Falkirk Pension Fund Some Facts

Falkirk Pension Fund – some facts

These are taken from the annual report for 2015-16

Who manages the investments?

Investment Managementof the Fund’s assets is undertaken by external fund managers and overseen by the Pensions Section with the support of Hymans Robertson, the Fund’s Investment Advisor. Additional support is provided via a Shared Service resourcing agreement with the Lothian Pension Fund.

Governance?

Governance is undertaken by the Pensions Committee to whom Fund business has been delegated by Falkirk Council. This includes the appointment and monitoring of investment managers. The Committee is supported by a Pension Board to ensure that its decisions are made within the terms of the Scheme rules and in accordance with good practice.

Impact Investment

In recognition of the lack of affordable housing in the UK, the Pensions Committee has investigated the possibility of making an investment in social and affordable property. Following a tendering process and consultation with the Investment Advisor in 2014, Hearthstone Investments were appointed to manage a £30m commitment.

The initiative, which has the support of the Scottish Government, is aiming to deliver a return of 7% p.a. over a 10 year period and will help secure the construction of around 190 social housing units in the Clackmannanshire, Falkirk and Stirling areas as well as additional units of affordable housing in Scotland.

The Fund is also investing in the UK economy through a £60m commitment to UK infrastructure. Thus far, investments have been made in hydro, solar and wind projects.

What is the overall investment strategy?

What are the top 10 stocks?

Carbon Disinvestment

There has been a growing campaign for pension funds to disinvest from companies that are failing to meet globally agreed Carbon reduction targets.

Have Falkirk pension Fund considered disinvestment?

Here’s what the Chair of the Pensions Committee said in the foreword.

The topic of fiduciary duty is particularly relevant to local authorities in the light of requests from pressure groups to disinvest from particular sectors such as oil, mining and tobacco. In keeping with around 70 other UK Funds, the Falkirk Fund is a member of the Local Authority Pension Fund Forum (LAPFF), an umbrella group which seeks to improve standards of corporate behaviour. The LAPFF approach, which is currently endorsed by the Falkirk Fund, is that Funds should not disinvest but should maintain their interests in such assets and use their collective influence as a force for change.

Who are the LAPPF?

This what their website says

The Local Authority Pension Fund Forum (LAPFF) is the UK’s leading collaborative shareholder engagement group. Formed in 1990, LAPFF brings together 71 LGPS funds from across the country with combined assets of over £175 billion. The Forum provides a unique opportunity for Britain's local authority pension funds to discuss investment issues and shareholder engagement.

What is their approach to Carbon disinvestment?

This is the relevant part of their policy guide on Environmental, Social and Corporate Governance issues.

6.6.2 Carbon Management and Business Strategy.LAPFF considers that companies should report on their approach to carbonmanagement in the context of how they are factoring the relevance of climate changeinto their business strategy.

The Forum’s engagement strategy is to ask companies to identify and tackle carbon risks intheir business models. LAPFF will continue to press companies on aligning their businessmodels with a 2°C scenario.

For coal, oil and gas companies, particular attention is given to carbon asset risk, by promotinga low carbon transition. For oil and gas companies, the focus should be on value at risk,particularly from high cost projects and support can be given to returning capital to investorswhere appropriate.

LAPFF does not support divestment from fossil fuel companies but supports an orderlytransition requiring companies to identify and tackle carbon risks in their business modelsLAPFF members are supportive of investment opportunities afforded by a low-carbon futurewhich increases diversification and provides long-term returns.

Is the 2OC target enough?

The COP 21: UN climate change conference held in Paris at the end of last year agreed some targets; this is taken from their Climate Action website.

The Paris Agreement is a bridge between today's policies and climate-neutrality before the end of the century.

Mitigation: reducing emissions

Governments agreed

•a long-term goal of keeping the increase in global average temperature to well below 2°C above pre-industrial levels;

•to aim to limit the increase to 1.5°C, since this would significantly reduce risks and the impacts of climate change;

•on the need for global emissions to peak as soon as possible, recognising that this will take longer for developing countries;

•to undertake rapid reductions thereafter in accordance with the best available science.

Before and during the Paris conference, countries submitted comprehensive national climate action plans (INDCs). These are not yet enough to keep global warming below 2°C, but the agreement traces the way to achieving this target.

What do we do?

This isn’t a simple “let’s start a disinvestment campaign”, pension funds are long term investment bodies that are required to make a certain level of returns to ensure adequate pensions for members. Disinvestment shouldn’t be taken lightly, so it’s time to start a conversation with members as to their views on what the pension fund should be doing with their money.

This will require more work to provide the information to them to allow us to consider how we proceed.