Correspondence with investment consultants & information on managing pension fund climate risk
Dear Scottish Borders Council,
Please provide the following information in relation to Scottish Borders management of pension fund climate risk, & information & advice on same provided by external investment consultants including (but not limited to) Aon, Mercer, Allenbridge Epic and Hymans Robertson.
1) Please provide emails & correspondence between council employees (Scottish Borders finance function + responsible investment & pension fund mgmt), procurement, elected members (on pension fund committee), scheme members & external investment consultants on climate risk between 2018 and 2023
2) Please confirm if specific advice or information on climate risk has been sought by Scottish Borders and received from Mercer, or other investment consultants? - If so please provide copies of this information. (key search terms include "climate risk", "physical risk", "asset allocation" and "fossil fuels")
3) Please provide the following data points in MS Excel format in relation to each external climate risk analyses undertaken on the councils investment portfolio, noting the date/ year + provider of each analysis:
i) Warming scenarios applied, i.e 2degC, 3degC, 4,degC, 5degC, 6degC & year in which it is suggested each warming threshold considered by the scenarios will be reached?
ii) Projected gains or losses for the portfolio &/or GDP activity for each scenario/year assessed
iii) Specifics of any change(s) to asset portfolio allocation recommended by the consultants to reduce the risk of future financial losses and/or to reduce financed emissions across the portfolio.
Yours faithfully,
Joel M Benjamin
Dear Joel M Benjamin
I acknowledge receipt of your request for information relating to the
above and shall respond within the relevant 20 working day period.
Yours sincerely
Nicola Driver
Information Management Team
Scottish Borders Council
0300 100 1800
[1][email address]
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Dear Joel M Benjamin
Further to your request for information under the Freedom of Information
(Scotland) Act 2002 relating to the above I am now able to respond.
The following response was prepared and provided on behalf of Finance &
Corporate Governance:
Although the SBC Pension is open and transparent in its approach to
responding to FOI requests, however, on this occasion we classify the
majority of the information requested as private and commercially
sensitive material which we are unable to share. I have provided an
overview of the SBC Pension Fund’s position, based on publicly available
information below.
The SBC Pension Fund does not currently have a policy in place to fully
divest from fossil fuels. However, this is an area, along with wider
environmental, social and governance (“ESG”) considerations, the Committee
has spent a great deal of time deliberating and debating in order to agree
a robust approach.
The Pension Fund does have a Responsible Investment Policy which
summarises the Committee’s approach in this area and can be found on the
SBC Pension Fund website. This policy specifically addresses climate and
environmental issues.
The position taken by the Committee is one which looks to balance the
fiduciary duty of delivering the best risk adjusted investment returns
possible and having a strong positive ESG impact with the investments the
Pension Fund makes. This balance is important to ensure the Pension Fund
is able to pay the members’ pension benefits as and when they fall due and
do so in an affordable and sustainable way.
The Committees’ central belief is that an engagement approach for ESG
matters, with a focus on funding investments which will facilitate the
transition to a low/zero carbon economy will be more beneficial than a
total disinvestment approach. The key thesis behind this is that “having a
seat at the table” allows greater discussion, influence and direction on
companies than not, and that disinvestment may well mean the worst
performing companies from a fossil fuel and ESG point of view may well
fall into the remit of less engaged investors who are less focused on
improving the position.
The Pension Fund has made significant progress in this respect in recent
years and this continues to be a key priority when setting investment
strategy and governing underlying investments. I have outlined a few of
the key milestones made to date:
· The SBC Pension Fund was the first LGPS Fund to invest in a
sustainable active global equity fund. This was a newly launched fund by
an existing investment manager of the Pension Fund. This fund applies a
number of screens to lower the exposure to certain non-ESG friendly
sectors e.g. energy, gambling and tobacco.
· Implementation of a “Paris aligned” global active equity mandate –
although this does not exclude fossil fuels companies completely, it does
exclude the highest emitters and focuses on investing in companies aligned
to the energy transition.
· Introduction of a global ESG focused passive index equity fund.
The global passive ESG index also tilts away from fossil fuel producing
companies without fully disinvesting from them
· Allocating to a infrastructure investment manager with strong ESG
credentials. The mandate in question takes an active approach to enhancing
the ESG attributes of existing essential infrastructure assets e.g. ports,
airports, toll roads with a focus on making these as “green” as possible.
This sits alongside a significant allocation to renewable energy assets
e.g. wind and solar.
· Addition of a socially focused property mandate. This mandate as
dual ESG focus – 1) deliver affordable housing to help tackle social
issues and 2) energy efficiency in housing to help tackle climate change.
Alongside the strategic changes noted above, the Fund has been actively
progressing broader climate and ESG priorities such as applying for
membership to the UK Stewardship Code 2020, agreeing Pension Fund level
climate objectives and targets, and measuring these on an ongoing basis.
The Fund is also targeting its first report in line with the Task Force
for Climate Related Disclosures in 2023. This report will be made publicly
available and will quantify the fossil fuel and carbon emission stance of
the Pension Fund and allow the Committee to monitor improvements over
time.
[1]Home | Scottish Borders Council (scottishborderscouncilpensionfund.org)
The exemption being relied on is section 33 of FOISA - Information may be
withheld if disclosure would (or would be likely to) prejudice
substantially the commercial interests of any person or organisation
(section 33(1)(b)).
I should advise that you have a right to request a review within 40
working days from the date we respond to your request. You should either
e-mail [2][email address] or write to the Information Manager,
Scottish Borders Council, Council HQ, Newtown St. Boswells TD6 0SA.
If after the Council’s FOI Advice Group have considered your review and
you are still not happy with the decision you then have a right to appeal
to the Office of the Scottish Information Commissioner, you do this either
by visiting [3]http://www.itspublicknowledge.info/Appeal or by post to:
Kinburn Castle, Doubledykes Road, St. Andrews, Fife KY16 9DS.
Yours sincerely
Jenna Waldie
for the
Information Management Team
Scottish Borders Council
Newtown St Boswells
TD6 0SA
E mail: [Scottish Borders Council request email]
Tel: 0300 100 1800
References
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2. mailto:[email address]
3. http://www.itspublicknowledge.info/Appeal
Dear Scottish Borders Council,
Please pass this on to the person who conducts Freedom of Information reviews.
I am writing to request an internal review of Scottish Borders Council's handling of my FOI request 'Correspondence with investment consultants & information on managing pension fund climate risk'.
The refusal notice implies that release of the requested information would be prejudicial to
commercial interests of the council &/or the person/consultants supplying it.
In its response, Scottish Borders has made no attempt to clarify to which specific types of information within the scope of the request (for e.g. email correspondence, risk register documents) commercial sensitivity should be applied?, nor any specific reasons or justification as to why each type of information held is deemed to be commercially sensitive or potentially damaging to the named parties?
As you may be aware, guidance states that when applying commercial sensitivity exemptions, an authority "must show that because [the information] is commercially sensitive, disclosure would be, or would be likely to be, prejudicial to the commercial activities of a person (an individual, a company, the public authority itself or any other legal entity)".
This response does not adequately explain why the release of information about climate risks associated with the Scottish Borders fund would be detrimental to either the council, or external consultant((s) - 'any persons'?) commercial interests?, so I am requesting that you conduct an internal review, and, if the exemption is upheld, show how the release would be prejudicial to commercial activities, and of whom?
In DoH vs Information Commissioner (EA/2008/0018) - it was held that while some contractual information may be exempted from disclosure, this should not result in the blanket exemption of whole contracts or documents, and any decision to redact or disclose should be taken on a clause by clause, point by point basis.
Please note I have zero interest in obtaining commercial fee or price structure information relating to information, contracted services, or advice the council has sought and received from external third parties - the request is targeted at the communications of senior council staff, with no realistic expectation of privacy when conducting public affairs - in order to better understand how public money is being invested and spent - and how councils responsibilities to manage climate risks, protect the environment, and contribute towards achieving the UK's wider net zero goal are being shaped by external investment consultants.
In relation to claims of commercial confidence - procurement framework guidance provided by Scottish Borders to the consultant(s) at bidding stage makes clear that any communications or information provided to the council will be subject to FOIA. Additionally, any climate risk assessment advice or modelling undertaken by the consultant(s) is only made possible with information and investment assumptions provided by Scottish Borders to the consultant(s), therefore hiding behind commercial sensitivity claims could be viewed as a convenient vehicle by which Scottish Borders could shield the assumptions it makes about the future impacts of climate change on future fund returns from effective public & LGPS member scrutiny.
Some examples of climate scenario analysis seen at other councils show implausibly low future impacts for 4 degrees warming, in a scenario described by climate scientists as "hellish" where society as we know it would cease to function, the pension fund assets are only shown to suffer annual losses in the order of ~1%?!
In deciding to withhold the information, the council has not applied the public interest test, nor considered how release of climate risk information would likely benefit both LGPS scheme members, and local taxpayers, by providing reassurance that the scheme is actively managing climate risks, while attempting to lower the funds climate impact.
The information requested pertains to climate risk assessments relating to significant public expenditure - namely, consultancy expenditure and the DB pension scheme investments of public sector workers - underwritten by the taxpayer, and how those schemes are managed in a way which provides for both a stable income in retirement for members, and either contributes towards achieving a liveable climate for scheme members and wider society, or as is presently the case - further contributes to the ongoing growth in global emissions - driving climate breakdown.
As such, given both the substantial sums of public money being managed, and the schemes investments in large financial, transportation, industrial, agricultural and fossil fuel sector companies driving climate change - there is a legitimate public interest in understanding upon what information and advice scheme funds are being invested, and that such information and climate risk advice, in the absence of any regulatory oversight, is consistent with the latest climate science on expected future global warming, and its likely effects on both the environment, and future pension scheme returns.
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
Dear Joel M Benjamin
I acknowledge receipt of your email requesting a review of the Council’s
response to your request for information under the Freedom of Information
(Scotland) Act 2002 relating to the above.
The FOI Advice Group shall meet within the 20 working day period and a
response will be sent to you within that timescale.
Yours sincerely
Nicola Driver
Information Management Team
Scottish Borders
Dear Joel M Benjamin
Please find attached the Council’s response to your review request.
Kind regards
Jenna Waldie
Jenna Waldie
Information Manager
Information Management Team
Legal & Licensing
Scottish Borders Council
Tel: 01835 824000 ex.8028
[1][email address]
References
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