The Independent Investment Advisor presented the Market Commentary Report for Members to consider and note. The Independent Advisor began by thanking the Board for her time on the Authority which she had found a fulfilling experience.

Members questioned whether there had been any reaction in the markets now that global sea temperatures were off the charts.

The Independent Advisor responded that there had been no reaction in the market day to day, but this does affect the direction of travel in terms of engagement, the transition and the sense of urgency.

Members probed around office properties and how the fund doesn’t have much exposure to this asking what the wider market risks would be and if the there are any indirect risks and if so, how would our portfolio be protected against this.

The Independent Advisor responded that the Authority’s portfolio on the real estate side is biased towards industrial buildings and the only danger in this sector is that perhaps it has gotten a little too popular but has very strong underlying components so we would not be directly affected here. The fund is not directly exposed but could be exposed to anything that may filter through, this is why the portfolio is diversified and has multi asset exposure.

Members raised concerns over companies dropping out of the London stock exchange and the earthquake this could cause in various financial institutions to change what they are doing and how this would affect the Authority with LGPS funding. In response the Independent Adviser indicated that this was a part of a global phenomenon and that the direct impact on the Fund was unlikely to be significant given both the relatively small proportion of the portfolio in UK equities and the long term move that had taken place into private markets.

Members further asked for the Independent Advisors thoughts on hydrogen and synthetic fuels and what investments were out there for this and what could be done. The Independent Advisor responded that the new climate opportunities fund at Border to Coast is poised to capture not only advances from climate technology but also existing technology around battery storage, renewable infrastructure funds and nature-based solutions which provides a whole package of opportunity. The Authority’s renewable energy exposure in the fund is already very high and with climate opportunities it will enable the Authority to bolster this to capture the new technology of this sort.

The Chair commented upon the Authority’s net zero target and questioned whether given the global political instability this was causing net zero to be moved down the investment agenda. The Independent Advisor responded that this only applies in the US as sustainability is good business. The political noise in the US and the energy security factors in Russia and Ukraine set things back by trying to keep pricing under control. 

RESOLVED: Members thanked the adviser and noted the report.