Governance

Role of the Trustee Board

NatWest Group Pension Fund is governed by NatWest Pension Trustee Limited (Trustee) through the Trustee Board. The Trustee Board is ultimately collectively responsible for oversight of all strategic matters related to the Fund. This includes approval of the governance and management framework relating to environmental, social and governance (ESG) considerations and climate-related risks and opportunities.

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The Trustee has delegated certain functions within its climate governance framework to committees of the Trustee Board. The relevant committees are the Asset and Liability Committee (ALCO), the ESG Sub-Committee of ALCO (ESGC), the Risk and Audit Committee (RAC) and the Member Experience Committee (MEXCO). The Trustee’s delegation of certain aspects of the oversight and management of climate change issues in the Fund is summarised below.

Trustee Board map of delegations associated with governance of climate-related risks and opportunities

Chart showing Trustee climate governance framework

More details about the role of each committee are provided below.

The Trustee has carried out research and consulted with its advisers and sponsors to develop an understanding of climate change and its implications for the Fund. It has articulated its climate-related beliefs and agreed an overarching approach to managing climate change risk. Details are set out in the Statement of Investment Principles (SIP) for the Main, AA, NatWest Markets (NWM) and Royal Bank of Scotland International Limited (RBSI) Sections, which are reviewed and (re)approved at least every three years (or sooner in the event of a significant change in investment policy) by the Trustee Board.

In summary, the Trustee:

  • Believes that ESG performance, including management of the impact of climate change, is fundamental to a company’s enduring success and therefore to its long-term financial returns. The Trustee has articulated its approach to asset ownership in its Responsible Ownership Policy (ROP), which is available on the Trustee’s website here.
  • Takes account of, and instructs its Investment Managers to take account of, financially material considerations in the Fund’s investment programme, including climate-related risks.
  • Believes that climate-related factors may create investment opportunities. Where possible, and where appropriately aligned with the Trustee’s strategic objectives, the Trustee will seek to capture such opportunities through its investment portfolio.
  • Believes that the relevant time horizons over which climate change will be relevant for the Fund’s Sections are as follows:
Main AA NWM RBSI
Short term Main2025 AA2025 NWM2025 RBSI2025
Medium term Main2035 AA2035 NWM2035 RBSI2035
Long term Main2050 AA2050 NWM2050 RBSI2050

Climate-related risks and opportunities are assessed over the above time horizons.

The Trustee Directors and the RIEL team receive regular training on climate-related issues, at least annually, to ensure that they have the appropriate degree of knowledge and understanding on these issues to support good decision-making. The Trustee expects its advisers to bring important and relevant climate-related issues and developments to the Trustee’s attention in a timely manner.

Roles of Trustee Committees

The committees of the Trustee Board have the following key roles:

  • Asset and Liability Committee

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    Responsible for the Fund’s investment strategy, including climate and other ESG risks and opportunities. Reviews the Trustee’s ROP at least annually to adapt to changes in the Fund, changes to regulation, industry guidance and best practice. ALCO is responsible for ensuring that investment and actuarial advice adequately incorporates climate-related risk factors where they are relevant and material which it does with assistance from RBS Investment Executive Limited (RIEL). ALCO will monitor and review progress against the Fund’s climate change risk management objectives and will report on these tasks at least annually.

  • Member Experience Committee

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    Responsible for ensuring the Trustee delivers a high-quality service to all members and their representatives. It monitors the administration of the Fund and communication to members, including correspondence on climate-related matters.

    Oakleaf Recycling Plant, Staines on Thames, UK

    Oakleaf Recycling Plant, Staines on Thames, UK.

    Image by Greencoat Capital.

  • Risk and Audit Committee

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    Responsible for risk oversight, covenant monitoring, audit and assurance. The RAC ensures that covenant advice adequately incorporates climate-related risk factors where they are relevant and material. The RAC will monitor and review progress against the Fund’s climate change risk management objectives.

  • ESG Sub-Committee

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    A Sub-Committee of ALCO formed in December 2021 and assuming the role previously carried out by the RIEL ESG Sub-Committee. The ESGC is responsible for supporting ALCO by developing and overseeing the approach to responsible ownership and climate risk management and reporting (described further below).

Role of the ESG Sub-Committee

The over-riding responsibility of the ESGC is to oversee and support the ALCO and the Trustee Board on all responsible ownership matters, including engagement, climate change risk and compliance with mandatory climate disclosure requirements. The ESGC reports to the ALCO, which then reports to the Trustee.

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The ESGC meets and reports to the Trustee on at least a quarterly basis and ad-hoc as required to address ESG (including climate-related) risk and opportunities for the Fund. With the support of the Trustee’s committees, the Trustee’s advisers, and the engagement partner, the ESGC is responsible for the following key activities:

  • Ensuring climate risks and opportunities are considered in the management of the Fund.
  • Regularly reviewing the ROP and proposing any changes to ALCO; approving annual engagement activity which will be carried out by the Fund’s engagement partner.
  • Identifying any risks that could impact the Trustee’s adherence to the ROP and on identification, recommending any remedial actions; ensuring such risks and actions are notified to the RAC.
  • Ensuring that stewardship activities are being undertaken appropriately on the Fund’s behalf.
  • Strategic decisions in relation to the Trustee’s disclosures on climate, ESG and responsible ownership matters.
  • Working with investment managers to disclose relevant climate-related data as required by the Taskforce on Climate-Related Financial Disclosures (TCFD) recommendations.

The ESGC is currently working closely with the Fund’s advisers RIEL and Aon to ensure the appropriate identification of climate-related risk and opportunities for the Fund, as well as identifying appropriate climate-related metrics and targets.

The ESGC will monitor and review progress against the Fund’s climate risk management framework on at least an annual basis.

Role of other advisers and relevant stakeholders

  • RBS Investment Executive Limited

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    Is responsible for:

    • Advising the Trustee on its long-term objectives and strategy and supporting the implementation of that strategy with delegated responsibility in relation to investment management.
    • Reviewing all significant asset purchases and sales, including reviewing whether they constitute a climate risk or opportunity.
    • Responsible for oversight of fund manager activities and reporting, including climate reporting.
    • Responsible for agreeing the exclusions list at asset level, subject to policy decisions taken by the ESGC.
    • Reporting to the ALCO annually on the implementation of the ROP.

  • Aon Solutions UK Limited

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    Provide reporting support to the Trustee in respect of climate-related risks and opportunities and ensuring compliance with the recommendations set out by the TCFD. It is in the Trustee’s objectives to assess its investment consultants on their ability to carry out climate-related risk and opportunities assessment for the Fund’s assets, through competency-based questions and consultants’ prior experience.

  • Engagement partner and voting adviser

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    EOS at Federated Hermes (EOS) provides engagement and voting services for the Fund’s listed equity and investment grade credit. It monitors the performance of companies against the UN Global Compact Principles, engages on relevant government policy initiatives and promotes collaboration between asset owners on the behalf of the Trustee. EOS reports to the Trustee and RIEL on engagement and voting activity. In turn, the Trustee monitors the engagement programme through updates to EOS’ progress map which summarises key milestones achieved with underlying managers on a quarterly basis.

  • Fund actuary

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    The Trustee works with the scheme actuary to assess the impact of climate change on the Fund’s liabilities and any risks to the funding assumptions for the Main, AA, NWM and RBSI Sections. The Trustee will work with the scheme actuary to incorporate climate-related risks within funding level assumptions in due course.

  • Covenant adviser

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    The covenant adviser, Penfida Limited, provides advice on the ability of the sponsoring employers to continue to meet their obligations to the Fund, taking account of all material risk factors, including climate risk.