The Pensions Committee of Lambeth Council met on Wednesday 01 November 2023 to discuss investment performance, responsible investment survey results, and a general update on government consultations. The committee noted the investment performance report, agreed to use the results of the responsible investment survey to inform the implementation of the new investment strategy and the production of a responsible investment policy, and discussed the government's consultation on the future of pooling and investment mandates.

Investment Performance

The committee reviewed the investment performance for Quarter 2 of 2023. Saul Lamuco, Acting Head of Treasury and Pensions, presented the report, highlighting that overall, the fund underperformed its benchmark by -0.5% for the quarter, compared to a benchmark of 0.4%. This underperformance was attributed to the property commercial property fund, managed by Investor and Emerging Markets, and JP Morgan earlier investments. Despite the investment performance, the funding level of the pension fund increased from 112% to 118% by the end of the quarter, representing a surplus of approximately £250 million.

The committee noted that there were significant variances in asset allocation compared to the benchmark. The fund was underweight in LDI (Liability Driven Investment) by 10.5% against a benchmark of 15%, and overweight in private debt and multi-asset credit. Performance in global equities was also noted as disappointing, with the RBC mandate being particularly challenged over the year. The UK private rented sector was also identified as a challenging area due to current market conditions and institutional investor de-risking.

Responsible Investment Survey Results

Rob Browning, Acting Assistant Director of Corporate Finance, presented the results of the responsible investment survey. The survey indicated a good response rate, with most respondents generally supportive of the committee and fund's approach to incorporating ESG (Environmental, Social, and Governance) factors into investment decisions. Key themes identified as most important by respondents included climate change strategy, energy usage, biodiversity, fair pay and living wages, diversity, equity, and inclusion, and from a governance perspective, bribery and corruption, risk management, and board structures.

Regarding specific exclusions, controversial weapons were identified as a priority for exclusion. Interestingly, 62% of respondents did not feel that alcohol should be actively excluded from investments.

The committee discussed the survey results, with Councillor Martin Bailey raising concerns about the methodology of the ESG exposure chart, particularly the placement of the don't know responses. Councillor Henna Shah highlighted the need for a public engagement strategy and suggested that the results could inform the development of a responsible investment policy. The committee agreed to the recommendations to:

• Review and update its statement of ESG beliefs to reflect the survey's output.
• Use the survey results to inform the implementation of the new investment strategy.
• Use the survey results to help inform the production of a responsible investment policy.

General Update

The committee received a general update, which included information on a government consultation regarding the future of pooling and investment mandates. Rob Browning explained that the consultation proposed that all listed assets should be pooled by 2025, a general proposal for super pooling with fewer, larger pools, and suggestions for funds to publish plans to commit 5% of their funds to levelling up missions and to invest up to 10% of their assets in private equity.

Officers, along with the Chair and Vice-Chair, had prepared a response to the consultation. The general sentiment of the response was supportive of the proposals, as most did not significantly affect Lambeth's current practices. However, the council expressed opposition to any proposals that prescribed specific rules or restrictions on how, what, or to what extent investments should be made. Councillor Scott Ainslie voiced concerns about potential centralisation of control and the government's perceived lack of belief in the public sector, worrying about losing local control over pensions and local investment. The committee noted the report and the response to the consultation.

The committee also discussed training logs and the possibility of seeing a more comprehensive record of training undertaken since the committee's inception.

The meeting concluded with the move to an exempt part of the meeting.