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

Waiting for an internal review by Gwynedd Council of their handling of this request.

Dear Gwynedd 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 provide information or 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 risk management 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

Rhyddid Gwybodaeth, Gwynedd Council

Dear Joel Benjamin,

 

Freedom of Information (ref T1767)

 

Thank you for your recent request under the Freedom of Information Act
2000.

Your request has been passed to me to process and I can confirm that it
has been logged under the reference number T1767.

The Council may take up to 20 working days, from the date of receipt, to
respond to your request. You should therefore receive the information you
have requested, subject to the application of any exemptions permitted
under the Act, by 12/01/2017.

If you require further information please contact me by phone on 01286
679809 or by emailing [1][Gwynedd Council request email] by quoting the reference
number above.

Yours sincerely,

Gwawr Owen

 

<gfidisc.gwynedd.llyw.cymru/>

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Mae'r e-bost hwn ac unrhyw atodiad iddo yn gyfrinachol ac fe'i bwriedir ar gyfer
y sawl a enwir arno yn unig. Gall gynnwys gwybodaeth freintiedig. Os yw wedi
eich cyrraedd trwy gamgymeriad ni ellwch ei gopio, ei ddosbarthu na'i ddangos i
unrhyw un arall a dylech gysylltu â'r anfonwr ar unwaith.
Mae unrhyw gynnwys nad yw'n ymwneud â busnes swyddogol y corff sy'n anfon yr
e-bost yn bersonol i'r awdur.

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Arbedwch bapur, ynni ac arian - Peidiwch argraffu'r neges yma oni bai ei bod yn
hollol angenrheidiol.
Save paper, energy and money - Do not print this message unless it is absolutely
necessary.

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References

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1. mailto:[Gwynedd Council request email]

Owen Gwawr (CG), Gwynedd Council

2 Attachments

Dear Joel Benjamin,

 

Freedom of Information (ref T1767)

 

Thank you for your recent request. Please see below and attached document
for the information requested:

 

(1)    Copies of the two most recent versions of the SIP are attached.

(2)    The fund will be reviewing the SIP by 31 March 2017 when the new
Investment Strategy Statement (ISS) will take its place. The review will
include many aspects of investment.

(3)    Commercially sensitive information

(4)    Commercially sensitive information

(5)    None

(6)    This will be part of the review currently taking place.

(7)    The Fund has not changed its approach to climate change to date but
this will be considered as part of the review.

(8)    We have not held specific debates regarding climate change in
committee or board meetings during that period

(9)    The ESG policy is part of the SIP document. All employers are part
of the consultation on each new SIP document and the documents are in the
public domain for any interested party including members of the fund.

(10)Gwynedd Pension Fund is a member of the Local Authority Pension Fund
Forum, a collaborative body of 71 LGPS funds with assets under management
of £175 billion. LAPFF operates to protect the long-term investment
interests of beneficiaries by promoting the highest standards of corporate
governance and corporate responsibility amongst investee companies.  On
behalf of its members, LAPFF runs a diverse work plan providing
comprehensive engagement over a range of different work streams including
LGPS reform, the promotion of good governance, reliable accounting and
various aspects of responsible investment. Publications released in 2016
include ‘Engaging for a Low Carbon Transition’, ‘The Corporate Tax
Transparency Initiative Report’ and a ‘Mergers and Acquisitions Trustee
Guide’ (see [1]www.lapfforum.org/Publications/latest-research).  The total
spend budgeted for the LAPFF work plan in 2016/2017 is in excess of
£400,000.  The annual membership fee paid to LAPFF for Gwynedd  Pension
Fund is £8,250.

 

 

Please note that where information is subject to copyright belonging to
the Council, you will need to obtain the permission of the Council to
re-use it for purposes other than private study or non-commercial
research. The Council may charge for re-use. Where third party copyright
material is disclosed, you must obtain permission to re-use from the
copyright holders concerned.

 

Complaints

 

If you are unhappy with the way the Council has handled your request, you
may ask for an internal review. Please contact me if you require an
internal review of your case. An internal review will be conducted by the
Monitoring Officer or Head of Service and we will aim to respond within 20
working days. However, if we are unable to complete the review by this
date, we will advise you accordingly.

 

If you are not content with the outcome of the internal review, you have
the right to apply directly to the Information Commissioner for a
decision. Please see below for the contact details:

 

Information Commissioner’s Office

2^nd Floor

Churchill House

Churchill Way

Cardiff

CF102HH

 

Telephone: 02920 678400

Email: [2][email address]

Fax: 02920 678399

 

Yours sincerely,

Gwawr Owen

 

<gfidisc.gwynedd.llyw.cymru/>

-------------------------------------------------------------
Mae'r e-bost hwn ac unrhyw atodiad iddo yn gyfrinachol ac fe'i bwriedir ar gyfer
y sawl a enwir arno yn unig. Gall gynnwys gwybodaeth freintiedig. Os yw wedi
eich cyrraedd trwy gamgymeriad ni ellwch ei gopio, ei ddosbarthu na'i ddangos i
unrhyw un arall a dylech gysylltu â'r anfonwr ar unwaith.
Mae unrhyw gynnwys nad yw'n ymwneud â busnes swyddogol y corff sy'n anfon yr
e-bost yn bersonol i'r awdur.

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Arbedwch bapur, ynni ac arian - Peidiwch argraffu'r neges yma oni bai ei bod yn
hollol angenrheidiol.
Save paper, energy and money - Do not print this message unless it is absolutely
necessary.

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References

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1. http://www.lapfforum.org/Publications/la...
2. blocked::mailto:[email address] mailto:[email address]
mailto:[email address]

Joel M Benjamin left an annotation ()

Questions 3 and 4 withheld - commercially sensitive Info. Internal Review

Dear Gwynedd Council,

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

I am writing to request an internal review of Gwynedd 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 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

Owen Gwawr (CG), Gwynedd Council

Dear Joel Benjamin ,

FREEDOM OF INFORMATION ACT

We refer to your email dated 04/01/2017 in respect of internal review.

As you are disagree with the decision made and the information received from the Council, your e-mail has been referred to the Monitoring Officer to conduct an Internal Review. You should receive a response within 20 working days. However, if the Council is unable to complete the Internal Review within this timescale, you will be advised accordingly.

If you are unhappy with the outcome of the internal Review, you have the right to apply directly to the Information Commissioner for a decision. The contact details are as follows:

Information Commissioner’s Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
Sk9 5AF

If you have any queries about this letter, please contact me as the Freedom of Information Co-ordinator, quoting the above reference number.

Yours sincerely,

Gwawr Owen
Swyddog Cefnogol a Gwybodaeth/ Information and Support Officer
Est 32809
[email address].cymru

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