Agenda item

The Committee considered the outcome of Environmental, Social and Governance (ESG) Audit and Climate Risk Review.

In the ensuing debate, the following points were made:

·         The Chairman thanked Mr P A Tuthill and Ms T Fagan for their work on the ESG working group, Philip Hebson and Karen Shackleton for their independent advice and support to the working group, Minerva for their input and to members of this Committee, the Pension Board and the Pensions Investment Sub-Committee for their attendance at seminars during the year. The approach to ESG had now shifted from anecdotal to a more structured approach. It was important to keep this approach under review within the context of this Committee’s fiduciary responsibility as trustees for the performance of the Fund. In addition, the Fund could look for support from LGPS Central in this respect and vice versa 

·         The report highlighted the difficulty in finding suitable data in relation to ESG as well as unpicking the basis and nature of this country’s energy supply which underpinned the financial systems. The TCFD would help the Fund to identify where there were issues

·         It was queried whether the Fund would continue to use the expert knowledge of Karen Shackleton and Pensions for Purpose in support of its ESG work. Rob Wilson, the Finance Manager – Pensions and Treasury Management, Finance advised that although this phase of work had concluded, work would start on the next phase to deliver the actions. It was intended to continue to seek advice and training from Karen Shackleton to support this work. Philip Hebson, the Independent Advisor to the Fund reminded members that Karen Shackleton also acted as his deputy. Her advice would be valuable as the Committee sought to reform the working group going forward. The key aspect was establishing meaningful outcomes that could enhance the returns for the Fund as well as enhancing its status

·         It was important to be able to identify those organisations that were not following the Fund’s ESG priorities and have the option to disinvest if necessary. It was hoped that this approach combined with those organisations who were already taking a positive approach to ESG would change the overall pattern of behaviour of companies

·         There was a risk associated with disinvestment, particularly for certain companies that had a greater role in the switch to zero-carbon. For certain companies, better outcomes could be achieved by working collaboratively with them to achieve ESG goals. The Fund’s investment managers had resorted to disinvestment when the need arose. The proposed approach to ESG was welcomed as long as the Fund recognised its fiduciary responsibilities to its members

·         It might be more appropriate to wait a further year before relaunching the working group rather than directly after the elections. The Chairman responded that the working group would have a different membership and role. It was clear that any review of the process would need to be undertaken before January 2022. The cost of the work associated with ESG was not cheap whether directly undertaken by the Fund or indirectly through LGPS Central. However, it was unavoidable and would need to be carefully monitored.

RESOLVED that:

a)     Worcestershire Pension Fund (the Fund) ESG Audit and Sustainable Development Goals (SDGs) Mapping Exercise project report from Minerva be noted and approved;

b)     The ‘Task Force on Climate related Financial Disclosures’ (TCFD) Report be approved; and

c)     The outcome of the ESG audit, SDG Mapping and Climate Risk review be noted, and the recommendations set out at paragraphs 20 to 24 of the report be approved, namely:

o    Considerations for the future investment strategy

o   SDG & Climate Reporting, and metrics.