The Pensions Committee of Hertfordshire Council met on Wednesday 29 October 2025 to discuss updates on risk management, the pension fund's statement of accounts, and responsible investment. Key decisions included noting the revised risk assessments for data security and IT breaches, and accepting the pension fund's statement of accounts for the 2024/25 financial year. The committee also reviewed the progress of the pension fund's decarbonisation efforts.

Update on Risks E4 and E5

The committee received an update on risks E4 (member data compromised) and E5 (member data compromised through IT security breaches). Following concerns raised at the previous meeting, officers, in collaboration with LPPA's Chief Technology Officer, reviewed and revised the risk tolerance and levels for these risks. Risk E4, concerning data sharing controls, staff training, and data handling protocols, was revised to a risk level of 9 (possible likelihood, moderate impact). Risk E5, relating to IT security breaches, was increased to a risk level of 16 (probable likelihood, major impact), reflecting the view that such breaches are a matter of when, not if. Assurance was provided that LPPA has robust cybersecurity measures, including ISO27001 certification and Cyber Essentials Plus accreditation, and that constant monitoring and regular data backups are in place. The committee noted the report.

Pension Fund Statement of Accounts

An update was provided on the Hertfordshire Pension Fund's Statement of Accounts for the 2024/25 financial year. The draft accounts, published on 30 June 2025, showed a net asset value of £6.403 billion. Since then, updated investment manager valuations have increased this by £8 million to £6.411 billion. The committee heard that Pantheon's valuation increased by £4.6 million and Macquarie's by £3.2 million. The external auditors, KPMG, were expected to complete their field testing by early November, with their findings anticipated to be reported to the Audit Committee on 4 December 2025, and subsequently to the Pensions Committee on 3 December 2025.

Concerns were raised regarding the valuation of Level 3 assets, which include private equity, infrastructure, and property. Officers assured the committee that external auditors employ specialist valuation teams and request external audit reports from investment managers to ensure the robustness of these valuations. It was noted that while these assets are complex to value, they possess intrinsic value and are subject to market valuation. The Pension Fund's Investment Strategy Statement, reviewed every three years, guides asset allocation, balancing risk, return, and diversification. The fund's assets are diversified, with 38.8% invested in Level 3 assets. The committee was also assured that the fund's diversification strategy does not lead to an over-reliance on Artificial Intelligence investments. The committee noted the content of the report and attached appendix.

Pension Fund Responsible Investment Report

The committee received a report analysing the Hertfordshire Pension Fund's decarbonisation progress as of 31 March 2025, prepared by Mercer. Mercer officers stated that the Environmental, Social, and Governance (ESG) framework remains relevant, despite some backtracking on ESG policies in the United States. They confirmed that the Hertfordshire Pension Fund maintains a good balance in its ESG considerations.

Regarding the fund's decarbonisation pathway, Mercer explained that the ACWI (All Country World Index) curve is decreasing towards 2050, with a projected 43% reduction in the first 10 years, followed by a more gradual reduction thereafter. Mercer officers emphasised that ongoing engagement, stewardship, and increased capital investment are crucial for achieving NetZero targets while mitigating transitional risk and ensuring appropriate financial returns.

The report highlighted that the Weighted Average Carbon Intensity (WACI) metric measures individual organisations' carbon efficiency, with a higher WACI score potentially indicating higher costs. It was noted that the metrics presented in the report primarily measure resource use efficiency. The committee noted the content of the report and attached appendix.

The meeting then moved into Part II, where the press and public were excluded to discuss exempt information.