Statement on pensions investments
Cllr Robert Chapman, Chair of the Council’s Pensions Committee, said: "I would like to respond to concerns about the Local Government Pension Scheme Fund’s investments in companies associated with the recent tragedy in the Middle East.
"I share the feeling of sadness and anger at the events in Israel and Palestine recently. Now that a ceasefire has been agreed, I hope that the international community will continue to push for a long-lasting solution to the conflict, secure a two-state solution and peace.
"Because, caught in the middle of these all too frequent wars, are the civilians of Israel and Palestine. I understand that 279 Palestinians, including 66 children, and 12 Israelis, including two children, died in the latest conflict ─ each death is a tragedy.
"First, I want to be clear that Hackney Council does not directly invest council taxpayers’ money in companies. The Pension Fund’s assets are managed by external managers, with oversight from the Council’s Pensions Committee, which I chair.
"The Committee has recently reviewed the Fund's investment strategy and will be making some significant changes in order to move to a greener and more sustainable portfolio. The Pensions Committee also firmly believes that human rights issues ─ as well as environmental, and social issues ─ are vital considerations when making investment decisions, and as such, we will also be reviewing our Pensions Fund’s responsible investment policies. As part of this, we will continue to monitor relevant legislation, court decisions and other developments.
"The Council’s pension fund is an active member of the national Local Authority Pension Fund Forum (LAPFF) which acts collectively using the weight of its 82 member Funds to champion responsible investment. The forum is actively engaging with companies cited by the UN as being involved in certain specified activities related to the Israeli settlements in the Occupied Palestinian Territory.
"However, the Pensions Committee’s primary duty is a financial one ─ to ensure that the Fund is able to pay pension benefits to its members when they become due. This is reflected in the Law Commission’s guidance that states that non-financial decisions cannot be made if they risk significant financial detriment.
"Staff members’ and former staff members' pensions are invested so that the Pension Fund does not enter into a deficit and has enough money to continue paying out pensions when they are due. As such, the Fund cannot make investment decisions based on moral or political grounds alone.
"The investments are a small part of a very large pooled investments and the Fund has no direct holdings in any company through its equity portfolios. However, we have been advised that the transition costs that the fund would be exposed to in moving away from these particular investments would be significant and therefore likely to conflict with our overarching fiduciary duty.
"For example, in the case of Elbit Systems, the Pension Fund’s stake in this company in December 2020 only amounted to approximately £34,500 - , 0.01% of the particular external investment fund that the holding is contained within, that whole investment fund was valued at £344.8 million.
"It is not possible for our Pensions Committee to direct the disposal of any particular holding within the investment fund. The only way of disinvesting would be to dispose of the whole investment fund and I have been advised that should the Pension Fund seek to do that we could incur costs and fees totalling as much as £1.5 million.
"While we cannot commit to any form of divestment that we believe might lead to financial detriment and potential breach of Law Commission guidance, responsible investment remains at the forefront of the Committee’s agenda."