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 successful.

Dear Hounslow 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

Freedom of Information, Hounslow Borough Council

Dear Resident/Member of the Public,

 

Thank you for your email which has been received by the Freedom of
Information and Data Protection Team. Receipt of your request for
information is acknowledged.

 

We will either deal with your request or pass it onto our service teams to
provide you with a response.   

 

Freedom of Information (FOI) requests – the Council will respond within 20
working days from the time of receipt if this is within working hours, or,
if received out of hours, from the next working day
[1]http://www.hounslow.gov.uk/index/council...

 

Data Protection Act (DPA) requests seeking personal information are dealt
with as Subject Access Requests (SAR) – the Council will respond within 40
working days from the time of receipt if this is within working hours, or,
if received out of hours, from the next working day
[2]http://www.hounslow.gov.uk/index/council...

 

To comply with the Local Government Transparency Code 2015 further
information can be found at
 [3]http://www.hounslow.gov.uk/index/council...

 

If it is a request for your own personal information, it will be dealt
with as a Subject Access Request (SAR) under the Data Protection Act. The
Council aims to respond to this within 40 calendar days from the date when
proof of identification is received, where this is
required.  [4]http://www.hounslow.gov.uk/index/council...

 

Yours sincerely 

Freedom of Information and Data Protection Mailbox

 

References

Visible links
1. http://www.hounslow.gov.uk/index/council...
2. http://www.hounslow.gov.uk/index/council...
3. http://www.hounslow.gov.uk/index/council...
4. http://www.hounslow.gov.uk/index/council...

Dear Hounslow Borough Council,

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

Yours faithfully,

Joel M Benjamin

Freedom of Information, Hounslow Borough Council

Dear Resident/Member of the Public,

 

Thank you for your email which has been received by the Freedom of
Information and Data Protection Team. Receipt of your request for
information is acknowledged.

 

We will either deal with your request or pass it onto our service teams to
provide you with a response.   

 

Freedom of Information (FOI) requests – the Council will respond within 20
working days from the time of receipt if this is within working hours, or,
if received out of hours, from the next working day
[1]http://www.hounslow.gov.uk/index/council...

 

Data Protection Act (DPA) requests seeking personal information are dealt
with as Subject Access Requests (SAR) – the Council will respond within 40
calendar days from the time of receipt if this is within working hours,
or, if received out of hours, from the next working day
[2]http://www.hounslow.gov.uk/index/council...

                                                                                                                                                        

To comply with the Local Government Transparency Code 2015 further
information can be found at
 [3]http://www.hounslow.gov.uk/index/council...

 

If it is a request for your own personal information, it will be dealt
with as a Subject Access Request (SAR) under the Data Protection Act. The
Council aims to respond to this within 40 calendar days from the date when
proof of identification is received, where this is
required.  [4]http://www.hounslow.gov.uk/index/council...

 

Yours sincerely 

Freedom of Information and Data Protection Mailbox

 

References

Visible links
1. http://www.hounslow.gov.uk/index/council...
2. http://www.hounslow.gov.uk/index/council...
3. http://www.hounslow.gov.uk/index/council...
4. http://www.hounslow.gov.uk/index/council...

Christine Holland, Hounslow Borough Council

1 Attachment

  • Attachment

    Pension Fund Investment Consultancy Services Specification JAN 2014 DL edit.doc

    270K Download View as HTML

 

Our ref: 17335

Dear Mr Benjamin

 

Re: FREEDOM OF INFORMATION (FOI) 2000 ACT RESPONSE

 

I am writing regarding your request for information dated 28th ^ October
2016.  I am sorry that there has been a delay in responding to your
request for information.  You have requested the following information
regarding the London Borough of Hounslow Pension Fund:

 

(1)  The two most recent versions of the Statement of Investment
Principles (SIP)

 

This information is available on the Council’s website at
[1]http://www.hounslow.gov.uk/pension

 

(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?

 

Yes, the Fund will be reviewing is SIP documents in March 2017

 

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

 

The service specification is attached.

 

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

 

The Fund Managers consider releasing this information to be prejudicial to
their commercial interests and that their contract documents should not be
released under Section 41 of the Freedom of Information Act.

 

(5) 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?

 

(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?

 

The London Borough of Hounslow Pension Fund are a member of the Local
Authority Pension Fund Forum (LAPFF). Our chairman is a member of the
Executive Board of the Local Authority Pension Fund Forum. This undertakes
engagement on environmental, social and governance issues on behalf of its
70 local authority pension fund members. Over the last eighteen months, we
have also been heavily involved in filing shareholder resolutions.
Hounslow has been a co-filer of the BP, Shell, and Rio Tinto climate
change resolutions. These resolutions were all passed by shareholders with
votes of over 98% at all meetings, and hence are now legally binding on
the companies.

 

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

 

Minutes of the Pension Fund Panel are available on the Council’s website
at:

 

[2]http://democraticservices.hounslow.gov.u...

 

(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

 

(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?

 

Over the past 10 years the Pension Fund has spent c£355k on engagement
activities relating to climate change/carbon risk:

 

Voting - £271k (8 years actual data, 2 years estimated)

LAPFF - £84k (8 years actual at £8,460 p.a. and 2 years assumed at same
rate).

 

The response to your request has been dealt with under the Freedom of
Information Act 2000.

 

Copyright and misuse information

Most of the information that is provided in response to a FOI request will
be owned by the London Borough of Hounslow and, therefore, covered by the
Open Government Licence. However, the copyright of some of the information
we share may be owned by another person or organisation (e.g. Ordnance
Survey). Individuals and organisations are free to re-use any information
covered by the [3]Open Government Licence for commercial or non-commercial
purposes, provided the terms of the licence are adhered to.  Where the
copyright of the information is owned by another person or organisation,
you must apply to the copyright owner to obtain their permission for
re-use.

 

Should you wish to make a request for information again, please complete
our online form accessed via the link below as this will provide us with
the required information to ensure a prompt response to your request:
[4]Freedom Of Information online request

 

Should you feel that the Council has dealt with your request for
information inappropriately or wish to request a review of this response
please contact the FOI Review Officer at [5][Hounslow Borough Council request email]

 

Yours sincerely

 

 

Christine Holland | Head of Finance and Resource Planning - Chief
Executive's and Specialist Services

 

London Borough of Hounslow

 

Office: 020 8583 2380 

[6]www.hounslow.gov.uk

Follow us online: Twitter: [7]@LBofHounslow and Facebook:
[8]www.facebook.com/HounslowCouncil

 

References

Visible links
1. http://www.hounslow.gov.uk/pension
2. http://democraticservices.hounslow.gov.u...
3. http://www.nationalarchives.gov.uk/doc/o...
http://www.nationalarchives.gov.uk/doc/o...
4. http://www.hounslow.gov.uk/index/council...
5. mailto:[Hounslow Borough Council request email]
6. http://www.hounslow.gov.uk/
7. https://twitter.com/LBofHounslow
8. http://www.facebook.com/hounslowcouncil

Dear Hounslow Borough Council,

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

I am writing to request an internal review of Hounslow 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 sections 41 (information provided in confidence) and 43 (commercial sensitivty) for Q4) 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 the 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

Freedom of Information, Hounslow Borough Council

Dear Resident/Member of the Public,

Thank you for your email which has been received by the Freedom of
Information and Data Protection Team. Receipt of your request for
information is acknowledged.

We will either deal with your request or pass it onto our service teams to
provide you with a response.    

o   Freedom of Information (FOI) requests – the Council will respond
within 20 working days from the time of receipt if this is within working
hours, or, if received out of hours, from the next working day.
[1]http://www.hounslow.gov.uk/index/council...

o   Data Protection Act (DPA) requests seeking personal information are
dealt with as Subject Access Requests (SAR) – the Council will respond
within 40 working days from the time of receipt if this is within working
hours, or, if received out of hours, from the next working day.
[2]http://www.hounslow.gov.uk/index/council...

o   To comply with the Local Government Transparency Code 2015 further
information can be found at
[3]http://www.hounslow.gov.uk/index/council...

o   If it is a request for your own personal information, it will be dealt
with as a Subject Access Request (SAR) under the Data Protection Act. The
Council aims to respond to this within 40 calendar days from the date when
proof of identification is received, where this is required.
 [4]http://www.hounslow.gov.uk/index/council...

                    Yours sincerely 

Customer Relations Team

 

References

Visible links
1. http://www.hounslow.gov.uk/index/council...
2. http://www.hounslow.gov.uk/index/council...
3. http://www.hounslow.gov.uk/index/council...
4. http://www.hounslow.gov.uk/index/council...

Emma Wallis, Hounslow Borough Council

Dear Joel M Benjamin,

Your request for an internal review has been received and logged and the reference number is 00020120.

This has been passed to Information Governance who will investigate and you will receive a response within 20 working days.

If you would like to contact us please email [email address] or telephone 0208 583 5211.

Yours sincerely,
Emma Wallis
Customer Relations Officer
0208 583 5211
ref:_00D24iixA._50024wjoYY:ref

Tina Dunkin, Hounslow Borough Council

6 Attachments

Dear Mr Benjamin,

 

Please find attached the response to your internal review.

 

Kind regards

Tina Dunkin

 

Tina Dunkin

Customer Relations and Improvement Manager

London Borough of Hounslow

Office: 020 8583 3749

[1]www.hounslow.gov.uk

Follow us online: Twitter: @LBofHounslow and Facebook:
[2]www.facebook.com/HounslowCouncil

 

References

Visible links
1. http://www.hounslow.gov.uk/
2. http://www.facebook.com/HounslowCouncil