The Barclays Bank UK Retirement Fund approach to Responsible Investment
The Barclays Bank UK Retirement Fund (‘the UKRF’) is administered by Barclays Pension Funds Trustees Limited, a wholly owned subsidiary of Barclays Bank PLC. The Trustee is the legal owner of the assets of the UKRF which are held separately from the assets of the Barclays Group.
UKRF has a stand-alone Responsible Investment (‘RI’) policy which describes the Trustee approach to RI in the context of managing the UKRF, outlining the guiding principles the Trustee has adopted and the core activities undertaken. These activities chiefly relate to: adherence to good practice standards and principles; ownership, disclosure and collaboration; and the integration of environmental, social and corporate governance (ESG) factors.
The Trustee frames its RI activities within its regulatory and fiduciary obligations, as well as its commitments as a signatory to the Principles for Responsible Investment (PRI) and UK Stewardship Code (2020). The RI policy is owned by the Trustee and is reviewed on an annual basis to reflect ongoing changes and improvements to the UKRF strategy.
The Trustee believes there is compelling evidence that sustainable business practices lead to better risk-adjusted returns and outcomes in the long-term, and therefore aims to fully incorporate assessment of these practices within its investment processes. The Trustee aims to be a leader amongst UK pension funds in RI and maintain an awareness of global best practice.
The Trustee has adopted the following guiding principles for the implementation of its RI policy:
|Integration||The Trustee will integrate RI and ESG factors, including climate change, throughout its investment processes as doing so should lead to better investment decisions and ultimately improve risk-adjusted returns|
|Ownership||Effective stewardship is important to protect and enhance the value of investments and therefore the Trustee will proactively engage (and vote where applicable) with the entities and markets in which it invests|
|Disclosure||Through its stewardship, the Trustee will promote appropriate disclosure on RI issues, including climate change|
|Best Practice||The Trustee will promote recognition of the benefits of RI and its implementation within the investment industry and benchmark itself against global best practice|
|Collaboration||Collaborative initiatives can be powerful in effecting positive change, therefore the UKRF will be a participant in select initiatives|
|Communication||The Trustee will make appropriate disclosures on how it implements this policy to both members and wider stakeholders|
The Trustee considers climate-related financial risks and their potential implications for the UKRF within the wider RI approach and consideration of ESG factors. Climate change is the subject of specific risk management, measurement, stewardship and collaborative efforts as part of the overall investment and RI activities.
The Trustee sees climate change as a key financial risk affecting its investment asset portfolio. In the interest of members and aligned with the goals of the Paris Agreement, across the portfolio we aim to halve greenhouse gas emissions by 2030 and to be net zero carbon by 2050 or sooner.
Industry standards and principles
The Trustee signed up to the Principles for Responsible Investment (PRI) in 2015. The PRI is globally recognised as the good practice standard for responsible investment. It is an investor-led voluntary initiative which promotes an economically efficient and sustainable global financial system to deliver long-term value. The PRI provides a high level framework for integrating ESG aspects into investment decision-making and ownership practices consistent with investors’ fiduciary duties. The UKRF adheres to the PRI principles, and reports its activities and developments annually in line with the PRI reporting framework.
In 2021, the UKRF became a signatory to the substantially revised and strengthened UK Stewardship Code 2020. The Code aims to enhance the quality of engagement between investors and companies to help improve long-term risk-adjusted returns to shareholders.
The Trustee is a member of the Asset Owners Network of the Prince’s Accounting for Sustainability. Founded by HRH The Prince of Wales in 2004, the organisation aims to make sustainable decision-making business as usual.
The Trustee is a member of the Institutional Investors Group on Climate Change (‘IIGCC’) Paris Aligned Initiative. This group is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low carbon world.
Stewardship and ESG integration
The Trustee recognises its position as an asset owner with ultimate responsibility to the UKRF members and beneficiaries, and accepts that effective stewardship can help protect and enhance the long-term value of its investments for the ultimate benefit of these beneficiaries.
Furthermore, the consideration of ESG factors is incorporated in all elements of the Fund investment approach, from strategic asset allocation, through manager selection, to portfolio monitoring. As part of the strategic asset allocation process, ESG risks and opportunities are considered, ensuring that asset and liability risk-return assumptions take these issues into account appropriately. The long-term sustainability of the Fund’s investment strategy is of primary importance and scenario analysis is used to stress-test the portfolio under different conditions, including those driven by ESG issues.
In selecting investment managers, their policy on and approach to ESG issues is an important factor in the process. The UKRF RI policy applies to all its investments although implementation expectations are tailored according to the different asset classes and the investment style of the manager in question.
The Trustee will proactively engage (and vote where applicable) with the entities and markets in which it invests and is willing to act collectively where appropriate. The Trustee has appointed Hermes Equity Ownership Services Limited (EOS at Federated Hermes) as a dedicated specialist engagement provider to maximise Trustee influence as an active owner. With the help of EOS at Federated Hermes, the Trustee will engage (and vote, where applicable) with the investee entities, regulators and markets on a more proactive basis.
The UKRF increasingly accounts for sustainability and climate-related risks into its investment decision-making. Over the last few years, the Fund has established exposure in several investments (as an equity or debt provider) that not only are financially sound (from a return and risk perspective) and consistent with the Trustee long-term strategy, but also acknowledge climate risk and contribute to meeting climate change targets.
The Defined Contribution scheme assets are subject to the same guiding principles and investment activities. The Trustee also provides an environmentally responsible investment option which members can choose as part of the self-select fund range. Members are provided with a factsheet describing the strategy of the underlying manager and information on performance versus an appropriate benchmark. The manager maintains its stated mandate regarding consideration of ESG criteria in investment analysis and active ownership, and its approach is regularly reviewed.