Agenda item

Responsible Investment Activities

[To review the report on the work undertaken by the Investment team regarding their responsible investment activities between the period 1 July to 30 September 2017]

Minutes:

Michael Marshall, Responsible Investment Officer presented the report on work undertaken by the investment team regarding their responsible investment activities since the last meeting in September 2017. He particularly highlighted engagement regarding Sports Direct undertaken via LAPFF; a pilot programme to monitor the Fund’s private equity managers’ approaches to responsible investment; outreach work by the team; recent fossil fuels divestment campaigns and the Fund’s response; and the engagement via LAPFF with Hanwha Corporation which was now considered to be unlikely to succeed at this time. In light of the status of LAPFF’s engagement with Hanwha Corporation, the committee was recommended to approve the de-selection of Hanwha Corporation within the Fund’s internal passive equity portfolio as part of a future portfolio rebalance or reconstruction. The officer explained the unique circumstances and reasons for this recommendation: that LAPFF’s engagement is unlikely to succeed at this time; that the de-selection of this particular stock at this particular time is not expected to cause significant financial detriment; that there is likely to be portfolio reconstruction in the near term which represents a rare opportunity to execute the de-selection; that scheme members have expressed ethical concerns regarding Hanwha Corporation and that one of the company’s product lines is the subject of an international convention. It was explained that, were the committee to approve the de-selection of Hanwha Corporation, the factors mentioned above would be monitored over time to ensure the decision remains the correct one, both from a financial and an ethical point of view. It was stressed to the committee members that the de-selection decision was not taken lightly, and that there were unique circumstances particular to the present situation which led to the recommendation.

 

 

Councillor John Mutton thanked the Fund’s officers and the Chair for responding to emails from Coventry regarding Hanwha Corporation. He indicated that it was disappointing that the Fund and LAPFF had not been able to persuade the company to change their approach and that he now welcomed the recommendation within the report to de-select Hanwha Corporation from the Fund’s internal passive equity portfolio.

 

Malcom Cantello (UNISON) queried whether the wording of the recommendation within the report to de select Hanwha Corporation should be elaborated upon to more fully explain the reason.  The Chair informed the Committee that officers would write to all those who had contacted the Fund concerning Hanwha to explain the Fund’s position with respect to Hanwha, and that the Fund’s Responsible Investment Framework and policy of engagement remain in place. He reported that the Fund had gone through the correct procedure to affect change in the company’s activities. However, the engagement had not achieved its primary objective.  In light of the particular circumstances the recommendation to de-select was unique.  

 

Rachel Brothwood, Director of Pensions confirmed that a draft response had been prepared pending the Committee’s decision regarding Hanwha Corporation. The Chair asked that a copy of the letter be forwarded to members of the Committee for information.

 

 

 

Resolved:

1.    That the de-selection of Hanwha Corporation from the Fund’s internal passive equity portfolio be approved.

 

2.    That the Fund’s voting and LAPFF’s engagement activity for the three months ending 30 September 2017, including Appendix 1 to the report be noted.

 

3.    That the issues discussed by LAPFF are set in the Quarterly Engagement Report which is available on their website be noted:


          http://www.lapfforum.org/publications/qrtly-engagement-reports/

 

4.    That the update provided on the recent engagement activities with Hanwha Corporation be noted.

 

5.    That other activity undertaken to ensure the Fund continues to develop and support its approach to Responsible Investment be noted.

 

6.    That the Fund’s responses to recent articles in the press relating to investments in fossil fuels producers and tax risk be noted.

Supporting documents: