Hampshire County Council Hampshire Pension Fund Responsible Investment Sub-Committee Meeting

All Members were noted to be present. The Chairman welcomed Mr Simon Walker and Ms Carolan Dobson, in attendance as observers.

Members were mindful that where they believed they had a Disclosable Pecuniary Interest in any matter considered at the meeting they must declare that interest at the time of the relevant debate and, having regard to the circumstances described in Part 3, Paragraph 1.5 of the County Council's Members' Code of Conduct, leave the meeting while the matter was discussed, save for exercising any right to speak in accordance with Paragraph 1.6 of the Code. Furthermore Members were mindful that where they believed they had a Personal Interest in a matter being considered at the meeting they considered whether such interest should be declared, and having regard to Part 5, Paragraph 5 of the Code, considered whether it was appropriate to leave the meeting whilst the matter was discussed, save for exercising any right to speak in accordance with the Code.

No declarations were made.

An error in the spelling of the word attended was noted within paragraph 65 of the minutes of the public minutes of the Pension Fund Responsible Investment Sub-Committee, held on 6 September 2024. Otherwise the minutes were agreed as a true record and signed by the Chairman.

No deputations were received the Sub-Committee on this occasion.

There were no announcements on this occasion.

The Sub-committee received a report from the Deputy Chief Executive and Director of Corporate Operations providing an update on communication to and from scheme members since its last meeting.

Members heard that a small amount of communication relating to responsible investment had been received in the last six months, the majority of which had related to the Gaza war, along with other matters including climate change and labour relations.

RESOLVED:

That the sub-committee note the communication received from scheme members on Responsible Investment (RI) and that the Pension Fund will publish its sixth annual RI update for scheme members.

The Sub-Committee received a report from the Deputy Chief Executive and Director of Corporate Operations providing information regarding the Pension Fund’s investment managers’ stewardship of the Pension Fund’s assets.

Through discussion and in response to Members questions it was heard that:

·         The number of conflicts in the voting of fund managers during the second half of the year had reduced.

·         The Pension Fund had no exposure to investments in weapons which were deemed to be controversial in nature, as defined within the report. The review had, however, highlighted a difference in approach by fund managers in relation to investment in armaments.

·         The fund had very limited exposure to investment in tobacco production, and that this had reduced significantly since the matter was last raised by the Director of Public Health in 2018.

·         Due to Acadian’s quantitative investment approach, the portfolio did not currently apply an exclusion for either controversial weapons or tobacco producing companies, but the quantitative style could consider the wider environmental, social and governance risks of these sectors, and it was confirmed that the Pension Fund currently had no exposure to controversial weapons. Acadian had offered to apply an exclusion for the Pension Fund in these areas, which they were confident would not impact on either risk or return. It was confirmed that this decision did not result in the Pension Fund taking a policy position on tobacco investments, and was being made only to improve stewardship to Acadian’s quantitative portfolio.

·         ACCESS was a signatory to the UK Stewardship Code, along with Hampshire Pension Fund and a number of other funds in the pool.

·         In response to concerns of a potential increase in armaments demand across Europe, it was heard that this would continue to be an area of scrutiny with the Pension Fund’s investment managers.

RESOLVED:

·         That the Pension Fund Responsible Investment Sub-Committee note the Fund’s annual compliance report with the UK Stewardship Code. This report will be used as Hampshire’s submission to reapply to the Financial Reporting Council (FRC) for membership of the Code.

·         That the Pension Fund Responsible Investment Sub-Committee note how the Pension Fund’s investment managers have voted in the Fund’s portfolios and engaged with the management of these companies as highlighted in this report and reported in the attached Fund’s Stewardship Code update report.

·         That the RI sub-committee recommend to the Panel and Board to instruct Acadian to add an exclusion for the categories of controversial weapons shown in Table 1. 

·         That the RI sub-committee recommend to the Panel and Board to instruct Acadian to add an exclusion for tobacco producing companies.  

The Sub-committee received a report from the Deputy Chief Executive and Director of Corporate Operations presenting the Pension Fund’s fifth annual Taskforce for Climate Related Financial Disclosure (TCFD) report.

It was heard that whilst TCFD was not a required approach, it had been adopted by the Hampshire Pension Fund as best practice in the industry. Whilst recognising that this was still an evolving area, reporting from investment managers had highlighted some inconsistencies in carbon emission impact, and therefore officers were identifying a suitable benchmark figure for consistent assessment moving forward.  Dodge and Cox had suggested a possible approach to exclude a level of investment in fossil fuels and this was recognised as a movement in the right direction, if it could be agreed by the other ACCESS investors. 

In response to members questions it was heard that Hampshire is the only fund in the ACCESS pool who had taken the approach to exclude investment in fossil fuels, and thus far efforts to encourage others in the pool to follow a similar approach had little success.

RESOLVED:

That the Pension Fund’s annual TCFD report and the report from Reddington is noted.