This meeting included reports on the Derbyshire Pension Fund's investments, its approach to stewardship, a governance policy update, and the Fund's strategy for managing climate change-related risks. The committee was also scheduled to consider whether to exclude members of the public for two of the day's topics.

Investment Performance and Strategy

The committee was scheduled to receive a report on the Fund's investment performance, activities, and strategy. This report was written by the council's Director of Finance, Neil Smith, and included a report by the council's independent external adviser, Anthony Fletcher, of Apex Group.¹

The report describes the investment performance of global markets in general, and of the Fund's assets in particular. It reviews investment returns in different asset classes over the past three months and year. It describes recent developments in the global economy, including the effect on markets of the recent UK budget and the US presidential election.

The report notes that UK economic growth is likely to slow following the October 2024 budget, which included tax increases for employers and on inheritance. It notes that the recent US election result, which saw former President Donald Trump and the Republican party returned to power, is likely to lead to a boost to US equities from proposed tax cuts and the prospect of easier regulatory policies. The report also discusses the implications for the global economy of Mr Trump’s proposed trade tariffs and immigration policies, which are likely to increase inflationary pressures in the US and could negatively impact growth in Europe and China.

The report contains analysis of the Fund's long-term investment performance and describes its current asset allocation. It reviews each of the investment categories used by the Fund and its advisers, and contains recommendations about how to strategically allocate the Fund's assets in future. In particular, the report notes that:

The IIMT recommends maintaining a relatively cautious stance to Growth Assets, locking in some of the strong performance achieved over the last twelve months, which has further stretched valuations. The MSCI World forward price earnings multiple on 30 September 2024 was 19.0x, 2.7x higher than the long-term average since 1990.

The report recommends that the committee delegates the approval of the publication of the Pension Fund's Annual Report for 2023-24 to the Director of Finance.

Stewardship Report

The committee was scheduled to receive a report on the stewardship activities of two of the Fund's investment managers: Legal & General Investment Management (LGIM)² and LGPS Central Limited (LGPSC).³

The report describes the ways in which LGIM and LGPSC have engaged with companies in the Fund's portfolio. It also details some of the themes which have been the focus of the managers' recent engagements. This includes LGIM's engagement with mining companies and LGPSC's involvement in the Investor Policy Dialogue on Deforestation (IPDD).⁴ It also contains examples of how LGIM and LGPSC have voted on behalf of the Fund at recent AGMs.

The report notes that the Fund's application to remain a signatory to the UK Stewardship Code 2020 was submitted to the Financial Reporting Council in October 2024, following approval by the committee at its previous meeting.

Governance Policy and Compliance Statement

The committee was scheduled to consider an updated version of the Fund's Governance Policy and Compliance Statement. The document describes the governance arrangements for the Fund and the ways in which it seeks to comply with best practice. It also describes the roles and responsibilities of various bodies, including the Pensions and Investments Committee, the Derbyshire Pension Board and LGPS Central Limited.

The report notes that the updated Governance Policy and Compliance Statement will be published on the Fund's website. It also notes that the Local Government Pension Scheme (England & Wales): Fit for the Future consultation was recently published and could lead to changes in the Fund's governance arrangements if adopted.

Climate Risk Management Report

The committee was scheduled to receive a report on the Fund's Climate Risk Management strategy. The report was prepared by LGPS Central Limited and follows the structure recommended by the Task Force on Climate-Related Financial Disclosures (TCFD). It covers governance, strategy, risk management, and metrics and targets.

The report describes the risks and opportunities for the Fund associated with climate change and sets out the Fund's approach to managing them. It presents analysis of the carbon emissions of the companies in the Fund's portfolio. It also sets out the Fund's climate targets, and the extent to which it is meeting them.

The report notes that:

The Fund’s Climate Strategy was updated in line with best practice and it is noted that the target to reduce the weighted average carbon intensity of the Fund’s listed asset portfolio by 60% by the end of 2030, relative to the weighted benchmark in 2020, is higher than the mid-point carbon reduction forecast of 48% by 2030 reflected in the IPCC’s Net Zero Emissions Pathway forecast.

The report recommends that the Fund:

Continue to collaborate with advisors, pooling company and other parties to ensure the Fund remains abreast of climate related issues and reporting regulations.

The report notes that a full version of the Climate Risk Management Report would be presented in the restricted part of the meeting.