The Lincolnshire County Council Pensions Committee met on Thursday, 11 June 2026, to discuss market performance, the fund's stewardship activities, and to consider a draft Investment Strategy Statement. The committee received updates on global investment markets, reviewed the fund's stewardship activities, and the draft Investment Strategy Statement was presented for consideration and consultation.

Independent Advisor's Market Update Report

Paul Watson, the committee's Independent Advisor, presented his market update for the first quarter of 2026, covering January to March. He noted that it was a difficult quarter for investors, with both equities and bonds falling in value, primarily driven by geopolitical events, specifically the US strikes on Iran which began on 28 February. These events led to increased oil and natural gas prices, contributing to inflationary pressures. While global equities experienced a negative return for the quarter, the UK equity market performed better due to its significant weighting in energy companies like BP and Shell. Bond markets also saw rising yield expectations as central banks paused anticipated interest rate reductions due to inflation concerns. Mr. Watson also highlighted that since the end of March, confidence has returned to equity markets, with a 12% increase in global equities, despite ongoing uncertainty in the Middle East.

Stewardship Update Report

Claire Machej, the Accounting, Investment and Governance Manager, presented the stewardship update report for the fourth quarter of the financial year 2025/26. The report detailed the fund's engagement activities through various external managers, including the Local Authority Pension Fund Forum (LAPFF), Border to Coast Pensions Partnership, and Robeco. LAPFF's engagements focused on issues such as water company preparedness for forever chemicals, the aviation industry's use of fossil fuel-based jet fuels, and companies operating in conflict-affected high-risk areas. Border to Coast's stewardship activities included voting at company meetings and engaging with companies on environmental, social, and governance (ESG) issues. The report also highlighted that the Global Equity Alpha sub-fund saw an improvement in its ESG score during the quarter.

Councillor Mrs Jacqueline Brockway raised a question about the red flag level at which voting against management recommendations becomes a concern, noting the percentages reported. Ms. Machej clarified that these percentages represent the number of occasions Border to Coast chose not to vote in favour of management, and that this action is intended to signal shareholder dissatisfaction. She added that Border to Coast also engages with companies to explain their voting decisions. Councillor Mrs Brockway also inquired about Public Finance Initiatives (PFIs), specifically regarding the long-term viability of investments in assets like schools and hospitals, and whether the fund considers potential difficulties these projects might face. Ms. Machej explained that these investments were made some time ago and are viewed from the pension fund's perspective as an investor seeking ongoing cash flows. The responsibility for managing relationships with underlying local authorities or trusts lies with the fund managers. She assured that while there is always a risk of losing money in any investment, these particular PFI investments were made in 2007-2008 and are considered lower risk due to their long-term nature and investment in secure bodies.

Draft Investment Strategy Statement

Jo Kempton, Head of Lincolnshire Pension Fund, presented the draft Investment Strategy Statement (ISS), which consolidates previous work on investment strategy and aligns with new requirements under the Fit for the Future review. The ISS aims to capture the committee's views on strategy and local investments. Following the committee's consideration, the draft ISS will be subject to a consultation period with key stakeholders, including fund employers and the Greater Lincolnshire Combined Authority, as well as being published on the council's website for scheme members to provide comments. A final version will be presented to the committee in September for approval.

Iain Campbell, from Hymans, provided a detailed walkthrough of the draft ISS. He explained that the document is a statutory requirement and incorporates new changes related to local investment and the increased importance of the pension pool, Border to Coast. Key sections include investment objectives, which now specify targets for investment return, risk, cash flow, and local investment. Mr. Campbell noted that the return and risk figures are based on modelling by Hyman and that Border to Coast will implement these. He also confirmed that the target for local investment is between 0% and 5% of the fund's assets, with a preference for investments within Greater Lincolnshire, but that attractive risk-adjusted returns remain paramount.

Councillor Barney asked about the process for individuals or groups to propose specific local investment projects. Ms. Kempton explained that while specific investment ideas can be put forward to Border to Coast, the responsibility for due diligence and investment decisions rests with them. She also clarified that the 0% lower limit for local investment means the fund is not compelled to invest if no suitable opportunities are found. The committee discussed the evolving nature of local investment and the learning curve involved for Border to Coast in building the capacity to manage these new types of investments.

Steve Larter raised a point regarding the numbering in the document and suggested including contact details for key officers, such as the Section 151 Officer, to aid external parties in finding them. The committee noted the suggestion to consider adding a key contacts section to the website.

The committee then moved to consider exempt information for agenda items 8 and 9, which involved an investment update and manager performance report, and a presentation from Border to Coast Pensions Partnership on fixed income sub-funds. These items were discussed in private.