LB Tower Hamlets Pension Committee Presentation 22 September 2020 - PowerPoint PPT Presentation

LB Tower Hamlets Pension Committee Presentation 22 September 2020 2020322 1

Agenda Sections Page LCIV CIO & Head of Responsible Investment Introduction 3 1 2 LCIV Investment Team Future Plans & LCIV Communications 6 ESG and RI at LCIV & Product Pipeline 3 9 4 London Borough of Tower Hamlets Pension Fund – LCIV Portfolio 16 Appendix: LCIV 100% Renewable Infrastructure Fund (Preliminary Fund Terms) 5 22 2

LCIV CIO & Head of Responsible Investment Introduction 1 Confidential – Not for Publication or Distribution 3

Jason Fletcher Ja Chief Investment Officer Education IIMR exams, CFA Society of the UK Regulation BSc Economics degree from the London School of Economics ▪ SMF3 Executive Director, SMCR certifications, CF30 and CF27 Downlands School, West Sussex and Haywards Heath 6th Form College ▪ Cost Transparency Initiative and Pensions Leadership Group. Skills Experience Years (29) Active Equities London CIV July 20- Present Factor based Investing CIO Derivatives LGPS Central 2 ½ years Building Investment teams CIO Responsible Investment and Engagement West Midlands Pension Fund 1 year CIO Asset Allocation Manager Selection USS Investment Management 21 years DCIO and Equities Manager Fund Management British Airways Pensions 5 years Private Markets Investment Trainee and Investment Analyst Hedge Laying Racquet Sports

Jacqueline Ja Ja Jackson Head of Responsible Investment Education CFA ESG Level 4 Jacqueline is a responsible investment professional and conceptual artist. She is committed to supporting Sustainable Finance at The Smith School of Enterprise and the Environment, University of Oxford the UN Sustainable Development Goals to tackle the global challenges we face, recognising that environmental and socioeconomic factors are not just a moral imperative but an economic necessity. She Alt MFA, Fine Art, London has experience delivering public speaking and training on responsible investment, podcasts on climate MFA (and BFA) in Fine Art, The Ruskin School of Drawing and Fine Art, change and environmental publications. Her artwork has been featured in the Times and Art World University of Oxford Magazine. This year is curating a piece for Kensington + Chelsea Art Week 2020. Jacqueline lives in Newham but spends most of her time in Southwark, Islington, Hackney or Tower Hamlets. Skills Experience Years (12) Manager Selection Responsible Investment London CIV June 2020- Present Head of Responsible Investment Project Management Climate Analytics Environmental Factors ESG Strategy Development S&P Global 3 ½ years Director, Business Development, Responsible Investment ESG Strategy Implementation Socioeconomic Analysis Trucost 3 years ESG Data Gathering ESG Integration Account Director, ESG Responsible Investment Reporting Stewardship Modern Networks 2 ¾ years Saxophone Managing Teams Account Director, Marketing Executive Conceptual Art Training and Workshop Delivery 2020, VCCP and Brothers and Sisters (All Advertising Agencies) 1 ½ years Strategic Planner, Art Director and Copywriter Carpentry Research Waterlow Residents 9 years Presentation and Design Welding Board Member

LCIV Investment Team Future Plans & LCIV Communications 2 Confidential – Not for Publication or Distribution 6

Confidential – Not for Publication or Distribution

Tran anspar arency, Lis Listening an and Com ommunicating Web ebsite See Seed and nd Cl Client Investor or Port ortal Grou Gr oups Ho How w can we e help help man manage you our pen pension on Pen ensio ion liabili litie ies? Commit Co ittee Mee Meetin ings gs How Do Ho Do We e Com Communicate? Fee eedback Resp espon onsib ible le Investment Workin orking g “Not keeping you Client Cl Grou Gr oup Co Cost t in the loop” – meetin mee ings gs Tran ansparency wor orkin ing g wi with you ou Workin orking g as par as partners! Grou Gr oup Confidential – Not for Publication or Distribution 8 8

ESG and RI at LCIV & Product Pipeline 3 Confidential – Not for Publication or Distribution 9

The Rise of ESG Increasing Expectations on Reporting Source: https://alphafmc.com/strong-foundations-the-rise-of-esg-and-responsibility-in-investing/

Overview of RI&E at LCIV Research and review Design Implement Disclose Client Policy Implementation Voting Principles London CIV Operations Peer Review Responsible Disclosure and Investment and Stewardship Transparency Code Selection Engagement Policy Regulation Stewardship Climate UKSC PRI TCFD Policy Investment Beliefs Collaboration

Progress to Date, Good News and Next Steps Implementation Priority Key Drivers Progress To Date Recommendation Client demand Review of climate data providers A: A, A, B 1.) Climate Policy Financial materiality LCIV is now a TCFD signatory as of June 2020 underway TCFD is now mandatory UKSC and SRDII Strategy & Governance, Listed New principles understood in LCIV requirements have Workshops and reviews have taken place 2.) Stewardship Policy Improved voting provision required Equity and Fixed Income increased with key proxy voting providers RFP process required “Apply and explain” Disclosure requirements ESG Analyst job search underway 3.) Capacity to Deliver Opportunity to deliver Head of Responsible Investment in place RI manager selection and assessment added value to clients criteria being strengthened Sustainable Equities Fund launched in 2018 Build ESG into the selection, with RBC Renewables Fund at SIG stage design and ongoing Sustainable Equities Exclusion Fund launched 4.) Product Offerings The London Fund opportunity is in management of investment in March 2020 with RBC development Global Core Equity fund launched with Morgan Stanley Need to implement policies Appointment of Chris Bilsland as NED ESG training planned for staff 5.) Culture Opportunity to deliver best- Champion Culture, values and vision statement in-class provision to clients Culture and values group set up underway Mandatory disclosure Provide thought leadership papers on requirements key topics 6.) Communications Compliance New website mapped (with client services) Provide RI text and information for Opportunity to drive website momentum

Responsible Investment By Design All Funds and managers will benefit from from Responsible monitoring and management by the London CIV as an overlay. Fund Structure Manager RI Design LCIV Sustainable Equity ACS, global equities Royal Bank Canada Invests in sustainable equities. Fully integrate ESG Fund Active issues into the Investment Process seeking to make a positive difference to their clients, companies they own and society as a whole through long term investment. LCIV Sustainable Equity ACS Global Equities Royal Bank of Canada Invests in sustainable equities with Carbon exclusions. Exclusion Fund Active Fully integrate ESG issues into the Investment Process seeking to make a positive difference to their clients, companies they own and society as a whole through long term investment. LCIV Infrastructure Fund EUUT Infrastructure Stepstone Seeks to Invest ~35% in renewables of the portfolio active with MIRA, Equitix, Arcus, Basalt and FSI. Currently seeking a pure-renewables fund. LCIV Global Core Fund ACS Global Equities Morgan Stanley Invests in quality factors and does not invest in Active Carbon intensive industries, Alcohol, Gambling and tobacco.

Product Pipeline All funds and managers will benefit from from Responsible monitoring and management by the London CIV as an overlay. LCIV Fund Planned structure Manager RI Design Renewables EUUT, Infrastructure London CIV The fund seeks to invest 100% in Active renewables within Infrastructure. London Fund SLLP Infrastructure, LLPI and London CIV Will invest in Renewables, Impact and Property and Equity to the benefit of Londoners in active Infrastructure, property and green initiatives. Low Carbon ACS Equity Passive Index and asset Will likely include carbon intensity, Equity manager green revenues as factors. Paris Aligned ACS Equity Active Active Manager Will invest in companies that are Paris Global Equity Aligned actively.

Renewables Renewables and RI Indicative Weightings: based on current portfolios in the market. There is a bias - In 2015, the UK Government set out their top 40 strategic The renewables fund provides material towards Wind and Solar, with “Other” including Biomass, Biogas and Hydroelectric. infrastructure priority areas for the next 6 years. SDG opportunities and a range of carbon and physical risk exposure mitigation - Of these 40, 4 would have been investible for this fund. metrics could be disclosed, e.g. CEAR, physical risk exposure, carbon footprint - Onshore/Offshore Wind = £17.8bn etc. - Other Renewable = £19.6bn - Transmission & distribution = £1.8bn - TOTAL = £39.2bn* - COVID-19 may change the priorities in the short term, but generation likely to still dominate project priorities. Wind Solar Other generation Transmission Distribution Brownfield Late Stage Development Sources: Stepstone SPI memos – average weights 2015 National Infrastructure Commission report *(Source: National Infrastructure Commission 2015 report)

London Borough of Tower Hamlets Pension Fund - LCIV Investments Portfolio 4 Confidential – Not for Publication or Distribution 16