Context

It is NatWest Pension Trustee Limited’s (the Trustee's) policy to exercise its voting rights in all practicable cases; the appointment of EOS at Federated Hermes (EOS) as the provider of voting services enables the Trustee to leverage EOS’s scale and capabilities as a proxy voter to ensure NatWest Group Pension Fund’s (the Fund’s) voting rights are exercised in a thoughtful manner.

The Trustee has delegated voting of all listed securities (debt and equity) to EOS. In consultation with its clients, EOS has established principles which guide its voting recommendations and are agreed by the Trustee.

The EOS Global Voting Principles were last updated in September 2020 and, at a high level, state that EOS will seek to:

• Cast a vote and only abstain in exceptional circumstances
• Generally vote in support of management unless there is a good reason not to
• Take a consistent position, and
• Engage prior to voting where possible for certain high priority issues

This approach is subject to voting policies, global or regional governance standards and the need to protect long-term shareholder interests. The Trustee was involved in the consultation around these Principles and believes that they align with its own views in this area. Therefore, the Trustee has adopted the EOS Principles, and does not overlay any specific voting requirements or policies of its own, although as stated above the Trustee does monitor EOS activity to ensure that it continues to meet the Trustee’s requirements.

Voting activity is reported to the Trustee on a quarterly and annual basis by EOS. Voting activity is reviewed by the Trustee annually and that review is included in the Responsible Ownership Report. During 2021, EOS voted on 98% of the eligible proposals for the assets covered by their mandate.

The Trustee’s listed equity portfolio is now a relatively small part of its asset allocation and being actively managed it is also more concentrated. Voting activity for credit assets is very limited (as a function of the rights attaching to those assets). The EOS Annual Review is made available to members on the Trustee website.

The Trustee also receives quarterly highlights from EOS. These quarterly highlights outline some of the more significant engagements and votes undertaken by EOS on behalf of the Trustee. EOS also provide the Trustee with weekly updates through their EOSi client portal. This web-based service allows the Trustee to stay on top of votes and engagement conducted on their behalf and gives them a greater insight into the progress made at the companies EOS focus on.

Activities & Outcomes

In 2021, EOS made voting recommendations on 2,023 resolutions at 160 meetings (representing about 98% of the Fund’s active equity holdings). At 80 of those meetings, it recommended opposing one or more resolutions, while there were no meetings at which it recommended abstaining. EOS recommended voting with management by exception at 12 meetings and supported management on all resolutions at 68 meetings.

The issues on which EOS recommended voting against management are shown below.

• Case Study: Voting at Heineken

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  EOS recommended the Trustee to vote against the remuneration report due to concerns about the severance pay to the former Chief Executive Officer. The local corporate governance code recommends a severance pay equivalent to one year of base salary but in addition to this he received variable compensation at target. While his employment agreement was formed before the introduction of the first Dutch corporate governance code, it should have been brought into line with developing best practice. EOS on behalf of the Trustee also reiterated an expectation for greater transparency regarding the bonus.