A report was submitted to update members on responsible investment activity undertaken over the last quarter of the 2018/19 financial year.

Members were reminded that the Authority’s approach to responsible investment was delivered through four streams of activity, largely in collaboration with the 11 other funds in the Border to Coast pool.  These were:

·       Voting;

·       Engagement through partnerships;

·       Shareholder litigation; and

·       Active Investing.

With regard to voting and the figures at 5.2 in the report, members were informed that these figures had greatly increased since the Authority had joined Border to Coast as there was now the ability to vote in every market.

Members were reminded that at the last meeting of the Investment Board, the Fund Director had been asked to write to the Government with regard to arms sales to Saudi Arabia in the context of the war in Yemen and whether the Government were taking into account the various issues that were raised in terms of licensing.  A reply had been received from the Minister and this was available in the Reading Room.

It was reported that as a result of the mining disaster in Brazil due to the collapse of a "tailings dam" Border to Coast had worked as part of a global coalition of investors to call for a new independent mine safety system

G Graham reported that Border to Coast had set up a Climate Change Working Party made up of officers from a number of the partner funds.  The aim of the group was to develop specific proposals for how the Partnership would address climate change within both its investment offerings and in terms of reporting and accountability.

Members had a lengthy discussion around climate change, fossil fuel investment, the benefits of engagement, fiduciary duty, divestment and the tobacco industry.

Cllr Sangar, although pleased with the report and happy with progress made to date on Responsible Investment, commented that tobacco investment was a problem area especially as councils were responsible for Public Health.

The Fund Director commented that no-one had produced any research that could prove that a Fund could divest from tobacco without a financial impact.

T Gardener reminded members that there was always a cost associated with exclusion which could lead to a need for increased contributions. 

The Fund Director remarked that how much the Fund could do would be limited due to Funds having a responsibility to act in the best financial interest of Scheme members.

Cllr Teal requested that the Authority initiate research on the effects of divesting form tobacco.

The Fund Director agreed noting that before making any such decisions members must be in possession of all the relevant evidence.

The research would have to be done by an external source as the Authority did not have the internal capacity.

RESOLVED:  That the Authority:

i)       Note the responsible investment activity undertaken during the last quarter of 2018/19.

ii)      Endorse Border to Coast’s decision to participate in the Investor Coalition in relation to Tailings Dams.

iii)     Endorse the proposed addition of climate risk to the corporate risk register.

iv)     Commission research into the effect of divesting from tobacco investments.