Welcome to your 26th Annual Meeting S Agenda 11.00am Welcome - - PowerPoint PPT Presentation

welcome to your 26th annual meeting
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Welcome to your 26th Annual Meeting S Agenda 11.00am Welcome - - PowerPoint PPT Presentation

Welcome to your 26th Annual Meeting S Agenda 11.00am Welcome Councillor Biggins, Chair of Pensions Committee Pensions Administration update Debbie Sharp, Pensions Administration Manager Investment performance Justin Bridges, Head of


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S

Welcome to your 26th Annual Meeting

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11.00am Welcome Councillor Biggins, Chair of Pensions Committee Pensions Administration update Debbie Sharp, Pensions Administration Manager Investment performance Justin Bridges, Head of Treasury and Pensions Actuarial valuation update James Walton, Scheme Administrator LGPS Central investment update Valborg Lie and Gordon Ross, LGPS Central Responsible investments Sacha Sadan, Director Corporate Governance and James Sparshott, Head of Local Authorities, Legal and General 12.45pm Questions and close Councillor Biggins, Chair of Pensions Committee

Agenda

This meeting is being filmed and will be available to watch on our website. A meeting feedback form will be emailed to you after the meeting. Prefer paper? Some paper copies available after the meeting.

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SLIDE 3

Debbie Sharp

Pensions Administration Manager

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Pensions Administration Update

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About us

87 LGPS administering authorities in England and Wales We look after your LGPS pension in Shropshire

Main administration aim: accuracy, timeliness and value for money

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SLIDE 5

LGPS Structure

Scheme Advisory Board Secretary of State for MHCLG= “Responsible Authority” Pensions Regulator

Administering Authority = “Scheme Manager” Administering Authority = “Scheme Manager”

Pensions Board Pensions Committee (or equivalent)

National Local

LGPS Governance Structure

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SLIDE 6

Our role

Pay member benefits accurately and on time inline with regulations

Communicate effectively with members

Set out and assist scheme employers with responsibilities Collect and check data and contributions Keep robust internal controls Report to governing bodies Ensure data is kept safe

Issue annual benefit statements

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SLIDE 7

LGPS in England and Wales

47,700 total 16,340 active members 19,132 deferred 12,228 pensioners 199 employers*

5.9 million total 2.0 million active members 2.2 million deferred 1.7 million pensioners 18,037 employers

Shropshire County Pension Fund

*or 151 with current active members

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SLIDE 8
  • 1993 - 1st annual meeting
  • 1998 - LG reorganisation

(Transfer of services to T&W Council)

  • 1998 – Change in scheme rules
  • 1999 - Repercussions of mis-

selling personal pensions – reinstatements

  • 2000 – Early days of cyber

security - ‘millennium bug’

  • 2003 - 10th annual meeting

covering investment strategy, responsible investment

  • 2003 – Our website and ‘My

Pension Online’ launched

  • 2006 - Change in pensions tax

regime – ‘A’ day

  • 2008 – More changes to scheme
  • 2011 – Lord Hutton publishes

report on proposals to change public sector pension schemes

  • 2014 – Public sector pension

changes brings removal of final salary scheme and career average introduced

  • 2016 - End of contracting out
  • 2018 – TPR sets cyber

security principles for pension schemes

  • 2019 - Ban on pensions cold

calling

  • 2020s…….

Lets look back…

2010s 2000s 1990s

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SLIDE 9

What’s in-store for the next decade?

  • Further scheme changes? Equality repercussions from

McCloud case

  • Increasing use of technology in communicating
  • Automation of benefit administration
  • Dealing with repercussions from scammed transfers -

LG funds now being forced to reinstate

  • Pensions dashboard?
  • Cyber ‘resilience’ – top focus of TPR

More of the same…..

2020

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SLIDE 10

Helping members understand the scheme

Liaising with more employers

Changing regulations

McCloud missing data

Ensuring we don’t hold unnecessary data

More data to hold securely

Increase in third party payroll providers

06 01 02 03 04 05

Ongoing challenges

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SLIDE 11

A secure pension payable for life and adjusted to take into account cost of living In event of death pensions paid to spouse, civil partner, cohabiting partner and eligible children and a lump sum death grant Ill health and redundancy cover ‘Normal pension age’ linked to state pension age but option to take pension early between 55 – 75

LGPS benefit package overview

Cost – monthly employee contribution based on annual pay – 9 bands between 5.5% and 12.5%

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SLIDE 12

How does it work?

…benefits paid out are not investment linked – instead based on set formula in regulations using pay!

Employer and employee contributions and investment returns …

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SLIDE 13

National pensions consultations

Consultation Stage Key dates

Academy treatment in LGPS Still being reviewed Ongoing review Exit payment cap Consultation now closed and awaiting response Not likely before 1 April 2020 Fair deal – outsourcing protection Consultation closed April 2019 Ongoing Scheme valuation and cost management process Paused February 2019 Paused McCloud MHCLG looking at remedy Ongoing

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SLIDE 14

Update your personal details Check your pay/pension in payment Check current value Run benefit projections Check death benefits

Check your pension online

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Justin Bridges

Head of Treasury and Pensions

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Investment Performance Update

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SLIDE 16

Fund Overview

  • Value just above £1.91 billion as at 31 March 2019
  • Value of the Fund as at 28 Nov 2019 £2 billion
  • Membership – 47,700
  • 199 employers (or 151 with current active members)
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SLIDE 17

Index Linked Bonds, 10.0% Investment Grade Bonds, 7.5% Absolute Return Bonds, 7.5% UK Equities, 8.0% Global Equities, 24.0% Global Equities (Passive), 20.0% Property, 5.0% Private Equity, 5.0% Hedge Funds, 10.0% Infrastructure, 3.0% Index Linked Bonds Investment Grade Bonds Absolute Return Bonds UK Equities Global Equities Global Equities (Passive) Property Private Equity

Funds assets invested as at 31 March 2016

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SLIDE 18

Unconstrained Bonds, 24.0% Liability Driven Investment, 3.5% UK Equities, 8.0% Global Equities, 11.0% Global Equities (Passive), 28.0% Property, 5.0% Private Equity, 5.0% Hedge Funds, 7.5% Infrastructure, 3.0% Insurance Linked Security, 1.5% Property Debt, 3.5%

Unconstrained Bonds Liability Driven Investment UK Equities Global Equities Global Equities (Passive) Property Private Equity Hedge Funds

Funds assets invested as at 31 March 2019

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SLIDE 19

Annualised returns over last 3 financial years

9.5% 17.4% 11.0% 12.3% 14.8% 3.6% 8.3% 4.7% 6.7% 13.7% 8.6% 8.1% 11.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% UK Equities US Equities Europe Ex UK Equities Japanese Equities Emerging Market Equities UK Fixed Interest Gilts UK Index Linked Gilts UK Corporate Bonds MSCI UK Property*

Annualised Index returns from 31/03/2016 to 29/03/2019

Sterling terms Local currency terms

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Individual Manager Performance - 3 years annualised

  • 2.00

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00

Majedie - UK Equities MFS - Global Equities* Legal & General - Global Equities Investec - Global Equities* Harris Associates - Global Equities* LGPS Central - Global Equities** PIMCO - Global Bonds BlackRock - Global Fixed Income GAM - Absolute Return Bonds*** BMO - Liability Driven Investment*** Blackrock - Hedge Funds HarbourVest - Private Equity Aberdeen - Property Global Infrastructure Partners - Global Infrastructure Securis - Insurance Linked Securities**** DRC - Property Debt***** WHOLE FUND RETURN Percentage Return p.a. (%) Fund Benchmark

* terminated Feb 19 ** inception date 15/2/19 *** inception date 12/5/16 **** inception date 31/5/18 ***** inception date 31/10/18

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2 4 6 8 10 12 3 Year to March 2019 5 Year to March 2019 10 Year to March 2019

Annualised Return (%)

Shropshire Fund Composite Benchmark

Investment performance over 3, 5 and 10 years

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Expected forward looking annualised returns

Source: Aon Capital market assumptions as at 31 March 2019

6.7% 6.1% 6.8% 6.7% 8.2% 1.2% 0.2% 1.9% 5.2%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% UK Equities US Equities European Equities Japanese Equities Emerging Market Equities UK Fixed Interest Gilts (20 Yr) UK Index Linked Gilts (20 Yr) 10 Yr AA Corporate Bonds UK Property Capital Market Assumptions over 10 years in GBP

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SLIDE 23

Equity Protection Strategy

  • Equity Markets Rallied Strongly
  • Resulted in an increased Funding level
  • Equity Protection Strategy Implemented
  • Lock in gains and protect against future price falls
  • £580m of Equities protected against falls of between 3-30%
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SLIDE 24

Issues to be addressed in next 6-12 months?

  • Prepare for further transition of assets into LGPS Central.

£260m already transitioned in March 2019 into global active equities sub fund.

  • Review Investment Strategy following Valuation
  • Implement investment strategy changes
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SLIDE 25
  • The fund value increased by £421 million over the last 3 years &
  • utperformed its benchmark by 0.6% p.a.
  • 5 & 10 year performance positive & above benchmark
  • Investment Strategy Review commencing following valuation results

and work with LGPS Central.

  • Annual reports on the Pension Fund website

To Sum Up

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James Walton

Scheme Administrator and Director of Finance, Governance & Assurance

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Overview of the 2019 Actuarial Valuation

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Purpose of an Actuarial Valuation

F U T U R E PA S T

Has the Fund got enough money to pay benefits earned to date? How much money is needed to pay benefits earned in future? Regulations say you have to…

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SLIDE 28

Timeline

31 March 2019 Valuation Date May / June / July 2019 Initial discussions on position and

  • assumptions. Mercer receive data

extract and begin data analysis June / August 2019 Data validation and queries provided April / May 2019 Employers provide renewal data to Fund August / September 2019 Calculations performed, and discuss results with Fund September / November 2019 Provide individual employer results and employer meetings take place. November 2019 – January 2020 FSS consultation. Employer contributions agreed and prepayment decisions made March 2020 Contributions certified and valuation process completed

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Purpose of an actuarial valuation - valuation outcomes

Assets Deficit Liabilities

PAS T S E RV I C E B E N E F I T S F U T U R E S E R V I C E B E N E F I T S

C O N T R I B U T I O N I M P A C T Deficit spread over agreed “Recovery Period” VARIES BY EMPLOYER C O N T R I B U T I O N I M P A C T Cost of 1 year’s service “Future service contribution rate” VARIES BY EMPLOYER

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What do we mean by funding?

Inflation Life Expectancy

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Where have we been? Recap of fund results as at 31 March 2016

PRIMARY CONTRIBUTION RATE % OF PENSIONABLE PAY 31st MARCH 2016 31st MARCH 2013 Normal contribution rate for retirement and death benefits 20.6 19.8 Allowance for administrative expenses 0.6 0.5 Total normal contribution rate 21.2 20.3 Average member contribution rate 6.3 6.3 Primary contribution rate 14.9 14.0 2013 Deficit £383m

Funding level 76% Funding level 84%

2016 Deficit £278m

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SLIDE 32

Where are we now? demographic assumptions update

Analysis Effect on Deficit (Whole Fund) Effect on Future Service Rate (Whole Fund) Comment in relation to Fund Life Expectancy Analysis indicates reductions from last time. Ill-Health Retirement General increase in numbers observed across LGPS. SCPF at the lower end of

  • bserved trend.

Withdrawal No material change so maintain assumption. Retirement Rates (pre 14 benefits) Some changes in observed retirement

  • patterns. Not significant from a liability

point of view (maintain assumption). Commutation Slight trend upwards in terms of commutation. Proportions Married / Dependants No material change so maintain assumption.

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Where are we now? 2019 whole fund results

2016 Valuation 2019 Valuation Including estimated McCloud impact

Assets £1,494m £1,915m £1,915m Liabilities £1,772m £2,047m £2,061m Surplus/ Deficit

  • £278m
  • £132m
  • £146m

Fund Level 84% 94% 93% Future Service Rate (% of pay) 14.9% 16.6% 17.3% Deficit Recovery Period 22 years 19 years 19 years Real Discount Rate (Past) 2.35% p.a. 1.85% p.a. 1.85% p.a. Real Discount Rate (Future) 2.75% p.a. 2.25% p.a. 2.25% p.a. Long Term Pay (Real) 1.50% p.a. 1.25% p.a. 1.25% p.a. Short Term Pay 2016 Valuation None None Life Expectancy Assumption CMI 2015 1.5% CMI 2018 1.5% CMI 2018 1.5%

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SLIDE 34

Where are we heading? what still don’t know…

Lots of flexibility in the Funding Strategy Statement needed….

McCloud and the cost cap

  • utcomes

4 year valuations & associated regulation changes How covenant and affordability has changed Impact on individual employers

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SLIDE 35

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LGPS CENTRAL LIMITED OVERVIEW

28th November 2019

Shropshire Pension Fund AGM 2019

Gordon Ross Deputy Chief Investment Officer Valborg Lie Stewardship Manager

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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The LGPS Central Pool –Working in Partnership

  • 8 Partner Funds
  • Circa £45bn collectively under management
  • Circa 1 million Scheme Members
  • Over 2,000 employers
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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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Recap and update on Pooling

  • Government policy to generate savings in investment management fees

without compromising performance

  • Expectation that pooled LGPS investments are within a regulated

environment

  • LGPS Central is being designed to deliver:
  • Total cumulative 16-year cost savings of £248m for Partner

Funds, with break-even in 2024/25

  • Shropshire savings £36m
  • Dedicated and cost-effective in-house investment options

for shareholders

  • Robust governance and assurance by setting up an FCA-

regulated entity

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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The LGPS Central Limited –Who are we? LGPS Central Limited is authorised and regulated by the Financial Conduct Authority as an asset manager and operator of alternative investment funds and currently has circa £20bn of assets under its stewardship

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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The LGPS Central Pool – Progress to Date

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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The LGPS Central Pool – Progress to Date 2019

January 2019 Launch of our Private Equity Fund February 2019 Annual Stakeholders’ Day March 2019 External managers selected for Corporate Bonds Fund May 2019 Corporate Bond Fund receives FCA approval July 2019 Climate Multi Factor Fund receives FCA approval July 2019 First LGPS Central Responsible Investment Summit July 2019 LGPS Central Limited Emerging Markets Fund goes live August 2019 LGPS Central Limited partners with KAS Bank on cost transparency reporting August 2019 LGPS Central shortlisted as Pool of the Year at LAPF Investments Awards September 2019 LGPS Central’s first graduate scheme members start at the Company October 2019 All World Equity Climate Multi Factor Fund launched January 2020 COMING SOON: Launch

  • f the Corporate Bonds

Fund December 2018 FCA Permissions granted for Private Equity November 2018 Launch of Global Equity Active Multi Manager Fund

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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Progress to Date

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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Benefits to Shropshire

Lower investment cost

  • £36m cost savings
  • Full cost transparency
  • Scale advantages
  • Pooled assets – Global Active Equities
  • Internal asset management

Creates a sustainable long-term investment business which as shareholders you are able to influence to meet your needs.

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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LGPS Central Limited sub-Funds: Our Current Product Offerings Global Investment Grade Corporate Bond Fund due to be launched January 2020

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

44

Responsible Investment & Engagement

In alignment with Partner Fund`s objectives, we aim to: 1) Primarily, support investment objectives: 2) Secondarily, be an exemplar for RI within the financial services industry and raise standards across the marketplace. These objectives will guide all RI related efforts, including Selection and Stewardship activities.

Source: RI&E Framework

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

45

RI&E framework

Selection Stewardship Transparency & Disclosure

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

46

RI&E in Fund Manager Selection & Monitoring

  • PQQ
  • RfP
  • Meetings
  • Portfolio

analysis

  • Calls
  • Meetings
  • ESG data
  • Engagement

data

  • Quarterly
  • Voting
  • Engagement
  • Climate data
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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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Expectations on investors

Revised UK Stewardship Code – takes effect Jan 2020 The Stewardship Code is the “mothership” for similar codes across more than 20 jurisdictions globally What is new in the revised code: 1) It redefines stewardship – addresses economic, environmental and social sustainable outcomes as part of the bigger investment picture 2) It sheds light on the responsibilities of the different actors across the investment chain (12 principles for asset owners) 3) It covers all asset classes and goes beyond listed equities 4) It requires reporting on activities and outcomes

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

How we engage Activities

  • Company-engagement
  • Directly or
  • Collaboratively
  • Industry participation
  • Policy engagement

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

Stewardship Themes Stewardship Themes have been determined based on a Client Survey Identification criteria

  • Economic relevance
  • Ability to resource
  • Stakeholder relevance

Climate change Single-use plastics Tax Tech and disruptive industries

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

Targets and results

Climate change Single-use plastics Tax

  • Engagement on 2°C pathway

and remuneraon

  • Shell has:
  • Set carbon intensity targets for next 3-5-year

period as part of carbon reduction ambitions

  • Linked carbon reduction targets with long-

term incentive plans of senior executives

  • Ceased its membership of the American Fuel

& Petrochemical Manufacturers

  • Tailings dam collapse (Jan 2019) with

200 fatalities and 10 million cubic meters of waste into the environment

  • Investor Mining &Tailings Safety

Initiative

  • Asking 655 mining companies for:
  • Location of each tailings dam
  • Classification according to the

consequences of failure

  • Safety standards to protect people

and environment

  • Remediation and reporting

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

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Climate Risk Monitoring Service

Climate Risk Reports, aligned with TCFD Carbon Risk Metrics Climate Scenario Analysis Climate Stewardship Plan

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

Transparency and Disclosure

Climate change Single-use plastics Tax Source: LGPS Central Limited

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

Find out more – visit our website WWW.LGPSCENTRAL.CO.UK

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LGPS Central Limited is authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No: 10425159. Registered Office: Mander House, Mander Centre, Wolverhampton, WV1 3NB

Disclaimer

54

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SLIDE 55

ESG demystified

Intended for professional clients only. Not to be distributed to retail clients. November 2019 Legal & General Investment Management

Sacha Sadan – Director of Corporate Governance

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What is ESG?

Environmental, Social and Governance (ESG) risks and opportunities

56 Weight of stocks with unequal voting rights in the MSCI World Index (%)

Loss of shareholder rights Business scandals

“Facebook, Google Regulatory Woes Erode $137 billion from FANGs” – Bloomberg

E S G Stranded assets

“Estimated losses are large – $1tn-$4tn when considering fossil fuels alone”

  • Bank of England

Talent retention Growth potential

The green economy is now the same size as the oil and gas industry

  • FTSE Russell

Well-run companies

“Millennials want to work for employers committed to values and ethics”

  • The Guardian

Source: MSCI (index constituent data as at 1 September 2017), Bloomberg, Bank of England, The Guardian FTSE Russell analysis of the market cap of the green economy, Fitch Ratings

“22% of our current corporate ratings are being influenced by E, S or G factors” – Fitch Ratings

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SLIDE 57

Defining ESG

Numerous components

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Climate change/ Energy Water Waste Biodiversity General Pollution Corruption Bribery Supply Chain Employee/ Community relations Human Rights Board of Directors Investor rights Remuneration Auditor/ Advisors

Financials

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SLIDE 58

How to think about ESG

If this is something you want, how do you express it?

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Increasing client demand Improved ESG client reporting Looking after members’ interests Innovation in ESG data and analytics Regulatory pressures Shift from ethics to financial materiality Market changes Different ways to implement Responsible Investing

For illustrative purposes only.

Exclusionary Approach: Identify the worst companies and sectors Active Ownership: Engage for positive change across all companies and sectors ESG Integration ESG information integrated into the investment process Capital Allocation: Reward the best companies and sectors Thematic/sustainable investing Including ESG objectives into investment strategies

Impact

Impact Investing: Positive, measurable social and environmental impact along a financial return

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SLIDE 59

LGIM’s ESG capability

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Stewardship

Engagement with consequences

Integration

ESG transparency and reporting

Client Solutions

Proprietary tools and long-term themes

Products

Mainstreaming ESG

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SLIDE 60

How LGIM engage on your behalf

60

*Source: IPE’s top 400 UK asset manager tables 2018. **Source: IPE’s top 120 European institutional managers table 2018.

Recognised as industry leader, delivering on

  • ur vision
  • Truly long-term views
  • Manage conflicts of

interest

  • Influence rather than

noise We build trust and long-term relationships

  • Using our votes

(not abstaining)

  • Collaborate with others

We escalate concerns

  • Firm-wide commitment
  • Address emerging issues
  • Cross-team collaboration

We integrate ESG to make better investment decisions

  • Number one asset

manager in the UK*

  • Number two institutional

asset manager in Europe** We use our scale to influence

Long-term returns for clients

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SLIDE 61

Engaging with consequences

LGIM’s escalation procedure

Direct engagement

Quality over quantity In 2018, LGIM held 236 meetings with companies, with 52% outside the UK

Collaborative engagement

Strengthening our voice In 2018, LGIM actively involved in at least 20 formal collaborative programs

Vote against

LGIM does not sit on the fence and does not abstain In 2018, LGIM voted against at least one resolution at 73% of companies

Capital allocation

Capital allocation drives change In 2018, LGIM introduced the Future World fund range to support clients in going further in integrating ESG

Engage regulator

In 2018, LGIM met regularly with key global regulators

Public pressure

Name and shame In 2019, LGIM named 11 companies as part of the Climate Impact Pledge 61

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SLIDE 62

0% 20% 40% 60% 80% 100% Manager E Manager D Manager C Manager B Manager A

Significant variation in industry practices

Are your rights to hold companies to account exercised?

6 2

Monitoring asset managers’ voting and engagement

Sources: Majority Action - Climate in the Boardroom (2019) , analysis of the voting records of the world’s 25 largest asset managers looking at support for management (directors and say-on-pay votes) in large capitalisation US energy and utility companies, climate proposals at S&P 500 companies, and political lobbying transparency at 49 energy, 2 auto and 1 financial services companies.

95%

Level of support for ‘climate-critical’ resolutions Level of support for political influence disclosure resolutions Level of votes against executive compensation

Average Top 5 asset managers

95

%

LGIM

100

%

27

%

24

%

28

%

6

%

Support for ‘climate-critical’ resolutions in US from LGIM vs. top 5 asset managers (2019)

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SLIDE 63

LGIM Climate Impact Pledge

Low scores High scores Meaningful improvement Failure to change

Industries

  • Energy
  • Transport
  • Finance
  • Agriculture

Sectors

  • Oil & Gas
  • Mining
  • Utilities
  • Autos
  • Banks
  • Insurance
  • Food Retail

Statement re climate and energy impact Transparency Board/governance structure Strategy of resilience and innovation Reputation Public policy

Identify key engagement companies LGIM analysis of ~90 companies Engagement over 12 months

Vote Against Possible Reduction

Review impact and adjust

Public Announcement 63

For illustrative purposes only.

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SLIDE 64

LGIM Climate Impact Pledge

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  • ExxonMobil
  • Rosneft Oil
  • Korean Electric Power
  • Subaru
  • Hormel Foods
  • Kroger

Engagement over 12 months No response No major improvement Following public announcement in 2018, Our engagement saw much improvement with 25% of companies being reinstated in 2019 Divestment Vote against

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. For illustrative purposes only.

…Engagement with consequences

  • Sysco Corporation
  • Loblaw
  • Metlife
  • China Construction Bank
  • Japan Post Holdings
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SLIDE 65

Case study: oil & gas

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2018 2019 No disclosure of total carbon emissions; No emissions targets Emissions targets are ‘superfluous’ Industry-leading targets, linked to pay Full disclosure; Targets in progress No disclosure of total carbon emissions; No emissions targets

Source: FT

Pushing for better standards within the sector

Royal Dutch Shell Occidental Petroleum Corporation Exxon Mobil Corporation

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SLIDE 66

Case study: BP

Alignment with climate change

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  • LGIM put forward a

shareholder resolution calling for BP to explain how its strategy is in line with the Paris Agreement on climate change

  • LGIM worked with the board
  • f BP to secure their support

for the motion

LGIM’s concerns LGIM’s actions Outcome

  • It is important for carbon-

intensive companies such as BP plc to realise the implications of a shift to a low-carbon economy

  • The proposal was passed

with overwhelming approval from BP’s shareholders (99%)

  • We look forward to

improved reporting and collaboration with the company

  • We continue to engage
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SLIDE 67

Case study: Snap

Protecting shareholder rights, an ongoing concern

67

  • Snap was not included in the

major investable indices

  • However, MSCI held that

going forward it would allow such companies to be included in its indices

  • Called for public

consultation by the major index providers

  • Co-ordinated with investor

associations to ensure consistent investor response

LGIM’s concerns LGIM’s actions Outcome for all

Snap – fourth largest tech IPO:

  • No voting rights for the

listed equity

  • Founder control embedded

to perpetuity

  • Eligible for entry to indices

Source: IPE

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SLIDE 68

LGIM – promoting a sustainable financial system

68

Asset owners Asset managers Companies

  • Guide to climate

change

  • Carbon

footprinting and analytics

  • The Climate Impact

Pledge: robust climate engagement with some of the world’s largest companies

  • Climate change policy
  • Collaboration with other

investors and consistent support for climate shareholder proposals

  • Reporting in line with the

Task Force on Climate- related Financial Disclosures (TCFD)

  • Proprietary model of the

energy transition to inform asset allocation and TCFD reporting

  • Public and client

ESG reporting

  • Webinars and

events

  • Blogs and

podcasts

Beneficiaries and the public Regulators

  • Global advocacy

to promote sustainable markets

  • Guide to climate

change

  • Guide to

ESG scores

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SLIDE 69

A continuing programme of education and innovation

Thought Leadership

Changing the way we think about Future World investment

MEMBER NEWSLETTER PRESS THOUGHT LEADERSHIP

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SLIDE 70

Legal & General Investment Management

70

LGIM Disclaimer and important legal notice

The information contained in this document (the ‘Information’) has been prepared by Legal & General Investment Management Limited, or by Legal and General Assurance (Pensions Management) Limited and/or their affiliates (‘Legal & General’, ‘we’ or ‘us’). Such Information is the property and/or confidential information of Legal & General and may not be disclosed by you to any other person without the prior written consent of Legal & General. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the Information, or any other written or oral information made available in connection with this

  • publication. Any investment advice that we provide to you is based solely on the limited initial information which you have provided to us. No part of this or any other document or presentation provided by us

shall be deemed to constitute ‘proper advice’ for the purposes of the Pensions Act 1995 (as amended). Any limited initial advice given relating to professional services will be further discussed and negotiated in order to agree formal investment guidelines which will form part of written contractual terms between the parties. Past performance is no guarantee of future results. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you

  • riginally invested.

The Information has been produced for use by a professional investor and their advisors only. It should not be distributed without our permission. The risks associated with each fund or investment strategy are set out in this publication, the relevant prospectus or investment management agreement (as applicable) and these should be read and understood before making any investment decisions. A copy of the relevant documentation can be obtained from your Client Relationship Manager. Confidentiality and Limitations: Unless otherwise agreed by Legal & General in writing, the Information in this document (a) is for information purposes only and we are not soliciting any action based on it, and (b) is not a recommendation to buy or sell securities or pursue a particular investment strategy; and (c) is not investment, legal, regulatory or tax advice. Any trading or investment decisions taken by you should be based on your own analysis and judgment (and/or that of your professional advisors) and not in reliance on us or the Information. To the fullest extent permitted by law, we exclude all representations, warranties, conditions, undertakings and all other terms of any kind, implied by statute or common law, with respect to the Information including (without limitation) any representations as to the quality, suitability, accuracy or completeness of the Information. Any projections, estimates or forecasts included in the Information (a) shall not constitute a guarantee of future events, (b) may not consider or reflect all possible future events or conditions relevant to you (for example, market disruption events); and (c) may be based on assumptions or simplifications that may not be relevant to you. The Information is provided ‘as is' and 'as available’. To the fullest extent permitted by law, Legal & General accepts no liability to you or any other recipient of the Information for any loss, damage or cost arising from, or in connection with, any use or reliance on the Information. Without limiting the generality of the foregoing, Legal & General does not accept any liability for any indirect, special or consequential loss howsoever caused and on any theory or liability, whether in contract or tort (including negligence) or otherwise, even if Legal & General has been advised of the possibility of such loss. Third Party Data: Where this document contains third party data ('Third Party Data’), we cannot guarantee the accuracy, completeness or reliability of such Third Party Data and accept no responsibility or liability whatsoever in respect of such Third Party Data. Publication, Amendments and Updates: We are under no obligation to update or amend the Information or correct any errors in the Information following the date it was delivered to you. Legal & General reserves the right to update this document and/or the Information at any time and without notice. Although the Information contained in this document is believed to be correct as at the time of printing or publication, no assurance can be given to you that this document is complete or accurate in the light

  • f information that may become available after its publication. The Information may not take into account any relevant events, facts or conditions that have occurred after the publication or printing of this

document. Telephone Recording As required under applicable laws Legal & General will record all telephone and electronic communications and conversations with you that result or may result in the undertaking of transactions in financial instruments on your behalf. Such records will be kept for a period of five years (or up to seven years upon request from the Financial Conduct Authority (or such successor from time to time)) and will be provided to you upon request. Legal & General Investment Management Limited. Registered in England and Wales No. 02091894. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119272. Legal and General Assurance (Pensions Management) Limited. Registered in England and Wales No. 01006112. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, No. 202202. The LGIM Workplace Savings division on behalf of both Legal and General Assurance Limited. Registered in England and Wales No. 00166055. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. As well as Legal & General (Portfolio Management Services) Limited. Registered in England and Wales No. 02457525. Authorised and regulated by the Financial Conduct Authority, No. 146786. Registered Offices: One Coleman Street, London, EC2R 5AA.

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SLIDE 71

Statement from Blackrock

‘The BlackRock Investment Stewardship team is one of the largest in the industry with 45 individuals operating across 7

  • ffices globally.

There are three pillars to our approach; engaging with companies, using our vote and promoting thought leadership. Climate risk is a key area of focus for us. In 2019 we have engaged with 207 companies globally with the majority our engagements being in-person. The aims of the climate risk engagements are to:

  • Ask companies to review and consider reporting in alignment with the Task Force on Financial Disclosures. This

framework encourages reporting on four pillars; governance, strategy, risk management and metrics.

  • Gain a better understanding, through disclosures, of the process that each company has in place to manage climate

risks and understand obstacles the company anticipates in reporting.

  • Understand how those risks are likely to impact the business.

An example of this approach is our engagement with Exxon Mobil where our engagement over a period of four years led to significant progress on climate disclosures. We continue to take issues surrounding climate risk very seriously and will ensure our engagement continues’

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SLIDE 72

S

Thank you for listening Any questions?