We manage environmental, social and governance (ESG) risks to protect and enhance the value of our investments.
By acting as a responsible and vigilant asset owner and using our influence as a major institutional investor, we encourage best practice from the top down and bottom-up.
“We believe it’s vital we demonstrate a robust and effective approach to RI, and we see the integration of material ESG issues as an essential part of the investment process.”
Barry Kenneth, Chief Investment Officer
What does ESG mean to us?
Our RI strategy is founded on our two core beliefs:
- By acting as a responsible and vigilant asset owner, we can protect and enhance the value of our investments.
- ESG factors, and especially climate change, can have an impact on the performance of our investments, and the management of these risks and opportunities can add value to our portfolio.
We view ESG factors as the interaction of our investments with:
- the physical environment and climate (Environment)
- communities, workforces, wider society and economies (Social)
- governance structures of the organisations and markets we invest in (Governance)
ESG integration (including but not limited to climate change) is achieved by engaging with and advancing the ESG practices of our external managers and underlying issuers, rather than divesting.
The United Nations Principles for Responsible Investment
We were an early signatory to the United Nation's supported Principles for Responsible Investment (PRI). We use them as guiding principles for our RI strategy, to integrate relevant ESG issues into the analysis of our investments.
Our PRI assessment scores:
We’re pleased to receive an assessment score of A+ for the Strategy & Governance module in the 2019 PRI reporting cycle, following the enhancement of our RI strategy in 2018/19. Furthermore, in the 2020 PRI reporting cycle recently published in July 2020, our assessment scores showed additional improvements in other modules, with seven modules scored as A+ and two as A.
Our three key priorities
Our RI strategy is put into practice through a robust framework that has three key priorities:
1. Climate change
We have a specific Climate Change Policy that details our commitment to identifying our exposure to and managing climate-related risks relevant to our investments. These risks require proper governance, risk management and close monitoring over time, in line with leading disclosure frameworks such as the FSB’s Task Force on Climate-related Financial Disclosures (TCFD).
We’re also collaborating with industry peers and the wider investment community on climate change initiatives, including support for the Paris Agreement and the transition towards a low-carbon economy.
We exercise our voting rights and engage with the companies we invest in to make sure they‘re accountable and fulfil their obligations to shareholders and other stakeholders. In addition, we monitor the stewardship activities of our fund managers.
Working together with fund managers, key stakeholders and organisations allows us to be more effective on the key ESG issues.
We’re committed to clear and robust reporting and require the same from our managers.
We’re a strong advocate for transparency across the entire investment value chain and are a supporter of several financial disclosure initiatives on ESG-related issues.
How we’re implementing our strategy
Our 2019/20 responsible investment report shares how we’re implementing our priorities and plans in detail.
Our recent highlights include:
- Enhancing our RI strategy and framework
- Developing our climate change policy
- Reporting in line with the recommendations from the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) and participating in the UK Government-backed Pensions Climate Risk Industry Group
- Expanding our in-house ESG dedicated resources
- Integrating minimum ESG requirements into our fund manager arrangements
- Achieving an assessment score of A+ for Strategy & Governance from the 2019 Principles for Responsible Investment reporting cycle
Staying transparent and open
We believe in transparency and in sharing what we’re doing with our members, levy payers and other stakeholders.
We’re pushing for greater transparency in reporting across our investment portfolio and the pensions and investment industries as a whole. This includes aligning our reporting with best practice guidelines such as the TCFD and the UK Stewardship code.
Alongside our annual RI report, we also regularly publish our engagement and voting reports.