Context

NatWest Pension Trustee Limited (the Trustee) ensures the Trustee Conflicts of Interest Policy is reviewed at least every three years and also if there is a change of law, regulatory guidance or circumstances which the Trustee considers requires a review. In addition, RBS Investment Executive Limited (RIEL) is responsible for ensuring investment managers and EOS at Federated Hermes (EOS) have appropriate policies of their own in place.

As part of their management of conflicts, the Trustee keeps a Register of Interests which is maintained and monitored by the Secretary and the register is also available for inspection by the Trustee directors. It is worth noting that, should a conflict of interest arise, in many cases, provided it is disclosed and authorised, it will likely have no impact on the ability of the Trustee director concerned to participate fully in debate and decision making. However, in some cases, action will be needed to manage the conflict. In severe cases, this might require a Trustee director to exclude themselves from any involvement in a decision. Trustee directors must disclose all conflict situations and have such conflicts reviewed and assessed in accordance with the policy.

Conflicts during the year

There are no recent examples of the Trustee or RIEL having to deal with a conflict of interest in the context of the Trustee stewardship activity.

Potential conflicts

The Conflicts of Interest Policy notes that conflicts could arise in the context of the close relationship between the Trustee and NatWest Group Plc. Since NatWest Group Pension Fund (the Fund) does not invest in NatWest Group securities, there is no stewardship activity carried out by or on behalf of the Trustee in relation to its sponsor. EOS will engage with NatWest Group Plc on behalf of its other clients, but this has no impact on the relationship between EOS and the Trustee or between NatWest Group Plc and the Trustee.

More broadly for listed securities, any possible conflicts of interest with investment managers and issuers are avoided by delegating stewardship to EOS. EOS maintains a Conflicts of Interest Policy which is made available to clients. The policy states that staff at EOS are required to report any potential conflicts of interest to the compliance teams which will be assessed, and the risk register will be updated as required. That register is reviewed regularly by senior management.

Potential conflicts of interest with investment managers arising in mandates for directly held assets (if any) would be resolved by RIEL having the ability to direct stewardship decisions on behalf of the Trustee and override potentially conflicting decisions of investment managers.

A third area of potential conflicts is when the Trustee selects and appoints advisers or asset managers. During the year there was a change of ownership of the EOS business, but no conflicts of interest have been identified as a result of this change. In addition, no conflicts were identified regarding the selection and appointment of a Responsible Investment Consultant to the Fund.

If a material conflict of interest was to arise in the context of stewardship, which RIEL was unable to deal with, it would be referred by RIEL to the Trustee (via the Chair of the environmental, social and governance (ESG) sub-committee or Trustee Board as appropriate) for a decision. The Trustee could then elect to proceed with the relevant action or abstain. In more severe situations, it is possible for the Trustee to sell assets or change its stewardship provider or investment managers to avoid conflicts.