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Active stewardship

Responsible investment (‘RI’) is fundamental to our investment approach. As a long-term investor and representative of asset owners, we are committed to the effective and active stewardship of the companies in which we invest, regardless of asset class.

We believe businesses that are governed well and manage environmental and social factors are more resilient, able to survive shocks and have the potential to provide better financial returns for investors. It is therefore important that responsibility for RI does not sit with a single, siloed team, but is embedded throughout the organisation with appropriate oversight.

Our approach to RI is developed in collaboration with our Partner Funds. We embed environmental, social and governance (‘ESG’) analysis into our investment process across all asset classes. At the core of our approach is our role as an active steward of our customers’ capital. We know we are stronger together, and we use our collective voice to hold companies to account via voting and engagement, all in pursuit of our purpose to make a difference.

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Engaging to make a difference

As a long-term investor and representative of asset owners – our Partner Funds – we are committed to being active stewards of the companies in which we invest, regardless of asset class, whether this be traditional listed equity and fixed income or private markets assets.

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  • As an active investor, we embed responsible investment at the heart of our analysis and investment decision-making process for all assets. We have an in-house Responsible Investment team which acts as our centre of expertise, providing research and support to mitigate and manage material environmental, social, and governance risks.

    We are a long-term investor and representative of asset owners and hold companies and asset managers to account regarding environmental, social and governance issues, including climate
    change factors, that have the potential to impact corporate value.

    We believe that engagement is a vital component of active ownership. Meeting and engaging with companies are integral to the investment process. As part of our stewardship duties, we monitor investee companies on an ongoing basis and act if investment returns are at risk.

  • Environmental, social, and governance (ESG) factors tend to be longer term in nature and can pose real material financial risks to an investment, but can also create opportunities. It is therefore important that, as a long-term investor, we take them into account when analysing potential investments. The factors considered are those which could cause financial and reputational risk, ultimately resulting in a reduction in corporate and shareholder value. 

  • Our engagement strategy includes several different strands to engaging with our investee companies:

    • Our internal portfolio managers and specialist Responsible Investment team engage directly with companies within our portfolios.
    • Our appointed external managers engage with companies on our behalf and provide details as part of their reporting cycles.
    • We work in partnership with Robeco, our voting and engagement partner, who engage with companies we own globally across several ESG themes on our behalf. This allows us to better fulfil our stewardship objectives as an active shareholder in overseas markets.
    • As a member of LAPFF we have added our voice to an influential group of local authority pension funds and pools, to maximise our influence as shareholders.
    • We collaborate with like-minded investors and bodies to create a stronger voice on ESG issues.
  • We have pledged to achieve net zero greenhouse gas emissions across our investment portfolios by 2050 or sooner and are a member of the Net Zero Asset Managers’ Initiative.

    Climate change is an existential threat to societies across the world – doing nothing is not an option.  Representing asset owners with more than £55bn of assets, we have a key role in not just managing the impact of climate change on our portfolios, but also in supporting the investment needed to transition to a low carbon future.

    Our roadmap to achieving net zero will be published in autumn 2022 and will include:

    • Setting interim targets for 2025 and 2030, supporting efforts to achieve a material reduction in CO2 emissions in line with a recognised science-based pathway;
    • Engaging with policymakers, regulators, and companies to achieve real economy emissions reductions within the sectors and companies in which we invest;
    • Creating and evolving investment propositions aligned with net zero emissions by 2050, such as our Climate Opportunities offering in Private Markets, and facilitating increased investment in climate transition solutions;
    • Working with the industry to improve carbon data disclosure and transparency in fixed income and private markets, where information is currently unreliable; and
    • Implementing a revised stewardship and engagement strategy with a clear escalation and voting policy that is consistent with being Net Zero across its investments by 2050 or sooner.

     

  • We believe in the power of engagement rather than divestment as we believe that constructive dialogue with companies in which we invest is more effective than excluding companies from the investment universe.

    Our investment approach is not to divest or exclude entire sectors, however there may be specific instances when we will look to sell or not invest in some industries or companies based on investment criteria, the investment time horizon, and if there is limited scope for successful engagement – particularly in areas where we have escalated our engagement with a company but still see no changes implemented.

    Using these criteria and due to the potential for stranded assets, we do exclude pure coal and tar sand companies from our investments as we believe there is little scope for successful engagement where companies either cannot or will not change their strategy.

  • Our extensive work implementing responsible investment is outlined in our Responsible Investment Policy and Climate Change Policy, and we proactively publish an annual report on our stewardship and engagement activity every year.

    For further detail on our activity, we publish a number of Responsible Investment Reports:

    • Annual Stewardship Reports
    • Quarterly Stewardship Reports
    • Robeco Active Ownership Reports
    • Quarterly Voting Reports
    • TCFD Reports

    All of these documents can be found in the Responsible Investment Reports section of our document library.

Collaborations

Collaboration is key to maximising our influence on behalf of our Partner Funds and we do so by working with a range of like-minded institutional investors and organisations such as LAPFF, Climate Action 100+, the Workforce Disclosure Initiative, and the 30% Club.

       

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