The Institutional Investors Group on Climate Change

At the beginning of the reporting period, the Trustee’s Asset & Liability Committee (ALCO) decided that it was appropriate for the Fund to become a member of the Institutional Investors Group on Climate Change (IIGCC), the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low-carbon future. IIGCC has more than 375 members, mainly pension funds and asset managers, across 23 countries, with over €51 trillion in assets under management.

IIGCC’s mission is to support and enable the investment community in driving significant and real progress by 2030 towards a net zero and resilient future. This will be achieved through capital allocation decisions, stewardship and successful engagement with companies, policy makers and fellow investors. IIGCC works to support and help define the public policies, investment practices and corporate behaviours that address the long-term risks and opportunities associated with climate change. Through IIGCC, the Trustee became a signatory of the 2021 Global Investor Statement.

Climate Action

The Trustee is a signatory of the Climate Action 100+ pledge. The initiative has expanded significantly in the reporting period and now has more than 615 signatories responsible for a record USD 65 trillion in assets under management. This represents an increase of 170% in investor participation since the initiative launched in 2017.

Investors are engaging with 167 of the world’s biggest listed corporate emitters and driving faster corporate climate action in line with the global goal of reaching net-zero emissions by 2050 or sooner. In response to investor action, 111 focus companies have set net zero targets for 2050 or before, compared to just five in 2018 after the initiative’s launch. To demonstrate the scale of impact, it is estimated that these net zero targets will reduce greenhouse gas (GHG) emissions by 9.8 billion metric tonnes annually by 2050.

Policy

RBS Investment Executive Limited (RIEL) responded to a public consultation on guidance being proposed by The Pensions Regulator in relation to climate reporting obligations and how it will regulate these. The guidance was in line with expectations as it follows guidance already prepared by the Department for Work & Pensions.

The Pensions and Lifetime Savings Association consulted on standards for a responsible investment quality mark. RIEL is generally not supportive of the proliferation of standards and pledges around environmental, social and governance (ESG) and responsible investment, preferring instead that the Trustee develop its own principles and allocate resource to relevant actions rather than more reporting.

Investment managers

All investment managers, except one, working for the Trustee have their own ESG or responsible ownership policies which have been reviewed by RIEL. In monitoring investment managers, RIEL conducts an annual performance review meeting in which it reviews ESG activity and developments at each firm.

Investment managers are encouraged to report to RIEL on ESG issues as part of the regular quarterly reporting cycle. Although the Trustee’s engagement programme is delegated to EOS at Federate Hermes (EOS), it also benefits indirectly from corporate engagement carried out by each of its investment managers in assets held by the Fund. Not all manager policy approaches are compatible with the Trustee’s Responsible Ownership Policy (ROP) and RIEL is in dialogue with one active equity manager and has requested it adapt its approach to climate change in particular.

Workforce diversity

RIEL is committed to monitoring diversity in its investment managers and does so in order to ensure continued effort to promote diversity in firms acting on behalf of the Trustee.

All investment managers working for the Trustee have confirmed to RIEL that they have in place polices to promote workforce diversity. Not all investment managers gather or publish data on ethnic minority employees or employees over 50.

Disclosure

The Trustee’s Climate Disclosures are appended to this report and include the metrics that the Trustee considers are appropriate to measure in its approach to managing the impact of climate change on the Fund. Also included in the Climate Disclosures is the Trustee’s chosen target which focuses on engaging with companies to adopt science-based targets for emissions reductions. This target is the same as that adopted in the Trustee’s net zero commitment and is viewed as the most appropriate way for the Trustee to influence the transition to a low carbon economy and effect change in the companies it invests in. Engagement is carried out through EOS and investment managers in directly held assets.