The Joint Pensions Committee met to discuss the external audit results, the draft funding strategy statement, general matters related to the pension fund, and the quarterly investment performance. The committee also heard deputations regarding ethical disinvestment, and resolved to instruct the Director of Financial Services to prepare a report with recommendations on implementing a disclosure and phased divestment programme, and to revise the Investment Strategy Statement and Responsible Investment/Stewardship Policy.

• Ethical Divestment and Investment in Companies Linked to Violations of International Law

  The committee heard two deputations regarding the ethical disinvestment of the Wandsworth and Richmond Pension Fund from companies linked to violations of international law, particularly concerning Israel's actions in Gaza. Harry Yip, a council worker and workplace steward representing the Wandsworth branch of Unison, raised concerns about the fund's investments in companies allegedly facilitating genocide against Palestinians, referencing the International Court of Justice (ICJ) decision and UN Commission findings. He called for the council to divest from companies with links to illegal settlements and to develop its policy on ethical investments in collaboration with workers' unions.

  Kathy Kettle, a GMB union representative and early health practitioner in Wandsworth Children's Services, echoed these concerns, emphasising that pension funds represent workers' deferred wages and should not be invested in companies complicit in human rights abuses. She criticised the council's lack of action on the matter and called for transparency, honesty, and a clear timeline for divestment, with full union involvement.

  Councillor Aydin Dikerdem, Cabinet Member for Housing, expressed his agreement with the deputations, highlighting the importance of soft power in advocating for funds that meet international law and human rights standards. He stressed the need for worker buy-in and suggested working with unions to achieve progressive decisions.

  Richard Moore, speaking as a member of the deputation, presented survey data indicating strong support among Unison members for regular consultation on pension schemes and for divesting from unethical companies, including those involved in genocide and apartheid.

  Paul Gelotti, Director of Financial Services, responded by stating that the council listens to the views of scheme members and that the government's 'Fit for the Future' initiative has changed the dynamics of investment. He noted that from 1 April, the London Collective Investment Vehicle (LCIV) will be directly responsible for 100% of the council's assets, necessitating a common approach across all funds within the LCIV. He also emphasised the need to consult with all scheme stakeholders, including workers, deferred members, and pensioners, as well as scheme employers, to balance ethical considerations with financial impacts on frontline services.

  Jenny Buck, chief investment officer of the LCIV, outlined the LCIV's responsible investment matrix, which includes three pillars with varying levels of exclusions, from controversial weapons to companies breaching human rights and international law in conflict zones. She noted that the LCIV aims to finalise the matrix by the end of the year and will then work to amend its products to align with the chosen pillars.

  Councillor Nikki Crookdake raised concerns about ensuring that employee wishes are not outvoted by primary employers and requested firm timelines for action. Councillor Kuldev Sehra sought clarification on the justification for disinvestment and the classification of significant financial detriment.

  Following the deputations and discussion, the committee resolved to instruct the Director of Financial Services to prepare a report with recommendations on implementing a disclosure and phased divestment programme, and to revise the Investment Strategy Statement and Responsible Investment/Stewardship Policy.

• External Audit Results Report 2024-25

  Ben Lazarus from Ernst & Young (EY) presented the final external audit results report for the 2024-25 financial year. He anticipated issuing an unqualified audit opinion on the pension fund accounts, indicating a clean audit opinion with no significant control deficiencies. He noted one minor audit difference above the reporting threshold related to a timing difference in the valuation of LCIV Renewable Infrastructure assets. Lazarus also commended the finance team for their stellar service during the audit process.

  Councillor Dikerdem sought clarification on the LCIV of Renewable Infrastructure Asset change, to which Lazarus explained it was a timing difference due to a misaligned third-party report, but the error was small and did not warrant reopening the accounts process.

  Councillor Crookdake sought confirmation that all outstanding audits were caught up and reassurance regarding the valuation of property investments. Lazarus confirmed that the pension fund audit was up to date and that the audit procedures ensured the property assets were materially correct in the accounts.

  The committee approved the recommendation to note the draft ISA 260[^2] audit results report for 2024-25.

  [^2]: ISA 260 is an International Standard on Auditing dealing with the auditor's responsibility to communicate with those charged with governance in an audit of financial statements.

• Draft Funding Strategy Statement

  Paul Gelotti presented the draft funding strategy statement, highlighting that the discount rate would be 5.1%. He explained that the statement outlines the assumptions used for carrying out the valuation and the approach to surpluses within the funds. He noted that the statement looks fundamentally different due to new guidance requiring information to be provided in a more prescribed manner.

  Councillor Dikerdem inquired about mitigating long-term climate risk, to which Gelotti responded that a climate scenario analysis had been conducted, leading to the adoption of a net-zero 2050 approach. He added that the fund is on track to meet its target of a 60% reduction by 2030.

  Councillor Crookdake asked about contribution reviews and the consideration of a volatility reserve. Gelotti explained that the discount rate had increased from 4.4% to 5.1%, necessitating prudence. He stated that contribution rates would be lower and that retaining the volatility reserve was important for stable financial planning.

  The committee approved the revised funding strategy statement and delegated authority to the Director of Financial Services, in consultation with the Chair and Deputy Chair, to make minor adjustments.

• General Matters

  Gelotti provided an update on 'Fit for the Future', explaining that from 1 April, 100% of the council's assets will be directly managed by the LCIV. He noted that this could constrain the council's approach and that two new roles would be created: an independent advisor and a statutory responsible officer. He suggested retaining Mercer for services the LCIV cannot provide and highlighted that he would be the statutory responsible officer.

  The committee then moved to the deputations, after which Jenny Buck, chief investment officer of the LCIV, outlined the LCIV's responsible investment matrix, which includes three pillars with varying levels of exclusions, from controversial weapons to companies breaching human rights and international law in conflict zones. She noted that the LCIV aims to finalise the matrix by the end of the year and will then work to amend its products to align with the chosen pillars.

  The committee also noted the updates on Buckinghamshire Pension Fund joining the LCIV and various consultations.

• Quarterly Investment Performance Report

  The committee discussed the quarterly investment performance report for 2025/26 Q2. Councillor Marshall raised concerns about the performance of active managers and the potential for revising the allocation of equity to passive management.

  Jenny Buck addressed concerns about the Longview fund's underperformance, attributing it to poor stock selection, particularly in AI companies. She assured the committee that the fund was on her radar for improvement.

  Councillor Sehra inquired about the renewable infrastructure fund's private debt, to which Buck clarified that the fund invests in greenfield projects and that one investment in a BlackRock renewable infrastructure fund had performed poorly due to assets bought at the peak of the market.

  Tony, from Mercer, cautioned against selling underperforming assets and suggested waiting for the LCIV to launch its multi-manager fund. Buck indicated that the multi-manager equity fund would hopefully be available by the end of April or early May.

  The committee approved the recommendations to consider revising the allocation of equity to passive management and to review the overweight positions in the LCIV Global Focus Fund and cash holdings.