The arrival of pooling has placed particular responsibilities on non-executives inside LGPS. Chris Bilsland reveals his focus on governance, communication, ESG and strategy.
The key responsibilities of all non-executive directors are pretty well understood. Essentially it’s to help formulate strategic direction, monitor performance, determine remuneration, oversee risk and generally be a constructive critic to the plans being devised by the chief executive and the executive team.
In the world of the LGPS and pooling I would suggest there are some additional nuances to the role of a non-executive. Pools are new and, as new relationships bed down, they need to pay particular attention to the effectiveness of governance, to communication, and to the networks in place between the pools and their shareholders and customers. As pools have limited resources, so non-executives should also share some specialist skills and experiences to be able to assist management.
An important dimension, at least to our company, is that as we are authorised and regulated by the Financial Conduct Authority (FCA) there is an additional and important responsibility to comply with the FCA’s rules and regulations. Compliance, in my experience, operates at a much more complex level that I was used to as a local government officer. FCA compliance runs through everything we do and should always be at the forefront of the non-executive’s mind.
Strategy & valuation
But what are the big business issues that we are attending to at present? First and foremost, our three-year financial plan and budget for 2020–21. We have a responsibility to consult with our shareholders on this—well in advance of the financial year—and that consultation will shortly commence. Although, if there were to be any material variations, we would have already been sharing these through our shareholders committee.
To reinforce our financial plans, we will shortly hold our annual strategy day for the board. Here we will be looking at our business model and more than likely finessing it in accordance with issues that have, or are likely to, emerge.
Our business is essentially asset management and the asset under management (AUM) figures are key to our plans. We are particularly interested in factoring in our boroughs’ plans for pooling as collated in the recent MCHLG survey and any likely changes in strategy as a result of the 2019 valuations.
An example of a particular issue we will focus on is our approach to ESG (evironmental, social and governance) and the impact of climate change, which is dominating much discussion in the LGPS at present.
It’s my own view that the declarations of climate emergency that we have seen this year will have a profound impact on the way we run our business.
Pipeline
As with most companies, ours is a people business and it’s not only an important general non-executive responsibility, but a particular requirement from our shareholders to keep our remuneration and people policies under constant review.
As the chair of our investment oversight committee, I pay particular attention to the pipeline of new fund launches and also, of course, the investor performance of our fund managers. As a regulated investment manager, we have to adopt a very thorough, rigorous and continual assessment of our managers, and if we identify any areas of particular risk, take measured and proportionate action.
And last, but not least, we need to review annually our own effectiveness, and in particular the way in which the board and committees operate and focus attention on any areas where improvement is necessary.
The key constant for the LGPS pool non-executive that runs through all decision making is to ensure that the pool meets its shareholders’ objectives, adds value to its clients and is itself sustainable. And, of course, these are very challenging times to be making those decisions.
Chris Bilsland is chair of the investment oversight committee, London CIV.
