The Authority received a presentation from J Firth, Principal Investment Manager, on Responsible Investment (RI).

The Authority noted the following key points:-

•         RI sought to generate both financial and sustainable value, and considered environmental, social, governance and ethical issues into financial analysis and decision making.  Active funds also involved active ownership.

•         Ethical investment commenced when religious investors began investing in the stock market in early C20th.

•         There were a number of legal and regulatory changes during the 1990’s to improve corporate governance.

•         The convergence of SRI, corporate governance and CSR saw an increasing use of shareholder rights; a shareholder resolution at Shell AGM and reporting by companies on non-financial issues.

•         There had been a move from avoidance to engagement and collaboration including shareholder activism/engagement, coalition of funds and investors.

•         The Authority’s RI Policy included:-

•       A Statement of Investment Principles.

•       Disclosure of the Top 10 UK and overseas holdings in the Annual Report and a list of all holdings at year end on the website.

•       Proxy voting with published voting activity.

•       Company engagement/collaboration.

Councillor Sangar wondered how the debate with the Directors of Public Health would develop over the next 10 years, in relation to investing in tobacco and potentially alcohol etc.

J Hattersley commented that last year the Authority had given consideration to the issue, when the responsible investment policy had been thoroughly reviewed.  The whole issue of public health was full of controversies; it was down to the individual to decide whether to smoke tobacco or drink alcohol though there were public costs associated with some outcomes.  It was important for Members to be aware of all sides of the argument.  It would be prudent for the Authority to revisit the subject again in either 2015 or 2016, to keep up to date with best practice.

Members noted that a lot of what was now perceived to be best practice had been achieved through pressure through shareholder engagement over the last 10 years.

Councillor Wood questioned whether the Authority was doing all it could to insulate itself from any potential financial risks in terms of litigation or changes in the law, and whether there were any risks in the future.

J Hattersley commented that J Firth ran part of the UK Equity Portfolio; she was aware of general climate change and fossil fuel issues, and all of her colleagues took such factors into consideration when evaluating investment opportunities.

Councillor Stowe welcomed the corporate pay campaign.

J Firth commented that this year LAPFF would be taking tax governance on board.  The Authority was a member of IIGCC, which allowed governments across the world to be lobbied.  One of the problems with legislation on climate change was that it was very difficult for governments, as they did not want to be the first one to change.  In relation to individual oil companies, the Authority had offered to co-file shareholding resolutions at forthcoming BP and Shell annual meetings; LAPFF had been in talks with BP and Shell.  If the Authority divested from such areas, it would no longer have a voice and this would present a problem of where to invest money.

Councillor Wootton thanked J Firth for an interesting and informative presentation.

RESOLVED – That the Authority noted the presentation.