The Surrey Pension Fund Committee met on Monday 14 September 2026 to discuss a range of financial and operational matters concerning the pension fund. Key discussions included proposed enhancements to the Fund's risk assessment framework and the draft annual report for 2025/26, with final approval of the report delegated to the Chair subject to an unqualified audit.

Public Question on Divestment from Companies Linked to International Law Violations

Mr. Ahmed Afana submitted a question regarding the Fund's exposure to companies potentially linked to violations of international law and humanitarian crises affecting Palestinian and Lebanese people. The Committee reiterated its previous stance that it does not dictate individual company exclusions to its investment managers. Instead, it expects managers, including its pooling partner Border to Coast Pensions Partnership (BCPP), to integrate responsible investment principles into their decision-making processes, assessing issues like human rights through the lens of financially material risks. BCPP uses third-party data and engages with companies through dialogue, voting, and supporting shareholder resolutions. BCPP's provider, Robeco, has initiated an engagement programme targeting companies with exposure to the Israel-Hamas conflict, focusing on human rights due diligence.

Surrey Pension Team Overview - Quarter 1

The Surrey Pension Team provided an overview of its performance for the first quarter of the financial year, covering April to June 2026. Customer Operations achieved a 96% overall performance score, with 64% of retirement cases processed through self-service. The McCloud remediation work was progressing, with 20,039 of 29,942 eligible records completed. A new data strategy was introduced to improve data governance. Financially, operating expenditure was £1.6 million against a budget of £2 million, with a forecast of £8.2 million for the full year. The Fund's total value increased to £7.4 billion, a 10% rise driven by strong equity performance, although it underperformed its composite benchmark. The funding ratio stood at 139%. Staff sentiment, as measured by the Pulse survey, showed general improvement, though communication was noted as an area for development.

Investment and Funding Level Update

The Committee received an update on the Fund's investment performance and funding level as of 30 June 2026. The Fund's total value reached £7.5 billion, with a 10% increase in the quarter driven by equities. While the Fund's overall return exceeded its strategic target, it underperformed its composite benchmark due to the performance of private market investments against a strong equity market. The funding ratio improved to 139%, reflecting asset growth and a reduction in the discount rate. Market reviews indicated global equities rose significantly, driven by AI investment and easing concerns over the Iranian conflict, though geopolitical tensions and a weaker global economic outlook presented challenges.

Responsible Investment Update

The Committee reviewed the Fund's responsible investment activities for the quarter ending 30 June 2026. Engagement activities by LAPFF, Legal & General, and BCPP focused on areas such as climate action, human rights, and responsible production. The Fund voted against management recommendations in 30.64% of cases, primarily concerning remuneration and audit transparency. Notably, a shareholder proposal at NVIDIA to remove supermajority voting provisions was successful, and two management-proposed remuneration resolutions at Thermo Fisher Scientific and Aon were defeated. The draft Climate-related Financial Disclosures Report for 2025/26 was presented, showing a decrease in the carbon footprint of listed equities despite a slight increase in Weighted Average Carbon Intensity (WACI), largely attributed to the growth of AI and semiconductor production. The Fund successfully renewed its signatory status to the UK Stewardship Code for the third consecutive year.

Review of the Risk Methodology

The Committee reviewed proposed enhancements to the Fund's risk assessment framework. This included adopting Option 1 for the likelihood scoring methodology, which narrows the central Possible/Moderate category from 30-70% to 40-60% to improve differentiation between risks. An expanded impact framework was also approved, incorporating categories such as impact on members, fund value, contribution rates, service delivery, and legal consequences, moving beyond traditional corporate measures.

Q1 Budget Monitoring Report 2026/27

The Committee noted the Q1 Budget Monitoring Report for 2026/27, which indicated that total income received was £51.8 million and total benefits paid were £71.3 million. Operating costs for the quarter were £1.6 million against a budget of £2 million, with the underspend attributed to timing differences in special projects, IT costs, and actuarial and audit fees. The report confirmed that the Fund was in line with expected costs.

Summary of the Surrey Local Pension Board

The Committee received a summary of the Surrey Local Pension Board's activities, including their endorsement of the proposed risk scoring methodology and expanded impact framework. The Board also noted updates on the Fit for the Future reforms, the recruitment of an Independent Person, and the progress of the McCloud remediation project. Concerns were raised regarding investment performance and governance oversight of Border to Coast, with assurances provided on ongoing scrutiny and outperformance against the average LGPS fund.

Recent Developments in LGPS

The Committee was updated on recent developments within the Local Government Pension Scheme (LGPS), including statutory guidance from MHCLG on Fit for the Future reforms, updated SCAPE discount rate factors from the Government Actuary's Department, and guidance on the use of AI in pensions. Updates were also provided on the Pensions Dashboard Programme, Scheme Advisory Board activities, and recent publications from His Majesty's Treasury, HMRC, DWP, The Pensions Ombudsman, and The Pensions Regulator.

Draft Annual Report 2025/26

The Committee noted the draft Annual Report for 2025/26 and agreed to delegate the approval of the final version to the Chair, subject to an unqualified audit. The report highlights the Fund's continued commitment to responsible investment, including its Net Zero target of 2050 or sooner, and details the investment performance, governance, financial performance, and administration of the Fund. The report also notes the ongoing transition to a Single Purpose Pension Authority.

The meeting concluded with the exclusion of the public for Part 2 items, which included discussions on the implementation of a single-purpose pension authority and other sensitive financial and investment matters.