The Chair welcomed everyone to the meeting.

Applogies were noted as above.

None

To determine whether there are any additional items of business which by reason of special circumstances the Chair is of the opinion should be considered at the meeting; the reason(s) for such urgency to be stated.

None

To identify where resolutions may be moved to exclude the public and press.  (For items marked * the public and press may be excluded from the meeting.)

Resolved: Items 21 and 22 shall be considered in the absence of Public and Press by virtue of Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972

None

None

RESOLVED: That the minutes of the meeting held on 8 June 2023 be agreed as a true record.

Questions were received from Mr Ashton, Mrs Smith and Ms Cattell.

The Director replied on behalf of the Authority.

Electronic versions of the questions and responses will be e-mailed to the relevant members of the public. The written replies are attached as appendices at the end of this pack.

The Assistant Director – Resources and Head of Finance presented the Q1 Corporate Performance Report for members to consider and approve.

Key areas for consideration were highlighted to members who raised a number of questions.

Members queried the new risk added to the strategic risk register in relation to the pensions administration backlog and asked what the root cause of the issue was.

Assurance was also sought that staff sickness was being monitored with rigour and appropriate measures put in place to manage.

In response the Director explained that this type of backlog is not unusual, with other Administering Authorities having similar issues, however the issue still needs addressing. A detailed analysis of the pensions administration workload has taken place and identified the need for additional staff and also highlighted the imbalance of the workforce with more experienced pensions practitioners required to assess the more complex cases. It was confirmed that these issues will be addressed as part of the report to be presented to the Staffing Committee in October.

The Assistant Director - Resources confirmed that staff sickness levels are still relatively low compared to pre covid levels. Assurance was given that sickness is monitored rigorously in line with the Managing Attendance Policy and that the HR Business Partner works closely with all managers to support this process.

It was explained that staff working from home seems to have reduced the sickness levels along with working creatively with hybrid working and the flexi scheme.

Members also questioned if the Authority is using more agency staff than necessary.

The Director confirmed that this is not the case, the only current agency member of staff is the interim Assistant Director - Pensions, due to the specialist nature of the role and subsequent recruitment process.

RESOLVED: Members noted, commented on and accepted the report.

The Independent Advisers presented the Market Commentary Report for members to consider and note.

Members sought the views of the advisers around the stability of the funding level and how this could be affected by the rise or fall in the Stirling along with the balance of liabilities.

The advisors responded that as a global investor a weaker Stirling can be more beneficial as portfolios not denominated in Stirling will rise. Returns will be eroded with a stronger Stirling. Whilst it is not felt that the funding levels will drop as dramatically as they have just risen, they could and need to be managed by controlling the asset number, which currently has a significant buffer. The current exposure is being monitored with a view to modifying our position, if necessary, for example if the dollar weakened. The liability number is also being carefully monitored, recognising that it is the present value of those liabilities and not the liabilities themselves.

Members also sought clarification on page 62 of the report in relation to ESG, around the claim that some environmental resolutions were overly prescriptive and not sufficiently flexible, and what course of correction can be taken.

The advisors confirmed that there is a lot of debate in this area. A key thought is for businesses to aim for a sustainable business plan that is compatible with minimising environmental damage whilst still achieving their goal – trying to couch environmental objectives in a commercial reality.

Members discussed the change in China’s position in the global market and how this would develop over the next 10 years, along with the concern over being driven by the US markets.

The advisers commented that a lot of China has already moved into a consumer class with an ageing population, and it could be argued that a lot of the growth is now coming out of the US.

Further discussion took place around pharmaceutical investment “bubbles” which reflected on the importance of diverse portfolios.

RESOLVED: Members thanked the advisers and noted the report  

The Assistant Director – Investments delivered the Q1 Investment Performance Report highlighting key areas of performance over the last quarter.

RESOLVED: Members noted and accepted the report.

The Director presented the regular quarterly report on Responsible Investment Activity for Members to note and comment upon.

Members queried the Shell vote and asked at what stage does the voting have a real impact.

The Director advised that companies do pay attention to these votes, a 20% vote against is not insignificant, and could impact at the margin. Continued engagement does chip away and there is the opportunity for petrochemical companies to evolve to become an energy company and engage in other renewable areas

RESOLVED: Members noted and accepted the report.

The Director presented the Discretions Policy Statement, explaining that it is a statement of existing policy and was being presented to ensure that policies had been reviewed and were now presented in a consolidated form.

RESOLVED: Members noted and accepted the current version of the Policy

The Director presented the Regulatory and Policy update, highlighting key areas of focus and work taking place in relation to these.

RESOLVED: Members noted the contents of the report and the work underway in relation to various policy and regulatory updates.

The Director presented the Investment Consultation Report to allow members to review the Authority’s response to the Government’s consultation “Local Government Pension Scheme (England and Wales): Next steps on investments”.

The Chair of the Border to Coast Board supported the approach taken in the report and commented that B2C and partner funds have already implemented pooling in the way that the government would wish it to have been done. He emphasised that the pooling company can not act on anything that the partner funds or shareholders do not agree with.

The Independent Advisers commented that the consultation response is exceptionally detailed and well thought out. They discussed the need to be mindful of the reporting requirements to make sure resourcing these will not offset any potential efficiencies. It was also highlighted that staffing investment pools can be a challenge, not being too overly ambitious at this stage in terms of consolidation could be a positive step. Common benchmarks were discussed, with a need to push back on this area to protect local control.

The size of pools, in terms of participants, is an important factor. B2C reiterated that no other funds would be joining Border to Coast without the partner funds approval.

Members discussed the response and agreed that the current pooling arrangement did seem to be in line with the government’s requirements. It was commented on that other local government pension funds have a different approach and there is a lack of consistency across funds.

Members asked if there was a deadline for further comments on the consultation.

The Director confirmed that the Government require responses by 2 October 2023, it is expected that the Chancellor will make an announcement on the consultation outcomes in November. The LGPS will create the new regulations and guidance which will likely not be available until summer 2024.

Members questioned how other partner funds are engaging with responsible investment. They were advised that B2C have a joint responsible investment policy that is currently under review. The policy generally aligns with the partner funds directions.

Members concluded with the statement that it is key that the local Authority’s voice is not lost as part of this process and is still strengthened.

The Director agreed to reflect this in the response.

RESOLVED: Members:

a. Approved the consultation response set out in Appendix A and delegate authority to the Director in consultation with the Chair to finalise the response in the light of any further feedback from advisers and Border to Coast partners.

b. Noted the work identified in the body of this report which will be undertaken in preparation for the introduction of the changes set out in the consultation.

The Head of Governance presented the report to inform members of decisions taken between meetings of the Authority due to the time sensitive nature of the matters involved.

RESOLVED: Members noted the decisions taken between meetings of the Authority using the appropriate urgency procedures.

The Head of Governance presented the Annual Review of the Local Pension Board Constitution for Members’ consideration and approval.

RESOLVED: Members:

a. Approved the adoption of the revised Constitution of the Local Pension Board attached at Appendix A.

b. Agreed that subject to the conclusion of consultation with the Constituent Authorities to authorise the Head of Governance to amend the Local Pension Board Constitution to increase the term of office of Councillor members to 3 years.

The Head of Governance presented the Policy Statement on Representation for members to approve.

RESOLVED: Members approved the Policy Statement on Representation

The Director presented the Border to Coast Funding Model to secure members approval for changes to the legal agreements concerned with the operation of Border to Coast to accommodate a change in the company’s funding model.

Members raised concerns around SYPA contributions being higher than other partner funds due to our early transfer of assets into the pool.

The Director confirmed that SYPA will pay a little more but clarified that we are also the largest investor in Border to Coast and their products and therefore this is a logical position.

RESOLVED: Members:

a. Supported the proposed changes to the funding model for the Border to Coast operating company.

b. Authorised the Head of Governance in consultation with the Director and subject to the receipt of appropriate legal advice commissioned by the 11 Partner Funds to execute the relevant legal documents on behalf of the Authority.

The Director presented the Border to Coast Annual Review 2022/23.

RESOLVED: Members:

a. Noted the conclusions of the Annual Review of the Border to Coast Pensions Partnership set out in Appendix A.

b. Endorsed the recommendations for action set out in Appendix A.

The Director presented the Independent Advisers Appraisal report 2022/23.

RESOLVED: Members considered the performance of the arrangements in place for independent investment advice and identified any areas for potential improvement.