Carbon Bubble Risk, Pension Fund Fiduciary Duty & Risks To Local Taxpayers Through LGPS Underfunding and Exposure to Investment Losses in Defined Benefit Schemes

The request was partially successful.

Dear Greenwich Borough Council,

The Bank of England, HSBC, Citi Bank, Mercers, and the World Bank are clear that climate change is a major and growing financial issue. Bank of England Governor Mark Carney has said that climate change poses physical, liability and transition risks, which are all increasing.

Therefore, carbon bubble risk is now a clear material financial risk, and it is in the best interests of pension fund members to have regard to and actively manage, financial risks posed by climate change.

Additionally, as the individual ensuring compliance with SIP documents and signing off on the pension fund annual accounts, the s151 officer has a fiduciary duty to local taxpayers - who would ultimately be required to bail out the defined benefit LGPS fund, in the event of significant losses suffered in carbon markets, should the LGPS fund not manage carbon risk prudently.

We are therefore requesting the Pension Fund/ Committee/ Board would set out the appropriate response of the fund to the following questions:

(1) Please provide the two most recent versions of the Statement of Investment Principles (SIP)
(2) Will the fund be reviewing its SIP documents to pursue best practice and review carbon risk management and investment mandates in advance of LGPS pooling? If so when?
(3) Please provide current contract and procurement documents for the Investment Adviser(s) to the Pension Fund Committee.
(4) Please provide current procurement and contract documentation for the external fund manager(s) as set out in investment management agreements.
(5) Please provide a list of compliance breaches identified by the Head of Finance/ s.151 officer and brought to the attention of the Pension Fund Committee, during the last three (3) financial years.
(6) What steps have the Pension Fund Committee and Board taken to address the financial risks posed by climate change?
(7) Since the December 2015 Paris COP agreement, Peabody bankruptcy, and Exxon Mobil downgrade, has the pension fund changed its approach to climate change risks and investment in carbon stocks?
(8) Please provide Pension Fund Committee and Board meeting minutes where climate change, and carbon bubble investment risk was discussed, and minuted 2014 - 2016.
(9) Have you surveyed or formally consulted with your individual members or employers for their views on your ESG policies or practices in the last 10 years?
(10) How much does the fund spend on ESG engagement services and can you give any examples of engagement activities relating to climate change/carbon risk from the last 10 years?

We are asking these questions to understand how/ if UK local authority pensions funds fiduciary duties are being met in regard to climate change related financial risks - and to appraise financial risks to taxpayers in situations where fiduciary duty to manage carbon investment risk has been breached.

Yours faithfully,

Joel M Benjamin

foi, Greenwich Borough Council

Dear Mr Benjamin,

Freedom of Information/Environmental Information Regulations request: FOI-1736

Thank you for your request dated 28 October 2016
Your request will be answered by 25 November 2016

If you have any queries about this request, please contact me, quoting the reference number above.

Yours sincerely,

David White
FOI Manager
Directorate of Central Services
Royal Borough of Greenwich
LGC Council of the Year 2013
 020 8921 5044
 Woolwich Centre, 35 Wellington Street, Woolwich, London SE18 6PW
www.royalgreenwich.gov.uk

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Dear foi,

This is request is now overdue. Please provide a full response ASAP.

Yours sincerely,

Joel M Benjamin

foi, Greenwich Borough Council

Dear Mr Benjamin,

Freedom of Information request: RFI/1736

Please accept our apologies for the delay in providing a response to your Freedom of Information request. This is taking more time than expected and we will forward the response to you shortly.

Yours sincerely,

David White
FOI Manager
Directorate of Central Services
Royal Borough of Greenwich
LGC Council of the Year 2013
 020 8921 3943
 Woolwich Centre, 35 Wellington Street, Woolwich, London SE18 6PW
www.royalgreenwich.gov.uk

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foi, Greenwich Borough Council

Dear Mr Benjamin,

Freedom of Information/Environmental Information Regulations request: FOI-1736
Thank you for your request dated 28 October 2016. I apologise for the delay in replying to you.

Our response is as follows:

(1) Please provide the two most recent versions of the Statement of Investment Principles (SIP).

The current SIP is published at: http://www.royalgreenwich.gov.uk/downloa... The document is updated annually.

(2) Will the fund be reviewing its SIP documents to pursue best practice and review carbon risk management and investment mandates in advance of LGPS pooling? If so when?

The Fund will produce its replacement to the SIP, the Investment Strategy Statement by 1 April 2017 in line with current LGPS regulations.

(3) Please provide current contract and procurement documents for the Investment Adviser(s) to the Pension Fund Committee.

The prejudice to commercial interests exemption in section 43 of the Freedom of Information Act 2000 would apply to this request. There is currently no obligation on investment advisers to disclose publically the content of their commercial agreements with clients. Our Investment Adviser would therefore be at a competitive disadvantage if they were required to make such a disclosure but their competitors were not. Such a disclosure may also prejudice the Council’s ability to exercise bargaining power in negotiating contractual provisions with your service providers in the future. We consider that the public interest in withholding the terms of our contractual relationship with you outweighs any public interest in disclosing that information. We therefore do not believe that we are required to give any information in response to this element of your Freedom of Information request.

(4) Please provide current procurement and contract documentation for the external fund manager(s) as set out in investment management agreements.

The prejudice to commercial interests exemption in section 43 of the Freedom of Information Act 2000 would apply to this request. There is currently no obligation on asset managers to disclose publically the content of their commercial agreements with clients. Our Fund Managers would therefore be at a competitive disadvantage if they were required to make such a disclosure but their competitors were not. Such a disclosure may also prejudice the Council’s ability to exercise bargaining power in negotiating contractual provisions with your service providers in the future. We consider that the public interest in withholding the terms of our contractual relationship with you outweighs any public interest in disclosing that information. We therefore do not believe that we are required to give any information in response to this element of your Freedom of Information request.

(5) Please provide a list of compliance breaches identified by the Head of Finance/ s.151 officer and brought to the attention of the Pension Fund Committee, during the last three (3) financial years.

None.

(6) What steps have the Pension Fund Committee and Board taken to address the financial risks posed by climate change?

The Fund takes advice on all investment matters from its external investment advisers and formulates its investment strategy accordingly. This advice covers a range of factors impacting upon Fund investments, including the risks posed by climate change.

(7) Since the December 2015 Paris COP agreement, Peabody bankruptcy, and Exxon Mobil downgrade, has the pension fund changed its approach to climate change risks and investment in carbon stocks?

See answer to (6).

(8) Please provide Pension Fund Committee and Board meeting minutes where climate change, and carbon bubble investment risk was discussed, and minute 2014 - 2016.

This is published at http://committees.royalgreenwich.gov.uk/...

(9) Have you surveyed or formally consulted with your individual members or employers for their views on your ESG policies or practices in the last 10 years?

No. Members and employers (along with other stakeholders) are welcome to contact the Fund on ESG matters. The Fund responds on a case by case basis.

(10) How much does the fund spend on ESG engagement services and can you give any examples of engagement activities relating to climate change/carbon risk from the last 10 years?

The Fund is a member of the Local Authority Pension Fund Forum which represents LGPS Funds on a range of ESG and other issues. The current annual subscription to the Forum is £8,250 per annum.

If you have any queries about this correspondence, please contact me, quoting the reference number above.
If you are not satisfied with our response to your request, you can ask for an Internal Review. Internal review requests should be submitted within two months of the date of receipt of the response to your original request. If you wish to do this, please contact us, setting out why you are dissatisfied.
If you are not satisfied with the outcome of the Internal Review, you may apply directly to the Information Commissioner (ICO) for a decision. Generally, the ICO cannot make a decision unless you have exhausted the Internal Review procedure provided by the Council.

Yours sincerely,

David White
FOI Manager
Directorate of Central Services
Royal Borough of Greenwich
LGC Council of the Year 2013
 020 8921 5044
 Woolwich Centre, 35 Wellington Street, Woolwich, London SE18 6PW
www.royalgreenwich.gov.uk

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Joel M Benjamin left an annotation ()

Procurement and contracts withheld 43(2)

Dear Greenwich Borough Council,

Please pass this on to the person who conducts Freedom of Information reviews.

I am writing to request an internal review of Greenwich Borough Council's handling of my FOI request 'Carbon Bubble Risk, Pension Fund Fiduciary Duty & Risks To Local Taxpayers Through LGPS Underfunding and Exposure to Investment Losses in Defined Benefit Schemes'.

With regard to refusal of Q3 and Q4:

(3) Please provide current contract and procurement documents for the Investment Adviser(s) to the Pension Fund Committee.
(4) Please provide current procurement and contract documentation for the external fund manager(s) as set out in investment management agreements.

Council has witheld both contract procurement/ brief documents AND the respective contracts citing section 43 (commercial sensitivty) despite the fact that the procurement brief/ framework documents are publicly tendered?

It is widely acknowledged and understood that individuals, businesses and corporations signing contracts with public authorities do so on the basis that such documents are subject to public srutiny, and may be requested by FOIA.

Employees of the council similarly understand that they are serving the public, and their decisions with regard to the use of public funds will be subjected to scrutiny, and can not reasonably be expected to be private, especially at senior management levels.

Despite this knowledge, a creeping practice of commercial secrecy has emerged throughout the public sector, culminating in the use of non-disclosure/ gag clauses in contracts - including contracts signed between public authorities and pension fund managers https://www.ft.com/content/94524a60-5b96...

Such agreements are designed to protect oversize corporate profits and shield the pervasive use of rip-off fees and charges observed throughout the fund management industry, and no public authority acting in the public interest has any business in signing such contracts.

Turning to section 43(2)

The reasons cited by the council justifying non-disclosure related to the financial health of firms transacting with the council, and b) the ability of the council to engage in competitive tender.

This is despite the known fact that failure to benchmark LGPS fund management fees has resulted in some LGPS funds paying 3-4x more in fees than their peers for the same returns and levels of service, precisely because their fund managers fee structures are not pubicly disclosed and are not transparent - meaning that councils are prevented from undertaking effective benchmarking and obtaining best value.

This raises legitmitate public interest questions regarding whose interests the local authority actually serves. Both LGPS members, and the taxpaying public lose out when fund managers over charge on fees, and it is only corporate actors in the City who benefit.

On balance, the risks to the taxpayer accruing through overcharging and resulting underfunding of LGPS funds, and the loss of retirement income from fund members should tip the balance firmly in favour of full disclosure.

Additionally, in terms of financial risk: the pension fund adviser and manager are responsible for steering hundreds of millions of pounds around financial markets, under instructions given by the pension fund committee and s151 officer, on behalf of LGPS fund members.

Crucially, if the council and its fund managers and advisors make mistakes, such as continuing to invest in fossil fuels, resulting in losses - despite prior warnings, then it is local taxpayers, who must then top up the defined benefit LGPS scheme to replenish losses suffered in financial markets - additional taxation for which the general public receive no tangible benefit.

Therefore, the public interest in favour of full disclosure, and for council to reveal the details of the advisors instruction/ fund mandate and investments is substantial - and has significant financial consequences for local taxpayers and LGPS members, whose retirement savings are reduced by overcharging on fees and failure of the council to obtain best value.

A full history of my FOI request and all correspondence is available on the Internet at this address: https://www.whatdotheyknow.com/request/c...

Yours faithfully,

Joel M Benjamin

foi, Greenwich Borough Council

Dear Mr Benjamin,

Freedom of Information request: RFI/1736

Thank you for your request for an Internal Review regarding our response to your Freedom of Information request.

Your request is being dealt with under the terms of the Freedom of Information Act 2000 and will be answered within twenty working days.
If you have any queries, please contact me, quoting the reference number.

If you are not content with the outcome of the Internal Review, you can apply directly to the Information Commissioner (ICO) for a decision. Generally, the ICO cannot make a decision unless you have exhausted the Internal Review procedure provided by the Council. The Information Commissioner can be contacted at: The Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF.

Yours sincerely,

David White
FOI Manager
Directorate of Central Services
Royal Borough of Greenwich
LGC Council of the Year 2013

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foi, Greenwich Borough Council

Dear Mr Benjamin,

Freedom of Information request: FOI/I-1736

Please accept our apologies for the delay in providing a response to your Freedom of Information/Internal Review request. This is taking more time than expected and we will forward the response to you shortly.

Yours sincerely,

David White
FOI Manager
Directorate of Central Services
Royal Borough of Greenwich
LGC Council of the Year 2013
 020 8921 3943
 Woolwich Centre, 35 Wellington Street, Woolwich, London SE18 6PW
www.royalgreenwich.gov.uk

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foi, Greenwich Borough Council

3 Attachments

Dear Mr Benjamin,

Internal Review on Freedom of Information request: FOI/IR-1736

Thank you for your Internal Review request on the handling of your Freedom
of Information request.

Please see above attachment’s for our full response.

If you are not content with the outcome of the Internal Review, you may
apply directly to the Information Commissioner (ICO) for a decision.
Generally, the ICO cannot make a decision unless you have exhausted the
Internal Review procedure provided by the Council. You can contact the ICO
by emailing [1][email address], or by post at Customer Contact,
Information Commissioner's Office, Wycliffe House, Water Lane, Wilmslow,
SK9 5AF

 

Yours sincerely,

 

David White

FOI Manager
Directorate of Central Services
Royal Borough of Greenwich

LGC Council of the Year 2013

' 020 8921 3943 
* Woolwich Centre, 35 Wellington Street, Woolwich, London SE18 6PW
8 [2]www.royalgreenwich.gov.uk  

 

 

 

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Royal Borough of Greenwich - LGC Council Of The Year 2013

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