It’s our job, as the Trustee, to manage the UKRF in the best interests of you, our members, and where we invest is a big part of this role.
We know that the wide-ranging impact of ongoing climate change – on the natural environment, industry, and society – will affect our ability to invest the UKRF’s assets successfully over the long term. That’s why we are committed to Responsible investment (RI) and have integrated environmental, social and governance (ESG) measures into our investment approach for some years.
As ESG issues move more and more into the spotlight, we are always looking to sharpen our focus. We’ve been busy acting on our RI commitment and there are two areas where we have recently made major headway in reaching the standards to which we aspire.
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We’re on our way to Net Zero
We see climate change as a significant financial risk affecting our investments. In the interest of our members and in line with the goals of the Paris Agreement, across our investments, we have announced our ambition to halving greenhouse gas emissions by 2030 and being net zero carbon by 2050 or sooner.
The scale and urgency of climate change has placed it at the front of all our minds. Aiming for net zero gives us the opportunity to contribute to the good of society as a whole in the face of the current climate challenges. It also supports our duty to safeguard your interests – on two levels:
- By investing sustainably and engaging with companies to adopt green business practices, we are working towards better future outcomes for our members. We also work to understand where climate issues may present risks for UKRF.
- We all know that climate change is real, present, and not going away unless we take urgent worldwide action across business, financial arenas, and society at large. You’ve told us that climate change is high on your agenda as well.
For more about what we’re doing to address climate change, read Committed to Net Zero.
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Cracking the code
We’ve been collaborating with our peers and the wider market, and using our voting rights, to encourage awareness and adoption of sustainable business practices, and as a result we’re pleased to confirm that we’ve met the revised – and considerably more challenging – UK Stewardship Code 2020.
Stewardship is how investors, like the UKRF, engage with fund managers and the companies they invest in on our behalf, to encourage and persuade them to operate in line with our RI standards. We do this by using our influence and voting rights and collaborating with other investors where appropriate.
The UK Stewardship Code (established by the Financial Reporting Council (FRC)) sets high stewardship standards and includes 12 principles for asset owners (who invest money on behalf of UK savers and pensioners). We signed up to the Code in its early days.
As of 1 January 2020, the FRC significantly revised the Code, raising the bar for complying with their principles, which is a recognised standard of excellence.
Due to our constant, ongoing drive to improve in all areas of stewardship, we were able to demonstrate how we were already meeting the updated standards and became one of the first signatories to the new UK Stewardship Code 2020 as an asset owner.
For more about the Code, visit the FRC website.
Widening our focus
While environmental concerns have a global impact and understandably dominate the media, sustainable investments also rely on our joint focus on the social and governance areas of ‘ESG’.
Tell me more
Social
Investing to promote the welfare of individuals and have a positive impact on their wider communities (for example, hospitals, schools and social housing). Other issues include:
- Workers’ conditions and rights
- Health and safety
- Diversity, inclusion and equity
- Data privacy and cyber security
Governance
Investing in well-managed organisations, that run to best practice standards. Other issues include:
- Board structure and diversity
- Bribery and corruption
Many of these activities benefit multiple areas. In common with the environment, improved social and governance practices improve business success and, in turn, result in better returns for investors.
But wait, there’s more…
Over the coming months, we’ll share more articles – along with some case studies that we included in our submission to the UK Stewardship Code – that will keep you informed of how we include responsible investment as a vital element across our activities. You’ll be able to read ‘real-world’ examples of how our actions – and engagement with our investment managers – led to positive effects on the environment, outreach into local communities and best practice improvements.