Responsible Investment Policy
The Barclays Bank UK Retirement Fund (‘the UKRF’ or ‘the Fund’) is administered by Barclays Pension Funds Trustees Limited, a wholly owned subsidiary of Barclays Bank PLC. The Trustee is the owner of the assets of the UKRF which are held separately from the assets of the Barclays Group.
This section describes the Trustee's approach to Responsible Investment (RI) in the context of managing the UKRF, outlining the guiding principles the Trustee has adopted and the core activities undertaken. These activities chiefly relate to: adherence to good practice standards and principles; ownership, disclosure and collaboration; and the integration of environmental, social and corporate governance (ESG) factors.
The UKRF’s RI policy is owned by the Trustee Board and is reviewed on an annual basis to reflect any changes and improvements to the UKRF’s strategy.
The Trustee has appointed a ‘primary’ manager, Oak Pension Asset Management Limited (OPAM), to act in a fiduciary capacity in relation to the UKRF, with duties including but not limited to the appointment and supervision of a number of ‘third party’ investment managers. OPAM has been delegated by the Trustee to oversee certain aspects of the implementation of its RI policy and reports progress regularly, and at least annually, to the Trustee.
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Guiding principles
Integration The Trustee will integrate RI and ESG factors, including climate change, throughout its investment processes as doing so should lead to better investment decisions and ultimately improve risk-adjusted returns. Ownership Effective stewardship is important to protect and enhance the value of investments and therefore the Trustee will proactively engage (and vote where applicable) with the entities and markets in which it invests. Disclosure Through its stewardship, the Trustee will promote appropriate disclosure on RI issues, including climate change. Best Practice The Trustee will promote recognition of the benefits of RI and its implementation within the investment industry and benchmark itself against global best practice. Collaboration Collaborative initiatives can be powerful in effecting positive change, therefore the UKRF will be a participant in select initiatives. Communication The Trustee will make appropriate disclosures on how it implements this policy to both members and wider stakeholders. The Trustee will disclose the outcome of its climate-related processes in an annual Task Force on Climate-Related Financial Disclosures (‘TCFD’) report. The Trustee considers climate-related financial risks and their potential implications for the UKRF within the Fund’s wider RI approach and consideration of ESG factors. Climate change is the subject of specific risk management, measurement, stewardship and collaborative efforts as part of the UKRF’s wider investment and RI activities. This is set out in the Fund’s Climate Change Risk Management Policy (CCRMP).
The Trustee of the UKRF sees climate change as a key financial risk affecting its investment asset portfolio. In the interest of members and aligned with the goals of the Paris Agreement, across the portfolio we aim to halve greenhouse gas emissions by 2030 and to be net zero carbon by 2050 or sooner.
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Industry standards, principles and initiatives
The Trustee of the UKRF frames its RI activities within its regulatory and fiduciary obligations, as well as its commitments as a signatory to the Principles for Responsible Investment (PRI) and UK Stewardship Code.
The Trustee signed up to the Principles for Responsible Investment (PRI) in 2015. The Trustee believes that the application of the UKRF RI Policy will enable the delivery of the commitments as a signatory to the PRI. The PRI is globally recognised as the good practice standard for RI. It is an investor-led, voluntary initiative which promotes an economically efficient, sustainable global financial system to deliver long-term value. The PRI provides a high level framework for integrating ESG issues into investment decision-making and ownership practices consistent with investors’ fiduciary duties. The UKRF adheres to the six principles of the PRI, and reports its activities and developments annually in line with the PRI reporting framework. These reports are available on www.unpri.org.
The Trustee initially signed up to the UK Stewardship Code in 2011. The Code aims to enhance the quality of engagement between investors and companies to help improve long-term risk-adjusted returns to shareholders. In 2021, the UKRF became a signatory to the substantially revised and strengthened UK Stewardship Code 2020. A copy of the Stewardship Code Report is available here.
The Trustee is a member of the A4S Asset Owners Network. Founded by HM King Charles III in 2004 when he was The Prince of Wales, it aims to make sustainable decision-making business as usual.
The Trustee is a member of the Institutional Investors Group on Climate Change (‘IIGCC’) Paris Aligned Initiative. This group is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low carbon world. IIGCC’s mission is to mobilise capital for the low carbon transition and to ensure resilience to the impacts of a changing climate by collaborating with business, policy makers and fellow investors.
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Integration of ESG factors in asset allocation, manager selection and monitoring
The consideration of ESG factors is incorporated in all elements of the Fund’s investment approach, from strategic asset allocation, through manager selection, to portfolio monitoring.
As part of the strategic asset allocation process, ESG risks and opportunities are considered, ensuring that asset and liability risk-return assumptions take these issues into account appropriately. The long-term sustainability of the Fund’s investment strategy is of primary importance, and scenario analysis is used to stress test the portfolio under different conditions, including those driven by ESG issues.
In selecting investment managers, the managers’ policy on and approach to ESG issues is an important factor in the process. The UKRF’s RI policy applies to all of its investments although the expectations are tailored according to the different asset classes and the investment style of the manager in question.
Where appropriate, OPAM has reviewed and accepted the appointed managers’ policies and monitors these policies on a regular basis. OPAM provides regular reporting to the Trustee to confirm this activity has been carried out appropriately, flagging any issues on an exceptions basis. The managers’ approach to ESG factors and stewardship is discussed at the manager update meetings. The Trustee delegates the oversight of individual assets (including investee companies) to its investment managers.
The Trustee expects its managers to be cognisant of climate risks and raise material concerns at manager monitoring meetings with OPAM periodically. This ensures that the Trustee (via OPAM) reviews that the Fund’s appointed managers incorporate climate risks and opportunities into the investment process.
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Ownership – Engagement and Voting Policy
The Trustee recognises its position as an asset owner with ultimate responsibility to its members and beneficiaries and recognises that effective stewardship can help protect and enhance the long-term value of its investments to the ultimate benefit of its beneficiaries.
The Trustee will proactively engage (and vote where applicable) with the entities and markets in which it invests and is willing to act collectively where appropriate. This is set out in the Fund’s Stewardship Policy. The Trustee has appointed Hermes Equity Ownership Services Limited (EOS at Federated Hermes) as a dedicated specialist engagement provider for the UKRF’s DB assets to carry out targeted engagement, including on climate-related matters in relation to the Fund’s investments. EOS at Federated Hermes performs this targeted engagement with companies as a collective on behalf of a number of clients, including the Fund. With the help of EOS at Federated Hermes, the Trustee will engage (and vote, where applicable) with the investee entities, regulators and markets in a more proactive basis.
As part of its ongoing process, EOS at Federated Hermes will vote at company general meetings in accordance with the voting policy adopted by the Trustee and as set out in EOS’s published corporate governance principles.
In principle, the Trustee believes that proxy voting activity should not be conducted in isolation but rather as part of a wider engagement strategy. It should be noted that there is no public equity allocation currently in the UKRF’s portfolio. Rather than prescribing specific actions, EOS at Federated Hermes and the UKRF’s external managers are afforded a measure of discretion and flexibility.
The Trustee will regularly monitor the effectiveness of the EOS at Federated Hermes activities and, where appropriate, will consider how engagement could inform investment decisions. The Trustee monitors material stewardship activity, including where agents take different voting actions at the same company. OPAM is responsible for monitoring EOS at Federated Hermes to ensure that engagement activities and outcomes are aligned with the Trustee’s climate-related objectives.
EOS at Federated Hermes has a stewardship conflicts of interest policy. As part of the suppliers review process, the Trustee will review the policy and consider whether it includes: an explanation of how they act in the best interests of the Trustee; how conflicts of interest are identified; and the process followed when a conflict of interest is seen to exist.
For the DC section, the Trustee has delegated the day to day stewardship activities, including voting and engagement, to its Investment Managers.
Specifically in relation to Fund investments, the Trustee has a general policy of no direct self-investment in shares or bonds issued by Barclays Bank PLC or associated companies.
The Trustee recognises that stewardship and active ownership principles apply across all the Fund’s investments. In selecting investment managers, the managers’ policy on and approach to stewardship is an important factor in the process, with expectations tailored according to the different asset classes and the investment style of the manager in question.
The Trustee expects its investment managers to adhere to the principles within the UK Stewardship Code. The Trustee encourages its investment managers to apply the principles of the Code to both UK and overseas holdings where possible. The primary mechanisms for the application of effective stewardship for these holdings are engagement with investee companies and the exercise of voting rights. The Trustee expects its investment managers to pursue both these mechanisms while being mindful of context.
The Trustee recognises the important role of stewardship in mitigating climate risk and enabling climate opportunities. The Trustee (via OPAM) will hold its fund managers and service providers to account for their delivery in this regard and expects them to incorporate climate risks and opportunities into the investment process.
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Collaboration and Disclosure
The Trustee believes that collaborative initiatives can be powerful in effecting positive change and will consider being a direct participant in select initiatives.
The Trustee recognises its position as an asset owner with ultimate responsibility to its members and beneficiaries, and recognises that effective stewardship can help protect and enhance the long-term value of its investments to the ultimate benefit of these beneficiaries.
The Trustee will consider various external engagement providers and platforms to maximise its influence as an active owner, including collaboration with other like-minded investors. The Fund’s investment managers are also encouraged to get involved in collective engagement where this is an effective means to protect and enhance long-term shareholder value.
In addition, the Trustee recognises the importance of effective corporate disclosure, and expects its investment managers to seek appropriate disclosure by its investee companies and promote good standards in this area.
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Exclusion Policy
The Trustee adopts a principles-based approach to ESG matters and supports internationally recognised norms of corporate practice. The UKRF exclusion policy is informed by international conventions on controversial weapons particularly the Convention on Cluster Munitions, the International Convention on the Prohibition of the use of, stockpiling, production and transfer of Anti-Personnel Mines, guidance from the United Nations and other global regulations that advocate ESG principles. The Trustee avoids investing in companies directly involved in the production or sale of cluster weapons, anti-personnel landmines or chemical and biological weapons.
In selecting investment managers, their policy on and approach to ESG issues and exclusions is an important factor in the process. The UKRF exclusion policy applies to all public Equity and Fixed Income investments although implementation expectations are tailored according to the different asset classes and the investment style of the manager in question. Screening will be carried out by the underlying managers and exclusions applied where there is evidence of non-compliance with treaties or legal bans on controversial weapons. We require current and future fund managers to implement the UKRF exclusion policy in accordance with their own exclusion approaches. This is the most practical and effective way of implementation. The UKRF has very diverse asset allocation with multiple external managers across different asset classes and there are likely to be immaterial deviations in application of the policy. Each of the UKRF Equity and Fixed Income managers operates its own exclusion policy on controversial weapons and may have made slightly different decisions on which securities to exclude, depending on the manager’s investment universe or information from third-party data providers. The UKRF will hold the underlying fund managers to account on the implementation of their individual policies and require that they review their exclusion lists periodically.
The UKRF portfolio is also screened by EOS at Federated Hermes on a quarterly basis to identify those companies creating an immediate risk to the portfolio through involvement in activities and behaviours that violate the relevant English law, guidance from the UK government and the UN Global Compact Principles. Where a company’s activities are found to conflict with the above, this will be reported by EOS at Federated Hermes and may result in a decision to engage with the company or in a decision to divest from the company.
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Defined Contribution (DC) scheme
The DC scheme assets are subject to the same guiding principles and investment activities as described above. In addition, the Trustee has provided an environmentally responsible investment option which members can choose as part of the self-select fund range. Members are provided with a fact sheet describing the strategy of the underlying manager and information on performance versus the benchmark. The UKRF’s environmentally responsible DC investment option is reviewed on an annual basis and the manager’s approach to ESG factors and stewardship is discussed at the manager update meetings. The manager is expected to maintain its stated mandate regarding consideration of ESG criteria in investment analysis and active ownership.
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Conflicts of interest
The Trustee has an appropriate policy on managing conflicts of interest. The Trustee maintains a register of Trustee Directors’ interests which could give rise to a conflict of interest. The Conflicts Register is considered at each Trustee Board meeting.
OPAM maintains a separate policy on managing conflicts of interest. OPAM identifies and manages conflicts of interest in accordance with the policy it has established. Activities which may give rise to a conflict are documented in a conflicts inventory which forms part of the OPAM Conflicts of Interest policy.
In addition, as part of the suppliers review process, OPAM will review each investment manager’s conflicts of interest policy and consider whether the policy includes: an explanation of how they act in the best interests of the Trustee; how conflicts of interest are identified; and the process followed when a conflict of interest is seen to exist.
Specifically in relation to Fund investments, the Trustee has a general policy of no direct self-investment in Barclays Bank PLC or associated companies.
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Communication and reporting
The Trustee will make any appropriate disclosures on how it implements this policy and on its RI activities in general in its Annual Report and Accounts.
The Trustee will disclose the outcome of its climate-related processes in an annual Task Force on Climate-Related Financial Disclosures (‘TCFD’) report.
The Trustee expects and encourages investment managers to disclose publicly their RI policy and stewardship activities (including voting records where appropriate) in an appropriate format.