Pension Sub-committee And Pension Board - 21/06/2021

At a JOINT MEETING of the PENSION SUB-COMMITTEE of the POLICY AND RESOURCES COMMITTEE AND THE PENSION BOARD held remotely on 21st June, 2021.

Present:-

PENSION SUB-COMMITTEE

BAILIES

COUNCILLORS

PENSION BOARD

Bailie Willie SAWERS, in the Chair.

I DECLARATION OF INTEREST

No declarations of interest were made.

II APOLOGIES

The Sub-Committee and Board noted that apologies had been received from Bailie Keenan, Councillors Scott and Davy, and Gordon Murray, Raymond Boyd and Claire Shepherd.

III MINUTE OF PREVIOUS MEETING

The minute of meeting of 8th March, 2021 was submitted and approved.

IV APPOINTMENT OF PENSION BOARD MEMBER

The Sub-Committee and Board were advised that GMB had nominated Raymond Boyd (Tayside Contracts) as a replacement for Stephen Massey, to provide member representation on the Tayside Pension Board. Jim Cunningham (Dundee City Council) had been nominated as his substitute.

It was agreed that these appointments be made.

V RISK REGISTER

There was submitted Report No 197-2021 by the Executive Director of Corporate Services updating the Risk Register for the Tayside Pension Fund.

The Sub-Committee was asked to approve the Quarterly Risk Register for Tayside Pension Fund which was updated on 2nd June, 2021, and note the following changes to risk profile since the previous report:-

Risk 6: Inability to participate in the scheme

The likelihood of this risk has risen as a result of increasing maturity of employer liability profiles, coupled with the low yield level of UK Government Gilts which form basis of cessation valuation. Triennial Actuarial Valuation results have been issued to all employers to raise their awareness of their liabilities, and a review of funding strategy has been undertaken to identify ways for employers to best meet their liabilities going forward with minimal risk to the Fund.

Risk 15: Lack of expertise on Pension Committee, Pension Board or amongst officers

Risk 16: Over reliance on key officers

The likelihood of these risks had increased due to the new appointments of the Section 95 officer and the Head of Corporate Finance, and the upcoming retiral of the current Head of Corporate Finance.

VI ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE POLICY

There was submitted Report No 198-2021 reviewing the Fund's current policy on Socially Responsible Investing (Article X of the minute of meeting of the Pension Sub-Committee of the Policy and Resources Committee of 7th December, Report No 331-2020 refers).

The Sub-Committee and Board approved an amendment to the report, whereby it was agreed that this policy be reviewed to commence the formal ending of investment in fossil fuel companies that were not strongly committed to reducing emissions. In order to facilitate this change to the policy, the Executive Director of Corporate Services was instructed to carry out an assessment of energy sector companies in its portfolios and work with advisors to set appropriate standards that would support this strategy, and would bring forward a report proposing an amended strategy to then consult with Fund employers and stakeholders for opinion and subsequently bring forward for consideration any required amendment to the policy and/or Statement of Investment Principles.

VII TASK FORCE FOR CLIMATE RELATED FINANCIAL DISCLOSURES (TCFD)

There was submitted Report No 199-2021 by the Executive Director of Corporate Services setting out the compliance requirements of the Task Force for Climate Related Financial Disclosures.

The Sub-Committee and Board noted the content of the report and approved the additional resource requirements detailed.

VIlI PENSION ADMINISTRATION PERFORMANCE - QUARTERLY UPDATE TO 31ST MARCH 2021

There was submitted Report No 200-2021 by the Executive Director of Corporate Services providing information on the recent quarters operational performance in relation to Pension Administration.

The Sub-Committee and Board noted the content of the report.

IX LOCAL GOVERNMENT PENSION SCHEME ADVISORY BOARD (SCOTLAND) - ANNUAL REPORT 2019-2020

There was submitted Report No 202-2021 by the Executive Director of Corporate Services providing information on the Scheme Advisory Boards activities over the financial year to 31st March, 2020.

The Sub-Committee and Board noted the content of the report.

X TAYSIDE PENSION FUND ANNUAL GOVERNANCE AND GOVERNANCE COMPLIANCE STATEMENTS

There was submitted Report No 203-2021 by the Executive Director of Corporate Services presenting the Annual Governance Statement and Governance Compliance Statement for approval and inclusion into the unaudited Annual Accounts for the year ended 31st March, 2021. The report set out the governance arrangements of Tayside Pension Fund and the extent to which it complied with regulations.

The Sub-Committee and Board agreed to:-

(i) approve the Annual Governance and Governance Compliance Statements which are included as an Appendix to this report; and

(ii) instruct the inclusion of the statements in the Annual Accounts for the year to 31st March, 2021.

XI TAYSIDE PENSION FUND UNAUDITED 2020/2021 ACCOUNTS

There was submitted Report No 204-2021 by the Executive Director of Corporate Services providing some additional commentary on the unaudited Annual Accounts 2020/2021 which were being submitted to the Sub-Committee and Board along with this report.

The Sub-Committee and Board agreed to:-

(i) note the contents of this covering report;

(ii) note the unaudited Annual Accounts which have been submitted along with this report in Appendix A;

(iii) instruct the Executive Director of Corporate Services to arrange for the unaudited Accounts to be signed as necessary; and

(iv) instruct the Executive Director of Corporate Services to submit the Annual Accounts to the Funds external auditor.

The Sub-Committee and Board resolved under Section 50(A)(4) of the Local Government (Scotland) Act 1973 that the press and public be excluded from the meeting for the undernoted items of business on the grounds that they involved the likely disclosure of exempt information as defined in paragraphs 4, 6 and 11 of Part I of Schedule 7A of the Act.

XII TAYSIDE PENSION FUNDS

(a) PERFORMANCE SUMMARIES

There was submitted Report No 205-2021 reviewing the investment performance of the Funds Investment Managers for the quarter to 31st March, 2021. The report compared investment performance of the Funds with the Funds specific benchmarks which consisted of various stock and security market indices.

The Sub-Committee and Board noted the information contained therein with regard to the performance of the Tayside Main Fund and their Fund Managers.

(b) SUMMARIES OF INVESTMENTS AND TRANSACTIONS

There was submitted Report No 206-2021 by the Executive Director of Corporate Services reviewing the investment activities of Tayside Pension Funds five Fund Managers for the quarter to 31st March, 2021 and summarising the transactions of each Fund Manager and showing the market values of the Pension Fund.

The Sub-Committee and Board noted the information contained therein with regard to the activities of the Tayside Pension Fund and its Fund Managers.

(c) QUARTERLY FUNDING UPDATE AS AT 31ST MARCH, 2021

There was submitted Report No 207-2021 by the Executive Director of Corporate Services reviewing the current funding level of the Fund as assessed by the Fund Actuary.

The Sub-Committee and Board noted the content of the report.

XlIl INVESTMENT STRATEGY REVIEW

There was submitted Report No 208-2021 by the Executive Director of Corporate Services recommending changes to the Funds Investment Strategy in light of a review by Isio and in the context of the recent Actuarial Valuation.

The Sub-Committee and Board agreed to:-

(i) note the content of the report by Isio as detailed in Appendix A to the report;

(ii) delegate officers to implement Isio recommendations in relation to equity and bond portfolios; and

(iii) delegate officers to commence mandate construction and manager selection of opportunistic portfolio.

XIV REVIEW OF REQUIREMENTS FOR EXITING EMPLOYERS

There was submitted Report No 201-2021 by the Executive Director of Corporate Services providing details on a review undertaken in relation to the requirements of employers wishing to exit the Fund in terms of cessation liabilities. The report also outlined a proposed change to Tayside Pension Funds Funding Strategy Statement and contained the supporting legal opinion.

The Sub-Committee and Board agreed to:-

(i) consider the proposal of the Funds Actuary and legal opinion provided;

(ii) approve the proposal, with instruction to amend Funding Strategy Statement and undertake required consultation;

(iii) delegate to officers to appoint independent services to assist with covenant and payment terms; and

(iv) delegate officers the authority in the interim period to agree reasonable repayment terms/periods with exiting employers.

XV SOCIALLY RESPONSIBLE INVESTMENT - SIX MONTHLY REPORT

There was submitted Report No 209-2021 by the Executive Director of Corporate Services reviewing the progress by the Fund Managers regarding positive engagement in line with the Policy on Environmental, Social and Corporate Governance approved by the Sub-Committee (Article X of the minute of meeting of the Pension Sub-Committee of the Policy and Resources Committee of 7th December, 2020, Report No 331-2020 refers).

The Sub-Committee and Board agreed to note the information contained within this report with regard to the activities of the Fund Managers during the six-month period ended 31st March, 2021.

XVI PRESENTATION

Patrick Bone and Sarah Cockburn from Schroders gave a short presentation to the Sub‑Committee and Board.

After Mr Bone and Ms Cockburn had given their presentation and answered questions from members, the Chair thanked the presenters on behalf of members of the Sub-Committee and Board.

XVII VALEDICTORY

The Chair, on behalf of the Sub-Committee and Board, paid tribute to Mr Sandy Flight, Head of Corporate Finance, upon his forthcoming retiral and wished him well for the future.

Willie SAWERS, Chair.