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

Joel M Benjamin made this Freedom of Information request to Brent Borough Council

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

The request was partially successful.

Dear Brent Borough Council,

The Bank of England, HSBC, City 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

Michael Almond,

Information request
Our reference: 6446097

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Dear Mr. Benjamin
 
Thank you for your information request. We will forward it to the
relevant department who will contact you shortly.
 
Brent Council
Brent Civic Centre
Engineers Way
Wembley HA9 0FJ
[email address]
 
NOTE: Please do not edit the subject line when replying to this email.

Michael Almond,

Information request
Our reference: 6446097

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Dear Mr. Benjamin
 
Freedom of Information Act 2000
 
Thank you for your request for information that was received on 31 October
2016, as follows:
Dear Brent Borough Council,

The Bank of England, HSBC, City 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
 
We are dealing with your request under the Freedom of Information Act 2000
and we aim to send a response by 28 November 2016.
 
In some case, a fee may be payable. If we decide a fee is payable, we will
send you a fee notice and we will require you to pay the fee before
proceeding with your request.
 
The Freedom of Information Act 2000 may restrict the release of some or
all of the information you have requested. We will carry out an assessment
and if any exemptions apply to some or all of the information then we
might not provide that information to you. We will inform you if this is
the case and advise you of your rights to request an internal review and
to complain to the Information Commissioner's Office.
 
We will also advise you if we cannot provide you with the information
requested for any other reason together with the reason(s) why and details
of how you may appeal (if appropriate).
 
Yours sincerely
 

Michael Almond

Finance Graduate Trainee

Resources Department

Brent Council

0208 937 1754

[1][email address

[2]www.brent.gov.uk

 

 
NOTE: Please do not edit the subject line when replying to this email.

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Dear Michael Almond,

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

Yours sincerely,

Joel M Benjamin

Dear Brent Borough Council,

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

I am writing to request an internal review of Brent 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'.

This request is now in excess of 1 month overdue, and has not been answered despite prompts to do so.

Given the large volumes of members funds being managed by the pension fund committee, advisors and fund managers, and the extensive financial risk being carried by local taxpayers who effectively underwrite the defined benefit LGPS schemes and cover losses where the scheme is mis-managed, there is a substantial public interest case in favour of full disclosure.

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, Brent Borough Council

4 Attachments

Dear Mr Benjamin,

The attached response was sent to the email address you provided ([FOI #367983 email]) on the 28th November 2016. We have not received any reminders or other communications from you at this address since that date.

Regards,

James Scott

Principal Freedom of Information Officer
Chief Executive’s Office
London Borough of Brent
020 8937 1109

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