NatWest Pension Trustee Limited (the Trustee) believes that the objective of any company it invests in should be to deliver sustainable long-term financial value. Through effective decisions and actions as asset owner, the Trustee is able to positively influence investment outcomes for members. The concept of investors exercising their rights to influence value creation and risk management in their investments is known as stewardship. Stewardship is promoted as a positive process by governments, regulators and industry participants and a means to hold companies to account. In the UK, the Financial Reporting Council is tasked with authoring and overseeing the implementation of a standard known as the UK Stewardship Code 2020.
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The Trustee has its own Responsible Ownership policy which is specific to its portfolio and strategy and the way it deals with its investments, but it also chooses to apply (and report on) the principles of the Code as it believes these to be of benefit to members. The Trustee’s application of these principles is described on this and subsequent pages and may be of interest to members wishing to see what the Trustee takes account of in its investment process in addition to financial returns and risk.
The Trustee is a responsible investor. Together with its investment managers it takes steps to actively monitor and take account of environmental, social and governance (ESG) issues when investing the assets of NatWest Group Pension Fund (the Fund). The Trustee’s approach is neatly captured in the phrase “engage your equity, deny debt and get active in your alternatives”.
Voting and engaging issuers of listed equity has been shown to have real impact on board behaviour. Refusing to lend is the most direct way of limiting capital available to businesses that are unwilling to change their behaviour. Owning and continuing to invest in alternative assets with positive ESG attributes ensures capital is available to businesses aligned with the Trustee’s Responsible Ownership Policy.
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. Trustees of pension funds are being asked to disclose more information about their stewardship activity, monitoring of investments and the potential impact of climate change on their schemes. The Trustee is supportive of improving disclosure throughout the investment chain.
The Trustee has applied the principles of the Financial Reporting Council’s Stewardship Code to its investment activity for almost a decade. We welcome the publication of the new UK Stewardship Code 2020 which we believe will increase investor influence. We are pleased to present our report describing the application of the Code to the investment activity of the Fund for the period 1 January 2021 – 31 December 2021.
Robert Waugh, Chief Executive Officer and Co-Chief Investment Officer NatWest Group Pension Fund
