The Director presented the regular quarterly report on Responsible Investment Activity for Members to note and comment upon drawing particular attention to the Robeco Active Ownership Report excerpt in the report.

Members referred to the graphs in the report representing the financed emissions target of net zero by 2030 and the 2025 interim target and asked if there was a risk the targets would not be met.

The Director explained that despite the progress made and a positive trajectory it was still a significant risk the targets may not be met. The Director explained the importance of having the goal for 2030 and that the next Investment Strategy review would need to look carefully at how different parts of the portfolio are implemented when considering both this goal and the requirement to achieve return in order to pay pensions.

The Chair noted the policy of staying with potentially controversial investments in order to effect change from within rather than removing assets and asked how the effectiveness of this was measured.

Jane Firth, Head of Responsible Investment at Border to Coast Pensions Partnership, explained that it is difficult toi draw a direct correlation between the carbon reductions of individual companies and the pooling company votes, but stressed the importance of the pooling company’s influence, particularly in smaller companies where they hold a larger stake. It was stated that divesting is the final stage of escalation and that engagement is more powerful and gives a voice to investors.

Councillors cited large companies being able to sue their own shareholders and asked whether this could mean engaging with such companies could pose a risk.

The Director acknowledged the risk but made the point that the example given (Exxon suing two shareholder groups) occurred in the USA which has a market conducive to facilitating lawsuits against environmental policies and that the environment was different elsewhere. The Head of Responsible Investment at Border to Coast Pensions Partnership added that there had only been one example of this so far and it was not known whether any other company would follow suit. It was explained that were many ways to demonstrate dissatisfaction in how the company is run as an investor that were more effective than divesting.

Councillors noted that Shell, a stock featured in the report, had the net zero GHG emissions ambition for 2050 and questioned the credibility of this target.

The Director responded that, as Shell had reduced or retired some of their interim targets, Border to Coast Pensions Partnership had voted against the company on certain shareholder resolutions. The Head of Responsible Investment at Border to Coast Pensions Partnership added that the journey to net zero was a long-term goal and that it was more effective for responsible investors to engage with companies to effect change and register dissatisfaction with any decisions that lead the company away from net zero targets. It was added that responsible investors need to invest with the oil and gas industry rather than divesting and leaving the companies to back track on environmental commitments with no complaint.

RESOLVED: Members noted the content of the report.