The Lincolnshire County Council Pensions Committee met on Thursday, 11 June 2026, to discuss market performance, the fund's stewardship activities, and to consider the draft Investment Strategy Statement. Key decisions included the approval of the draft Investment Strategy Statement for consultation and the noting of the market update and stewardship reports.

Independent Advisor's Market Update Report

Paul Key Watton, the committee's Independent Advisor, presented the market report for the first calendar quarter of 2026. He explained that the quarter was challenging for investors, with both equities and bonds experiencing negative returns. This volatility was primarily attributed to geopolitical events, specifically strikes on Iran which began on 28 February, leading to the closure of the Strait of Hormuz. This disruption caused oil and natural gas prices to rise, increasing inflationary pressures. Consequently, bond markets, which had initially anticipated falling yields, ended the quarter with rising bond yield expectations.

The UK equity market was noted as an exception, performing better due to its significant weighting in energy stocks like BP and Shell. However, uncertainty surrounding the UK's future labour leadership also impacted UK government bonds. Despite the difficult quarter, confidence has returned to equity markets since the end of March, with a notable increase in global equities, driven by expectations of positive company earnings and advancements in AI.

Councillor Mrs Jacqueline Brockway questioned the substantial returns in commodities despite Middle East production disruptions. Mr Watton explained this was partly due to a move towards safer assets in uncertain environments, alongside speculative investment in commodities like gold, which saw a 20% fall at one point during the quarter. The committee resolved to accept the report.

Stewardship Update Report

Claire Machej, the Accounting, Investment and Governance Manager, presented the stewardship update report, covering the fund's stewardship activity during the fourth quarter of the financial year 2025/26. The report detailed engagement activities undertaken by the Local Authority Pension Fund Forum (LAPFF), Border to Coast Pensions Partnership, and other investment managers.

LAPFF's engagements included work with water companies on issues such as forever chemicals and the aviation industry regarding fossil fuel-based jet fuels. They also engaged with companies operating in conflict-affected high-risk areas. Border to Coast's reporting covered industry updates, voting activity, and ESG ratings for their sub-funds. Notably, the Global Equity Alpha sub-fund saw an improvement in its ESG score.

Councillor Mrs Jacqueline Brockway raised concerns about the percentage of votes cast against management recommendations, asking if there was a red flag level. Ms Machej clarified that these percentages represented the proportion of meetings where votes were cast against management, not the number of companies voting against them. She explained that voting against management is a way to signal shareholder dissatisfaction and that Border to Coast engages with companies to explain their reasoning.

Councillor Mrs Brockway also inquired about Public Finance Initiatives (PFIs), specifically regarding investments in rail, hospitals, and schools, and whether the fund considered the long-term impact of these investments, especially if the underlying local authorities or trusts faced difficulties. Ms Machej explained that these investments were made some time ago and are viewed from an investor perspective, with the manager responsible for engaging with the underlying authorities. While quarterly reports provide updates, the manager is in charge of the relationship. She acknowledged that if the underlying owner fails, there is a risk of losing money, but these were considered lower-risk, long-term investments. The committee resolved to accept the report.

Draft Investment Strategy Statement

Jo Kempton, Head of Lincolnshire Pension Fund, presented the draft Investment Strategy Statement (ISS). The recommendation was for the committee to consider and agree the draft ISS before it was sent out for consultation with key stakeholders, including fund employers and the Greater Lincolnshire Combined Authority. The ISS will also be published online for scheme members to comment on. A final version will be presented to the committee in September for approval.

Iain Campbell, the investment consultant, provided a detailed overview of the draft ISS. He highlighted that it is a statutory requirement and incorporates new regulations, including a focus on local investment and the increased importance of the Border to Coast Pensions Partnership (the Pool ). Key sections include investment objectives, which now encompass investment return, risk, cash flow, and local investment targets. The draft ISS sets a target of 0-5% of assets for local investment, with a preference for Greater Lincolnshire but prioritising risk-adjusted returns.

Councillor Barney raised questions about the process for influencing local investment decisions and what happens if suitable local investments cannot be found. It was clarified that while opportunities can be put forward to Border to Coast, the responsibility for due diligence lies with them. The 0% lower limit on local investment was emphasised, meaning the fund is not forced to invest if no suitable opportunities arise.

Steve Larter pointed out a numbering issue in the document and suggested including contact details for key officers, acknowledging the difficulty in finding such information on council websites. It was agreed that adding a key contacts section to the website would be a more practical solution for keeping information up-to-date. The committee resolved to approve the draft ISS for consultation.

Following these discussions, the committee moved to consider exempt information for agenda items 8 and 9, which involved investment updates and manager performance reports.