Pension Scheme - Engagement Policy Implementation Statement (30 June 2020)

Introduction

This statement, written for the benefit of the members of the Scheme, sets out how, and the extent to which, the Statement of Investment Principles (‘SIP’) produced by the Trustees, has been followed during the year to 30 June 2020.

The SIP is a document drafted by the Trustees in order to help govern the Scheme’s investment strategy and it details a range of investment-related policies.

This statement has been produced in accordance with The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Disclosure of Information) Regulations 2013/2734 and the guidance published by the Pensions Regulator.

 

Trustees Investment Objectives

The Trustees’ primary investment objective for the Scheme is to achieve an overall rate of return that is sufficient to ensure that assets are available to meet all liabilities as and when they fall due.

This objective requires taking a degree of investment risk and the SIP describes the ways in which the Trustees seek to manage such risk exposures. In addition, the Trustees are required to consult with the Sponsoring Employer on the nature of the Scheme’s investment strategy and consider its views. This process helps to inform a suitable investment time horizon and the extent of funding support available.

 

Investment Strategy

During the course of the financial year, the Trustees did not make any changes to the Scheme’s investment strategy.

 

Statement of Investment Principles

During the year to 30 June 2020, the Trustees reviewed the Scheme’s SIP and a revised SIP was implemented with effect from September 2019. Changes were made to reflect new requirements under the Occupational Pension Scheme (Investment and Disclosure) (Amendment) Regulations 2018 relating to the Trustees’ policies in regards to the following:

• Financially material considerations of the investments, including Environmental, Social and Governance (“ESG”) considerations, and how these are taken into account in the selection, retention and realization of investments.
• The extent to which non-financial matters are taken into account in the selection, retention and realization of investments.
• The exercise of the rights (including voting rights) attached to the investments.
• Undertaking engagement activities in respect of the investments (including methods by which, and the circumstances under which, Trustees would monitor and engage with relevant persons about relevant matters).

 

Policy on ESG, Stewardship and Climate Change

The SIP includes the Trustees’ policy on ESG factors, Stewardship and Climate Change, which also includes the processes followed by the Trustees in relation to voting rights. In order to inform these views the Trustees undertook training on responsible investment and on the legal obligations of Trustees under the new legislation. The policies were last reviewed in September 2019 following training on the current ESG regulations.

The Trustees keep their policies under regular review with the SIP subject to review at least triennially.

The details below describe the work that was undertaken during the year relating to the Trustees’ policy on ESG factors, stewardship and climate change, and sets out how the Trustees’ engagement and voting policies were followed.

 

Scheme’s Investment Structure

The Scheme’s only investment is a Trustee Investment Policy (“TIP”) with Mobius Life Limited (“Mobius”), through a fiduciary arrangement with JLT Investment Management (“JLT IM”). Mobius provides an investment platform and enables the Scheme to invest in a range of multi-client pooled funds managed by third party investment managers and JLT IM have responsibility for the selection of pooled funds on the Mobius Platform.

As such, the Trustees have no direct relationship with the Scheme’s underlying investments managers.

As an investor in multi-client pooled funds the Trustees have limited ability to influence the investment  manager’s investment decision making process. The Trustees therefore delegate decisions around ESG directly to the investment managers.

 

Engagement

In the relevant year, the Trustees have not directly engaged with either Mobius, JLT IM, or the underlying pooled fund managers on matters pertaining to ESG, stewardship or climate change.  However, the Trustees refer to research ratings as provided by their investment consultant, Mercer, on a semi-annual basis. These research ratings reflect Mercer’s forward-looking assessment of the fund manager’s ability to deliver on their target objectives including ESG-credentials, which are captured within each fund manager’s investment decision-making processes.

 

Voting Activity

The Trustees have no direct relationship with the pooled funds that are ultimately invested in by the Scheme, and therefore have no voting rights in relation to the Scheme’s investments. The Trustees have therefore effectively delegated their voting rights to the Scheme’s underlying investment managers.

The Trustees do not use the services of a proxy voter.

Nevertheless, the table below sets out a summary of the key voting activity of the pooled funds for which voting is possible (i.e. all funds which include equity holdings) in which the Scheme’s assets are invested, over the year from 30 June 2019 to 30 June 2020.  

 

 

 

Fund	Proxy voter used?	Votes cast			Significant vote examples
		Votes in total	Votes against management	abstentions
Baillie Gifford Diversified Growth	Baillie Gifford do not use a proxy voter.  However, they are cognisant of the recommendations made by proxy voters but ultimately vote inline with its in-house policies.	750	6%	0.3%	Covivio – Opposition to a proposed long-term incentive scheme which could lead to rewarding under-performance.  After the vote, Baillie Gifford informed Covivio of their voting decision and advised that they expected more stretching performance criteria to apply to long-term incentives going forward.  Baillie Gifford continue to enter in to dialogue with the company on this and will take appropriate voting action in the future.   EDP Renovaveis – voted against the election of a director to the board due to lack of diversity.
Columbia Threadneedle Multi Asset Fund	ISS – for voting execution and recommendations IVIS – recommendations only Glass Lewis – recommendations only.	6646	380 (further 79 votes supporting proposals raised by shareholders but not endorsed by management)	182 (further 4 votes abstaining from proposals raised by shareholders but not endorsed by management)	Adobe Inc. – a vote ‘for’ was cast to provide shareholder resolution regarding a report on gender pay gap, specifically to encourage company to increase disclosure of material, decision-useful data. Alexion Pharmaceuticals, Inc. - a vote ‘against’ was cast for the election of a Director as there were concerns with a number of that Director’s outside commitments.
Nordea Diversified Return[1]	ISS – for the technical expertise and voting platform, as well as their global reach, and second opinion   NIS – small niche player which provides input and third opinion	1075	140	4	Alphabet – a vote ‘for’ was cast to support a number of shareholder proposals, including proposal to establish a risk oversight committee, to report on takedown requests and to report on whistleblower policies and practices.   Comcast – a vote ‘against’ Incentive Programs for Management was cast as they thought that bonuses and share-based incentives should only be paid when management reach clearly defined and relevant targets which are aligned with shareholder interest.