Responsible Investment
Financially Material Investment Considerations
The Trustee believes that environmental, social and governance (“ESG”) factors can have a significant impact on the performance of its investments and the consideration of ESG factors, such as climate change, can enhance the risk and return profile of its investments. The Trustee believes that, in the case of the Scheme, such factors are primarily relevant to the allocation decisions between sectors and companies, which will typically be delegated to its Investment Managers, with the exception of passive mandates. The Trustee expects its Investment Managers, when exercising discretion in the mandates that they manage for the Scheme, to integrate all relevant and material financial factors, including ESG factors into the investment decision making process. This is intended to identify investment opportunities and financially material risks. This will influence the selection, retention and realisation of investments.
The Trustee also considers how potential new Investment Managers incorporate ESG factors into their investment process before selecting an Investment Manager. As part of its regular monitoring process the Trustee requests that Investment Managers demonstrate their approach to incorporating ESG factors when exercising discretion in the mandates that they manage for the Scheme over the relevant investment horizon. Depending on the findings, the Trustee may take steps to seek improvement. The Trustee’s expectations and monitoring process will depend on the mandate type and investment horizon.
The Trustee does not take into account “non-financial matters” (i.e. the personal views of members and beneficiaries of the Scheme on ethical or other matters) when making investment decisions.
The Trustee sets out its policy relating to the governance of climate-related risks and opportunities in a separate annually published climate report which is available here. The Trustee includes its portfolio metrics and climate change targets in this report.
Corporate Governance and Stewardship Policy
The Trustee believes that in order to act in the best financial interests of the Scheme’s members it must act as a responsible asset owner. The Trustee, as a policy, delegates the exercise of voting rights of the underlying holdings and engagement with investee companies and other stakeholders as appropriate to its Investment Managers. The Trustee expects its Investment Managers to exercise these rights and to engage with the investee companies or any other relevant persons on relevant matters so as to protect and enhance the value of the Scheme’s investments. The Trustee monitors the actions taken by the Investment Managers, on a regular basis as part of the ongoing Investment Manager reviews at the IC and ALCo meetings. As part of this, the Trustee also monitors the Investment Managers’ voting records or their reports on responsible investments (such as UN PRI reports), and will seek explanations and discussions, as appropriate. The Trustee’s expectations and monitoring process will depend on the mandate type, in particular in respect of the asset class(es) involved and the degree of discretion given to the Investment Manager. Where the Trustee is a unit holder of a fund, it seeks to retain the use of voting (and other) rights associated with the operations of that fund. The Trustee makes decisions on the use of such rights on those funds based on advice from its Legal and/or Investment Advisers as appropriate.