Scottish Borders Council

Agenda item

Environmental Social Governance

Presentation by Capital and Investment Manager.  

Minutes:

The Capital and Investment Manager, Kirsty Robb, then gave a presentation on Environmental Social Governance (ESG) Policy.   Mrs Robb explained that the ESG policy covered wide and varied areas including climate change, deforestation, working conditions, child labour, bribery and corruption.  Mrs Robb advised that officers often received requests from pension fund members that the Fund be discouraged from investing in certain companies, for example armament companies, or companies that used child labour. However, in response, it was explained that fiduciary considerations meant that the Pension Fund could not specifically exclude the choice of investment purely based on non-financial considerations and there was no policy in place that could restrict choice.  The Pension Fund Committee sought to obtain the best return for the Fund while acting prudently.

 

The Fund’s current positon, in relation to ESG, was contained in Section 6 of the Statement of Investment Policy (SIP).  The SIP recognised the Committee’s responsibility to exercise voting rights, which had been delegated to the Fund’s Investment Managers.  Mrs Robb stated that other pension funds in Scotland were signing up to the United Nations Principles Responsible Investment (UNPRI) Stewardship Code, which was mandatory in England and Wales.  If members agreed, then this could be added to the ESG governance arrangements requiring all Fund Managers signed the Code and could be included as a standard requirement for any future appointments of Fund Managers.    In response to a question, Mrs Robb advised that by requesting Fund Managers to sign up to the Code there would be no financial or administration burden for officers.  In response to a question regarding the Code restricting investment opportunities, Mr O’Hara advised that the Code did not exclude areas of investment.  However, Fund Managers would engage with companies and encourage them to address ESG considerations. For example, if a company used child labour the Fund Manager would consider that as a risk which could impact on stock price and therefore encourage the company to address their concerns.  

 

Mrs Robb went on to advise that to improve monitoring of ESG, the Pension Fund could consider the appointment of a Voting Consultant. KPMG presently, in their report, included information on Fund Manager’s voting decisions. However, a Voting Consultant would give more detail and background information, explaining the rationale behind voting choices.  This would further enhance the Committee and Board’s monitoring role.    The Pension Fund and Board discussed the appointment of a Voting Consultant and requested that a report be presented to the next meeting detailing the cost involved.  It was also requested that a Voting Consultant be asked to attend the meeting to give a briefing on their role and the benefits to the Pension Fund.

  

DECISION

AGREED

(a)        To request that the Capital and Investment Manager arrange for an Voting Consultant to brief the June Meeting of the Pension Fund Committee and Pension Board;

 

(b)       To request a report detailing the cost of appointing a Voting Consultant; and

 

(c)        To update the Statement of Investment Policy to reflect that Fund Managers be requested to sign up to the United Nations Principles Responsible Investment (UNPRI) Stewardship Code and bring back to the June meeting for approval.

 

 

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