The Chair welcomed everyone to the meeting.

Applogies were noted as above.

The Director announced the Government Pensions Review Call for Evidence which invited input, data and information from interested parties to inform the first phase of the Pensions Investment Review. It was explained that colleagues across the Border to Coast Partnership were working on a core response to allow each partner fund to submit its own response with its own emphasis while maintaining a common core message. The deadline for submissions was 25 September 2024 and the Director explained that the response from South Yorkshire Pensions Authority would be circulated to Section 41 members ahead of submission and then shared with all members when submitted.

The response can be viewed here: News & information (sypensions.org.uk)

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: Item 17 was 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 as presented for the Authority Meeting held on 6th June 2024 are a true and accurate record.

Questions were received from Ruth Hobson, Sue Owen, Mohammed Yaqoob Ashraf, Wendy Cooksey, Caroline Poland and Finn Cross. The Director replied on behalf of the Authority.

Written copies of the questions and responses were given to the questioners.

The written replies are attached as appendices to these minutes.

The Assistant Director – Resources presented the Q1 Corporate Performance Report which gave a summary view of overall performance of the Authority against its objectives, information on progress against the corporate strategy, key performance measures, financial monitoring, and an assessment of the risks to the delivery of the Corporate Strategy.

The Head of Finance and Performance highlighted the key issues regarding the budget at the end of Quarter 1 drawing attention to the overall underspend of £88k and breaking down how this had been achieved. It was explained that this trend of underspending was expected to continue into the next quarter allowing reserves to build for future capital projects subject to any unexpected expenditure.

Members asked for further information on the risk identified on the dependency on the software provider to deliver system upgrades to enable the team to implement the McCloud Remedy.

The Assistant Director – Pensions explained that delays to the provision of the software needed posed a significant reputational risk. It was explained that the software was critical to clearing the backlog of work and, that although all cases would be dealt with, delay put the Authority at risk of not being able to rectify cases in line with statutory time expectations. The Assistant Director – Pensions explained that SYPA was not the only authority dependent on the software and that pressure was being put on the software company, Civica, to avoid further delay in provision.

Members queried the Authority’s Investment Strategy to progress the Authority’s Net Zero Ambition noting that the report stated that achieving the overall goal was unlikely. It was asked whether, given the 156% funding level, now could be the time to look at this particular strategy to achieve the net zero goal including divesting from companies involved with fossil fuel and whether the ‘stable’ status of the strategy on the Strategic Risk Register in the report was appropriate or should be increasing and whether stranded assets should be on the register.

The Director responded that it was the highest rated risk on the Strategic Risk Register and that the score is based on reports from the actuaries and the broader impacts to the Authority’s assets and liabilities and, as part of corporate planning, there will be in depth risk assessment to reassess scores on the register. The Director explained that risks regarding stranded assets were contained within the broader climate change risk and fed into the investment decision making process by managers in individual funds.

Members questioned the status of the ‘Maintain the Authority’s cyber defences’ project when cyber security remained an ongoing and serious risk.

The Assistant Director – Resources explained that the status the project had was of being ‘on track for timescale’ rather than being completed. It was explained that this meant the Authority was keeping up to date with testing, accreditation, monitoring and training but that the Authority was aware that cyber security is a significant and ongoing risk and were keeping the protection level as high as  ...  view the full minutes text for item 9.

The Service Manager – Programmes and Performance introduced himself and the purpose and aims of his role then presented the report to secure approval of the Authority’s Performance Management Framework which will support the next iteration of the Corporate Strategy.

Members praised the scope of the report and asked how they would be kept up to date with updates or changes to the framework.

The Service Manager – Programmes and Performance explained that they were using Power BI software to produce dashboards for internal use at first but with the ambition they be accessible to members in the future to allow them to be able to view updates and insights.

RESOLVED: Members approved the Performance Management Framework set out in Appendix A

The Assistant Director – Investment Strategy presented the Q1 Investment Performance Report for members to consider.

Members reflected on the Renewable Energy and Climate Opportunities funds and asked when they were expected to show more positive performance and why Renewable Energy showed a net reduction.

The Assistant Director – Investment Strategy explained that as both were relatively new investments, current performance as set out in the report was expected due to fees requiring payment on the whole committed investment but that as the investment period progressed, the performance was expected to improve within 2 to 5 years. It was explained that the net reduction in the Renewable Energy fund was due to old investments maturing and that new investment was being made but not yet showing on the report.

Members questioned again whether, given the high level of the fund, it was now the time to look at addressing climate risk in portfolios in different ways to achieve the net zero goal.

The Director explained that the Authority was obliged to pool investments so would need the cooperation of Border to Coast Pensions Partnership. It was explained that should the funding level remain high once a valuation of the Fund is complete, then it could be expected to look at taking less risk, however, as the Fund continues to need to provide benefits for current and future members as an open scheme, continued growth is required from investment to meet demand meaning scope for taking less risk was limited.

The Chief Executive Officer of Border to Coast Pensions Partnership added that there was more to mitigating climate risk than the carbon footprint of hard-to-abate industries. It was explained that the increased use of Scope 3 as a metric to measure indirect emissions would change understanding of how society can use less energy rather than focussing on direct emissions. It was expressed that it was a very complex situation and that any changes needed to be made in a safe and informed way.

The Assistant Director – Investment Strategy explained that the expectation was that interest rates would fall and this would lower the funding level so a long term strategy was appropriate. It was stated that investment was moving to avoid having stranded assets and to invest in new technology particularly with the Border to Coast Climate Opportunities fund but this was a long term and complex strategy.

Members recognised the complexities of the issue but asked for clarification on the potential impact of continuing to invest in hard to abate industries and whether there was any modelling on the potential impact of removing investment.

The Chief Executive Officer of Border to Coast Pensions Partnership explained that there had been extensive modelling on the impact of divestment versus engagement and that the results were complex and nuanced. It was explained that some companies were rejected due to Responsible Investment policy but the whole sector could not be excluded completely and that engagement causing change from within could be more effective  ...  view the full minutes text for item 11.

The Director presented the Q1 Responsible Investment Update for members to consider drawing attention to the highlights and recommendations at the start of the report.

Members stated that they had been informed it was not possible for the Authority to be an ethical investor but that it did have a Responsible Investment Policy and it was queried whether this was a legal definition.

The Director explained that it was a judgement and legal opinion on fiduciary duty of the LGPS as advised by the Scheme Advisory Board and circulated the following links to members following the meeting:

Duties of Administering Authorities Under the Local Government Pension Scheme

Summary of legal opinions and judgements on the role of non-financial considerations in investment decision making

Members queried whether the Authority was subject to international law in relation to investments made. The Director explained that SYPA was  subject to UK law under the UK Government.

Referencing Climate Action 100+ and the legal action ongoing in the US as detailed in the report, members asked whether this activity was a risk to UK investors. The Director stated that there was a possibility activity of Climate Action 100+ could be curtailed in the US but was unlikely to be abandoned due to its scale and momentum. SYPA and Border to Coast Pensions Partnership will continue to support Climate Action 100+ as a valuable means of aggregating the impact of investors on companies.

Members asked for clarification on the position of Rio Tinto and their engagement with Robeco over mitigation of their footprint and emissions and asked whether the engagement was effective. The Director and the Chief Executive Officer of Border to Coast Pensions Partnership explained that Rio Tinto had made progress by committing to providing important details on plans to reduce emissions but that the report noted that Robeco required Rio Tinto to disclose further information to allow  them to assess efforts being made. Rio Tinto had subsequently made further pledges with Robeco welcoming this positive engagement outcome. The Chief Executive Officer of Border to Coast Pensions Partnership detailed the value of this adaptable approach to engagement and explained that Robeco had extensive experience with engagement including knowing the point at which to stop if it was not working.

Members asked what percentage of organisations beyond UK equities provided the clear figures needed on emissions to enable responsible investment. The Director and the Chief Executive Officer of Border to Coast Pensions Partnership explained that there was not always adequate information but that the industry was improving over time with the Data Convergence Programme and it was important to focus on the organisations that do provide the information and give required returns. The Director recommended the below article on this issue:

Long read: How carbon counting could hamper LGPS’s climate goals | Local Government Chronicle (LGC)

RESOLVED: Members noted the report.

The Assistant Director – Pensions presented the report to update the Authority on the Pensions Administration Improvement Plan.

Members asked if peer organisations within the LGPS were also facing challenges relating to the ability of the software supplier to deliver the updates required to give effect to the McCloud rectification in line with the relevant regulatory timescales.

The Assistant Director – Pensions explained that while some used different software or had ‘cleaner’ data to start with enabling a faster turnaround, many funds were in the same situation as SYPA regarding the software delay.

It was asked whether there would be any penalty if SYPA were unable to deliver McCloud rectification in line with the relevant regulatory timescales.

The Assistant Director – Pensions stated that should it seem SYPA will be unable to meet the statutory guidance deadline for implementation of 1 August 2025 then The Pensions Regulator would look at actions taken so far and recognise that the delay was not the fault of the Authority. It was explained that there are currently no in house resources to begin the implementation; the Authority is dependent on the software supplier and constant effort is being made to push the supplier for progress.

Members queried when it was expected that SYPA would successfully link to the Pensions Dashboards.

The Assistant Director – Pensions explained that October 2025 was the aim for the dashboards to connect but that this date depended on the progress of the  infrastructure provided by the Government and the performance of the contractors and suppliers selected by SYPA to prepare. It was explained that connection to the dashboards would not make them live for use by scheme members; this would take longer but members of the Authority would be kept updated with the progress of the dashboard project.

Resolved: Members

a)    Noted and commented on the 2024/2025 plans for Administration improvement that are in place.

b)    Agreed to add a new risk related to the McCloud project to the Corporate Risk Register.

The Head of Governance and Corporate Services presented the report to provide Authority members with an update on current governance related activity and regulatory matters.

RESOLVED: Members noted the report.

The Assistant Director – Resources presented the report to obtain Authority approval for amendments to the Contract Standing Orders (Part 4d to the Constitution) as required for compliance with the provisions of the Procurement Act 2023 which come into force on 28 October 2024.

RESOVLED: Members approved the amended Part 4d to the Constitution – Contract Standing Orders to take effect from 28 October 2024.

The Head of Governance and Corporate Resources presented the report on decisions taken as a matter of urgency between meetings of the Authority.

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

Exclusion of the Public and Press RESOLVED – That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Act and the public interest not to disclose information outweighs the public interest in disclosing it.

The report was presented to secure approval for the conclusions and recommendations of the Annual Review of the Border to Coast Pensions Partnership conducted by the Investment Advisory Panel and set out at Appendix A.

Members asked about the recruitment of new independent investment advisers given the vacancies noted in the report. The Director explained that one vacancy had been filled already with Authority approval and that recruitment was underway for one further independent adviser who will work alongside the Authority and the Investment Advisory Panel and closely with the Border to Coast Joint Committee to provide independent advice. It was explained that close collaboration between the Authority and the Border to Coast Pensions Partnership was encouraged and members were advised to attend the Border to Coast Pensions Partnership Annual Conference in 2025 to foster the relationship.

Members requested officers look closely at succession planning and how Authority membership changes caused by elections and rotations affected SYPA’s representation on the Joint Committee.

Members asked for clarification regarding benchmarks as opposed to performance targets and the Director explained that more appropriate benchmarks as detailed in the report would enable peer group comparisons to measure whether the Authority is gaining value for money from the Border to Coast Pensions Partnership.

Members asked for more detail around the Responsible Investment findings and the Director explained that this area represents a positive in the report but that further work and analysis is ongoing and will by shared with members when possible.

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.