Agenda item

[To provide an update on the work undertaken by the investment team regarding their responsible investment activities since the last Pensions Committee meeting]

Councillor Tersaim Singh declared a pecuniary interest in the report in so far as it related to GKN from whom he received a pension.

Michael Marshall, Director of Responsible Investment and Engagement presented the update on the work undertaken by the investment team regarding their responsible investment activities since the last Committee meeting. He particularly highlighted the FRC consultation on the UK corporate governance code; the Fund’s engagement through partnerships and focus on its stewardship themes for 2018 of climate change, cyber security and diversity; and changes to the Fund’s Responsible Investment Framework.

Malcolm Cantello (Union) asked and it was agreed that the phase ‘labour management’ in the Responsible Investment Framework document be amended to employee relations.

The Director of Responsible Investment and Engagement also reported on correspondence the Fund had received from campaign group Support Saudi Women and GKN and Melrose Plc.  GKN had been invited to consider an offer from Melrose Plc to acquire 100% of GKN Plc through a cash and share offer.  As the Fund was a GKN shareholder it was called upon to consider the offer made by Melrose. The Director of Responsible Investment and  Engagement explained the position of the Fund and the basis on which a decision would be made, with reference to the principles of the Fund’s Responsible Investment Framework and in line with its fiduciary duty.  The situation would continue to be monitored carefully.

Members of the Committee asked about the pensions deficit at GKN and the contribution both GKN and Melrose were committed to make towards the deficit. It was also reported that GKN had a history in the Bilston area of Wolverhampton; that the City of Wolverhampton had a commitment to the aerospace industry and that the Committee also had a role to show commitment to local businesses. Members of the Committee also expressed concerns relating to GKN’s employee pensions; a potential loss of jobs in the UK (whether or not the offer was accepted); the perceived reputation Melrose Plc had for splitting up companies. The Fund’s small position in GKN was noted as was the historic relevance to Bilston. The Committee noted their fiduciary duty.

Rachel Brothwood, Director of Pensions reported that the Committee’s comments would be fed into a due diligence process before the Fund exercised any decision on the offer from Melrose Plc.

Resolved:

1.     That the updated Responsible Investment Framework be approved.

2.     That the Fund’s voting and Local Authority Pension Fund Forum’s (LAPFF’s) engagement activity for the three months ending 31 December 2018, including Appendix 1 to the report be noted.

3.     That it be noted that the issues discussed by LAPFF are set in the Quarterly Engagement Report which is available on the LAPFF website:
http://www.lapfforum.org/publications/qrtly-engagement-reports/

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

5.     That correspondence received from the Support Saudi Women campaign group and the Fund’s response be noted

6.     That the Fund’s 2018 stewardship themes, which are climate change, cyber security and diversity be noted.

7.     That work ongoing to consider issues raised in relation to the potential takeover of GKN Plc be noted.

8.     That it be noted that the Fund had joined the 30% Club Investor Group and endorsed its Statement of Intent.