The most significant legislative development in the reporting period was the enactment of the Pension Schemes Act 2021 which created the obligation for pension schemes to publish mandatory climate disclosures. The primary legislation is expanded upon in various statutory instruments and guidance from the Department for Work & Pensions and The Pensions Regulator which together prescribe the timing and content of mandatory disclosures. The disclosures require trustees to have appropriate governance, risk and strategy frameworks to respond to climate change which the Trustee had already done in previous years. The disclosure obligations recognise the important point that, for the time being, the investment industry lacks comprehensive data to support mandatory climate metrics.

With this in mind, the Trustee’s obligation is to make disclosure “as far as it is able” to do so and over time it is anticipated that investment managers and the companies they invest in will work to produce the information required to properly measure and manage important concepts such as the extent to which portfolio companies have committed to science-based targets to reduce greenhouse gas (GHG) emissions. The Trustee’s climate disclosure obligations are satisfied by the publication of the Climate Disclosures.

The Trustee’s net zero commitment describes the intended approach as regards the Fund and its portfolio and the way in which the Trustee believes it can best influence the transition while also meeting the Fund’s strategic goals. It is important to note that the Trustee expects its influence to diminish over time as it de-risks the Fund.

European legislation known as the Shareholder Rights Directive II was adopted in the UK to improve transparency and stewardship of occupational pension schemes, allowing for comparison between schemes so that engaged members and other stakeholders can better understand their investments. One of the obligations under this legislation is for trustees to publish an implementation statement each year, setting out (among other things) how, and the extent to which, the scheme’s policies on stewardship have been followed and the voting behaviour by, or on behalf of, the trustees (including the most significant votes cast by the trustees or on their behalf) during the scheme year. The Trustee published an implementation statement as part of the annual report and accounts for the scheme years ending December 2020 and December 2021.

Although it has occurred outside of the reporting period, it is worth noting that RIEL placed a restriction on any further investments being made in Russia, Belarus or Ukraine as a direct response to the Russian invasion of Ukraine in February 2022. The Fund does not have any significant exposure to these markets in any event.

Together with its investment managers, the Trustee takes steps to actively monitor and take account of ESG issues when investing the Fund’s assets. The Trustee exercises voting and other rights associated with the assets it holds and engages with companies it invests in so that management can work to address investor concerns. The Trustee’s Asset & Liability Committee (ALCO) has approved the ROP and this was reviewed twice during the reporting period (at each February ALCO meeting). The ROP includes principles which the Trustee and investment managers (on its behalf) apply to the investment process. The Trustee is prepared to sell assets that do not comply with those principles. Investment decisions are made by the Trustee taking account of all relevant factors in line with trustee duties to act in members’ best financial interests.

Coinciding with this change was the Trustee’s decision to appoint third party adviser Aon to assist with responsible ownership issues, in particular, the Climate Disclosures. Aon has carried out climate scenario analysis for the Trustee using its proprietary models, the results of which are set out in the Climate Disclosures. The policy intention is that this work can influence Fund strategic and risk decisions. The Aon scenario work indicated that the Fund is resilient to climate change (based on current knowledge and projected climate paths) and there is currently no intention to make changes to the Fund consequent on this analysis. The Aon work followed scenario analysis carried out earlier in 2021 with one of the Fund’s investment managers which also pointed to a high level of resilience. In each case, the scenario work assumed no changes to Fund investments. However, the Fund will change over time with the proportion of assets that are managed by the Trustee anticipated to be at risk due to climate change reducing further.

During the reporting period, the Trustee has been appraised of all ESG activity in the Fund and has received regular training on ESG issues, including climate change. The RIEL ESG sub-committee and subsequently the ESGC met each quarter to oversee implementation of the ROP and respond to market developments and public consultations.