The People’s Pension, the £26bn (€30.4bn) UK master trust, has published a responsible investment policy setting out the minimum requirements and ongoing expectations that it has for its fund managers.
As part of its minimum requirements, fund managers are expected to have a commitment to net zero and adequate stewardship resourcing. The trust will look to assess fund managers’:
- approach to engagement and prioritisation framework;
- stewardship headcount;
- sector and theme specific expertise;
- stewardship staff in key markets globally.
If these are not met, the scheme trustee has warned it will put their relationship under review, which would result in “moving” its 6.7 million members’ assets to other managers, it said.
The scheme’s trustee has set also out clear objectives regarding its responsible investment approach. The policy sets out specifically how The People’s Pension plans to use its scale and influence as one of the largest UK asset owners toward this objective and the areas that it has prioritised.
It said that climate change, nature and human rights are its three stewardship priorities going forward and fund managers will be expected to support the trust in achieving their emissions reduction targets, which are set out over the short, medium and long term and include:
- net zero greenhouse gas (GHG) emissions by 2050;
- halving its GHG emission intensity by 2030 for the scheme’s growth assets;
- 30% GHG emissions intensity reduction by 2025 for the developed equity portion of the portfolio.
The document also includes new net zero voting guidelines which The People’s Pension expects its fund managers to implement. It details when to vote against company directors in fossil fuel reliant sectors on both the supply and demand side, and on deforestation.
It said that the guidelines represent a targeted approach to voting and company engagement, to achieve the maximum potential for impact.
The master trust said the new policy underlines its commitment to working with industry-wide groups such as Nature Action 100 and Climate Action 100+. It believes these groups are the best way to collaborate with others to improve stewardship and engagement levels on behalf of retirement savers and other investors, and most importantly, expects the same commitment of its fund managers.
Leanne Clements, head of responsible investment at People’s Partnership, said: “Our new responsible investment policy has both our members’ views and interests at its very heart.”
“What we want from our fund managers is evidence of a targeted approach to engagement, routed in a robust theory of change to achieve maximum impact”
Leanne Clements, People’s Partnership
She said that with stewardship firmly under the microscope and the clock running down on critical issues such as climate change, adding that “now is the time” to be “bolder and braver” in terms of its expectations for fund managers.
“Gone are the days of ‘tea and cake’ engagement – what we want from our fund managers is evidence of a targeted approach to engagement, routed in a robust theory of change to achieve maximum impact,” she noted.
Clements added that The People’s Pension wants to see evidence that limited stewardship resources are being employed in the most effective way possible, and that fund managers execute robust voting escalation strategies.
She pointed out that as an important complement to its portfolio construction on climate change, the trust recognises the need to achieve real-world emissions reductions in priority sectors through targeted engagement.
Mark Condron, chair of the board of trustees at The People’s Pension, added that the main objective is to drive better investment outcomes for the members.
He said that People’s Pension’s stewardship objective is to encourage investee companies to behave in more responsible and sustainable ways.
“Hard working pension savers expect asset owners such as us to ensure that their money is invested responsibly, and this report outlines how we are doing just that. Our approach is to ensure both financial value and resilience of our members’ savings, which is why the requirements we have of fund managers are so robust,” he noted.
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