The agenda for this meeting of Hackney Council's Pensions Board includes a number of items relating to the Council's policies on responsible investment, as well as a review of a recent survey of scheme members' views on these issues. The Board will also consider a proposal to increase the frequency of its meetings.

Responsible Investment Policy

The Board will be asked to comment on a new draft Responsible Investment Policy 2025 that defines the commitment of the Fund to responsible investment and details the approach that the Fund aims to follow in integrating Environment, Social and Governance (ESG) issues into investment.

The draft policy notes that the Council has a fiduciary duty[^2] to act in the best, long-term, interests of the Fund’s scheme members and wider stakeholders including employers and local taxpayers. It goes on to set out the Council's beliefs and priorities when it comes to responsible investment, which include:

• Environmental, social and corporate governance issues can have a material impact on the long-term performance of investments • The UN Sustainable Development Goals highlight investment risks and potential opportunities as well as areas in which asset owners can have a positive impact • Responsible investing is relevant to the performance of the entire Fund across asset classes • Engagement with managers, and through them with investee companies, can have a material impact on progress towards the chosen Goals as well as on investment performance • The Fund believes investment, stewardship and engagement are the primary ways to deliver change rather than exclusion or divestment

The draft policy sets out five UN Sustainable Development Goals (SDGs) to which the Council is committed, these include SDG 13 (Climate Action), SDG 7 (Affordable and Clean Energy), SDG 5 (Gender Equality), SDG 10 (Reduced Inequalities) and SDG 14 (Life Below Water). Notably, the draft policy proposes to add two new SDGs - 15 (Life on Land) and 16 (Peace, Justice and Strong Institutions) - in response to feedback from a recent survey of scheme members.

The draft policy identifies a number of responsible investment themes that are important to the Council, which include climate change, the natural environment, human rights, peace and justice and corporate governance. It notes that the Fund acknowledges the climate crisis and recognises the trajectory towards net zero in 2050 that the Paris Agreement encourages governments and the world economy towards.

The draft policy also notes that the Council has an ambition of achieving alignment with a 1.5-degree warming scenario and net zero in its investment portfolio by 2040. In line with this, it notes that the Fund’s primary regulator being the Ministry for Housing, Communities and Local Government (MHCLG), but remains cognisant of the broader regulatory landscape as it applies to responsible investment in respect of this policy.

The draft policy sets out how the Council plans to ensure its investments are consistent with these themes, including through engagement with investment managers, stewardship activities and the use of its voting rights.

Investment Engagement Policy

The Board will be asked to comment on a draft Investment Engagement Policy that sets out the Council’s approach to investment stewardship and how the Fund aims to practice effective stewardship as part of its fiduciary duty to act in the best financial interest of its members.

The policy begins with an introduction that states engagement lies at the core of the Fund’s beliefs and is a key element of Hackney’s responsible investment behaviours. It explains that the council defines engagement as purposeful dialogue by investors with investee companies (or other assets) with a specific objective in mind, typically seeking improvements to companies’ business practices, often in relation to the management of ESG factors.

The policy makes reference to the results of the recent survey of scheme members, noting that over 60% felt the Fund should engage, with a further 25% believing the Fund should engage depending on the situation.

The draft policy goes on to outline the Council's approach to engagement, which includes:

• Identifying key areas of focus for engagement, such as climate change, human rights, biodiversity and animal welfare, and corporate governance
• Considering factors such as materiality, scope for influence, and sensitivity and level of interest when deciding whether to engage with a company
• Recognising global standards such as the UK's Stewardship Code 2020
• Managing conflicts of interest
• Establishing an engagement framework that includes investment, engagement and exclusion as possible levers for change
• Identifying engagement mechanisms such as engagement through fund managers, specialist services, LAPFF, collaborative engagement, direct engagement and public policy and best practice engagement
• Recognising the role of the London Collective Investment Vehicle (LCIV)¹ in pooling investments and the implications for engagement
• Escalating engagement activities when necessary, including through voting against company management, proposing shareholder resolutions, attendance at AGMs, public statements, and litigation
• Considering exclusions and divestments as a last resort

The draft policy concludes by stating that the Council will regularly monitor and assess the effectiveness of its engagement efforts and those of its service providers, adjusting strategies as needed.

Scheme Member Responsible Investment Survey Results

The Board will be asked to consider the results of a survey of scheme members on responsible investment issues. The survey was issued on 6 January 2025 and closed on 2 February 2025. A total of 1,025 responses were received, out of the 20,623 scheme members who were contacted. The survey sought to understand the views of scheme members on a range of responsible investment issues and what is important to them so that these can be taken into account when formulating policies and as the Fund seeks to carry out its stewardship of assets it holds to pay pensions.

The survey results suggest that scheme members are broadly supportive of the Council's approach to responsible investment. However, there were also some calls for the Council to take a more active role in engaging with companies on issues such as climate change and human rights.

The Board will be asked to consider how to respond to the survey results. The report concludes that the Fund appreciates the input from scheme members taking time to complete the survey to support the work of the Pension Fund in connection with its responsible investment activities and recommends that taking into account the feedback received the Fund has considered how to capture and address the responses within the workplan of the Fund.

Stewardship Code Submission Outcome and 2025 Improvement Plan

The Board will be asked to note that the Council's submission to the UK Stewardship Code was successful. The Stewardship Code is a set of principles that investors can sign up to which sets out how they should manage their investments responsibly.

The report notes that the Financial Reporting Council (FRC) confirmed on 6th February 2025, that Hackney Pension Fund has successfully met the FRC’s standard of reporting for the UK Stewardship Code and will be listed as a signatory of the Code with the announcement made public on 11 February 2025.

The report goes on to set out the Council's plans to improve its stewardship activities in 2025 and to maintain its signatory status to the Code. These plans include:

• Reviewing and strengthening the Council's commentary on its purpose and strategy
• Recruiting a dedicated fund resource to support stewardship activities
• Considering objective setting for officers at annual reviews which includes objectives for the integration of stewardship and engagement
• Reviewing and updating the Fund’s risk register to identify ESG risks
• Enhancing reporting by capturing how the Fund has identified market-wide and systemic risks and how effective collaborative engagements have been undertaken
• Including the work of the Responsible Investment Working Group in the Fund's reporting on stewardship
• Providing clearer reporting of assets according to geographies and asset classes
• Working with external managers to ensure the Fund’s policies are clear and to seek additional information on where the Fund’s policies have not been met
• Capturing examples of how the Fund is holding managers to account
• Reviewing and updating the Fund’s voting policy
• Reviewing fixed income mandates to assess whether enhancements can be made in respect of the Fund’s RI policies within the terms and conditions

Pensions Board 2025/26 Work Programme and Frequency of Meetings

The Board will be asked to adopt a work programme for 2025/26 and to agree to increase the frequency of its meetings to four times a year.

The proposed work programme includes a number of standard items that will appear on the agenda of each meeting, such as a review of recent Pensions Committee papers, updates on pensions administration, and updates on ongoing projects such as the McCloud exercise and the introduction of pensions dashboards. The work programme also includes a number of items that will appear on an annual basis or as one-off projects.

The report notes that the 2015 Guidance on the creation and operation of Local Pension Boards in England and Wales suggests that the frequency of Pensions Committee meetings may serve as a useful benchmark for how often the Board should meet. It goes on to recommend that the Board consider and agree to increasing the frequency of its meetings from a minimum of 3 meetings a year to 4 to better align with the Pensions Committee’s meeting frequency of a minimum of 6 meetings a year.