A report was submitted which presented the annual review of the Responsible Investment Policy and the Corporate Governance and Voting Guidelines.

Members were reminded that the 2019 review had identified a number of areas for further development during 2020.  A Responsible Investment workshop had been held in March 2020 to seek Partner Funds’ views on the areas to build into the 2020 review:

·         With regard to climate change, the consensus had been for no targets to be set regarding carbon emissions reduction, with the direction of travel being more important.  There was also a reiteration of the importance of engagement rather than divestment (from sectors as opposed to individual, poorly managed companies).  The policy reflected that position, however it was noted that SYPA had recently set a goal of making its portfolios carbon neutral by 2030.

·         The Board had requested that diversity beyond gender be considered.  It was noted that voting on wider diversity matters would continue to be difficult where there was insufficient data, however an update to the wording in the RI policy had been suggested, indicating the intent to engage in this area.

A seminar had also been held the previous week to discuss the revisions in depth.

Scheme member representative D Burnett commented that she had not been invited to last week’s seminar and would like to be involved in any future events. She also welcomed the planned stand-alone Climate Change Policy.

The Committee discussed concerns regarding not setting a target for reducing carbon emissions and the possible consequences of this, the importance of remembering that Responsible Investment was not just about climate change and that there were other factors involved such as how companies treated their employees, the importance of fiduciary duty and also engagement rather than divestment and the difficulty of Border to Coast producing policies that all Partner Funds were happy to sign up to.

R Elwell commented that at the moment there did not appear to be conflict between the Partner Funds and all appreciated that there was a lot of hard work to be done in this area. 

J Firth updated the Committee on the work being done to develop the Climate Change Policy including scenario analysis, metrics and targets.

In answer to a question, J Firth informed the Committee that Border to Coast’s intention to vote against the Chair of the Board of a company in a high emitting sector that had not been making progress in the climate change area had been included in the Voting Guidelines to make Border to Coast’s stance in this area clear.

CIO D Booth made the following observations:

·         Two thirds of public companies did not report carbon related data at this stage and private company reporting levels were even worse. 

·         Care needed to be taken regarding unintended consequences.  If simple methodologies were adopted of excluding high carbon emitting companies this could result in selling companies that were committed to change and targets.

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·         If Border to Coast divested from the oil and gas or other sectors with heavy carbon footprints, then it would not reduce emissions (or climate change) but rather simply shift the emissions onto another investor who may be less engaged and therefore reduce the pressure on such companies to change.  Border to Coast was considering the optimal solutions for managing climate change risk in their internally managed funds and further information would be shared with investors later in the year.

Cllr D McMurdo expressed concern that the polices were not strong enough and was looking to see how the Climate Change Policy would develop.

N Wirz supported the move for diversity beyond gender.

RESOLVED – That the Committee:

i)      Had reviewed and commented on the proposed revisions to the Responsible Investment Policy at Appendix 1 and the Corporate Governance and Voting Guidelines at Appendix 2.

ii)      Supports taking the revised policies to Pensions Committees for comment and for them to consider adoption of the principles in their own Responsible Investment policies in line with industry best practice.

iii)     Notes the proposed areas for future development in Section 6 of the report.