive Equity Portfolio

The Committee was scheduled to receive an update on the restructuring of two existing Legal & General Investment Management (LGIM) passive equity funds. This restructuring was scheduled to create a single pooled fund of one investor, combining both portfolios into one and mirroring the Paris-aligned strategy.

The meeting was scheduled to be updated on the progress towards divesting from 10 companies that have been listed by the UN Human Rights Council (UNHRC) as being complicit in human rights abuses in the Occupied Palestinian Territories¹. This would include an update on the outcome of a consultation that was held with the members of the pension fund, and details of an equalities impact assessment that was carried out.

The report included for discussion explained that

The UNHRC produced a database in 2020 of businesses involved in certain specified activities relating to Israeli settlements in the Occupied Palestinian Territory (OPT).

and that

The Pension Fund currently has holdings in 10 companies that are listed on the database.

Update on the London CIV

The London CIV was created in 2015 to enable local authorities in Greater London to pool their pension fund investments. Islington Council was one of the founding members of the London CIV. The Committee was scheduled to receive a presentation from the London CIV on the performance of its funds and any updates on new funds. It was also scheduled to receive an update on the CIV's nature-based solutions fund, which has been launched with a first close scheduled for December 2024, and to consider whether to approve terms and conditions for a 2% commitment to the fund. This fund invests in projects that aim to protect, manage and restore natural ecosystems.

In particular, the Committee was scheduled to be asked to note that

Three managers for [the] initial portfolio [were] approved by [the] EIC and Exco.

Interim Valuation Funding Review

The Committee was scheduled to receive an update on the interim funding review of the Islington Pension Fund, which is carried out by an actuary every three years to determine the financial health of the fund. This review was scheduled to set out the actuary's key considerations and assumptions, as well as a snapshot of the whole fund position as at 30 September 2024.

The actuary's report noted that the

period since the 31 March 2022 valuation has seen market volatility, the Russian invasion of Ukraine, higher inflation and resulting higher interest rates as well as conflict in the Middle East.

Pension Fund Performance

The Committee was scheduled to be provided with the quarterly performance report for the period 1 July to 30 September 2024. The report pack included a summary of the performance of the fund, as well as information on the individual performance of the fund managers who invest the fund's assets.

It also included details about the recent performance of the Hearthstone UK Residential Property Fund, which is being wound down.

Three capital distribution have now been paid since the termination process began: ▪ 12/12/2023 – c. 5.7m total, of which Islington received £2,277,628 ▪ 31/05/2024 – c. £3m total, of which Islington received £1,229,297 ▪ 30/09/2024 – c. £3m total, of which Islington received £1,184,497

Update on the Implementation of the Investment Strategy

The Committee was scheduled to receive an update on the progress being made on the implementation of the investment strategy that was agreed as part of the 2022 Actuarial Valuation process. The strategy takes into consideration the need for liquidity, risk management, the promotion of an inclusive economy and the achievement of the fund's net zero decarbonisation targets.

The strategy includes an allocation to impact investments, which are investments that aim to generate a positive social or environmental impact alongside a financial return. The Committee was scheduled to be updated on the progress that has been made on shortlisting and carrying out due diligence on impact investment managers.

The Committee was also scheduled to be updated on the appointment of a new manager for the Emerging Markets equities portfolio and on the selection of a new European Private Debt manager, which is scheduled to take place via a procurement process.

The Committee was also scheduled to be asked to note that

considering the governments’ consultation on pooling, Officers are reviewing the LCIV proposition before a recommitment to our existing US Private debt manager Churchill’s next vintage Fund V via delegated authority to Corporate Director of Resources.

Local Government Pension Scheme (England and Wales): Fit for the Future Consultation

The Committee was scheduled to be asked to note the contents of a recent consultation that was carried out by the government on the future of the Local Government Pension Scheme (LGPS).

The Chancellor of the Exchequer has previously proposed the consolidation of the assets of all LGPS funds into eight “mega pools” of £80bn each by 2030, with a target of 100% pooling by March 2026. The implication of this is that the partner funds of these pools would have much less control over the selection of investments.

The consultation document explains that it is proposed that

Administering Authorities (AAs) [will] fully delegate investment strategy implementation to pools in full (including active vs passive investing, geographical split etc). Fund’s will be expected to use a simple template to tell the pool what their strategic asset allocation is.

and that

AAs [will] take principal investment advice from pools. This looks to be the governments way to reduce spend on external investment consultants.

The consultation document also explains that it is proposed that

Pools [will be] established as FCA-authorised investment management companies. This places question marks of some of the pools that are not FCA regulated given the time frame to get to this position is challenging.

Investment Consultancy Review

The Committee was scheduled to receive an annual report detailing the performance of its Investment Consultant, Mercer, against a set of strategic objectives that were agreed by the Committee in December 2019. The new Pensions Regulations, which came into effect in October 2022, require administering authorities to set these objectives for their investment consultancy providers.

Pensions Committee Forward Work Programme

Finally, the Committee was scheduled to discuss its forward work programme for 2024/25. This was scheduled to include a review of training needs, the approval of a four-year business plan and a report on progress that is being made on monitoring the carbon footprint of the fund’s investments.

The Committee was also scheduled to be asked to approve the addition of the following items to its forward plan:

• "Passive equity portfolio restructuring update - responses to consultation and equality impact assessment”
• Investment Strategy update