Here, we bring together in one place:
Useful background information about what responsible investment is and why it is so important.
From this introductory page, you can explore each of our three "RI" pillars: Environmental, Social & Governance.
Responsible investment is an approach that aims to manage risk and achieve good outcomes for our members by adopting certain principles:
- Taking a broad view of the long-term effect of our investment decisions;
- Effective stewardship – this is when we influence, use our voting rights and engage directly with our fund managers, and the organisations where they invest; and
- Investing with an environmental, social and governance (ESG) focus.
Why invest responsibly?
As the Trustee, our duty is to manage the UKRF’s assets in the best interests of you, its members. This means planning for good returns on our investments, without exposing them to undue risk.
Evidence shows that a responsible investment approach allows us to do exactly this.
Your pension is a long-term investment, you build it up over decades.
As a result, it makes sense to invest in companies that are mindful about the future – whether that means they have:
- An excellent record on green issues;
- A healthy and useful relationship with their community; or
- Best practice operating standards.
Or, ideally, a combination of all three.
These are the most likely organisations to survive, grow and thrive over the long term. And in turn, the better those companies perform, the better it is for the environment, the community and their own long-term success.
So – it is not a case of placing environmental or ethical concerns over aiming for good returns: in fact, the one supports and influences the other.
Take a look at our introductory video.
What is ESG?
Environmental, social and governance – ESG – is a term that sums up real-world issues that have an impact on investment decisions and performance.
Here are some examples.
- Climate change
- Waste and pollution
- Use of water and energy
- Workers’ conditions and rights
- Health and safety
- Diversity, inclusion and equity
- Data privacy and cyber security
- Executive pay
- Board structure
- Bribery and corruption
How stewardship works
Stewardship is where we actively use our rights as asset holders to influence organisations where we invest and, ultimately, safeguard good returns on those assets. As well as voting, it involves engaging directly with companies and the industry at large on strategy, performance, operations and even culture and values.
An ESG focus helps us understand more about how the companies we invest in work, and the challenges they face. In turn, we can decide whether or not they are a good long-term investment, managing our risk and enabling better returns.
Climate change is one of the biggest risk factors affecting our long-term investments. This is why we have adopted our Net Zero ambition to halve greenhouse gas emission and reach net zero carbon by 2050 or sooner.
We use our influence to engage fund managers and companies with responsible investment. This involves meeting certain industry standards and holding others to those standards.
For example, we have signed up to both the UK Stewardship Code, and the Principles of Responsible Investment (or PRI).
The UK Stewardship Code promotes better engagement between investors and companies to provide the best possible results for shareholders. As a result, ESG standards are a crucial feature of its principles. For example, the first of these states clearly that long-term value for investors leads to sustainable benefits for the economy, the environment and society.
Please find our latest Stewardship Code submission here.
The PRI is globally recognised as the good practice measure in this area. It provides guidance for investment decision-making in line with ESG issues, and a framework to help us keep track of our actions, record UKRF activities each year and continue to progress. The UKRF has been part of this network since 2015.
Please read more about the PRI here
We have appointed a firm that specialises in stewardship services, EOS at Federated Hermes, to carry out this kind of engagement on our behalf as part of a collective group of investors – in particular to have specific discussions with certain companies, and vote in line with our policies in relevant meetings. Take a look at our Governance page for more details about their activities.
Find our full set of documents about responsible investment on one page, including our Statement of Investment Principles and our Responsible Investment Statement.