The People’s Pension has published a new responsible investment policy, which could result in it severing ties with State Street Global Advisors, currently the sole manager of the default fund assets for the master trust’s 6.7m members.
This policy sets out minimum requirements for the trust’s fund managers, and commits the master trust to work with a number of industry-wide groups including Climate Action 100+ and Nature Action 100.
The People’s Pension says it believes groups such as Climate Action 100+ are the best way to improve stewardship and engagement levels on behalf of retirement savers. It adds it expects the same commitment from its fund managers.
Earlier this year a number of US-based fund managers including State Street Global Advisors (SSGA) and JPMorgan Asset Management announced they would quit this coalition, with BlackRock downgrading its membership of this climate group.
This new responsible investment policy also requires fund managers to have set net-zero commitments and have adequate stewardship resourcing. It says it wants a more robust approach to tackling issues such as climate changes rather than a “cake-and-tea approach to engagement.”
If the requirements in its RI policy are not met, the scheme’s trustee has warned it will put their relationship under review, which could result with them moving members’ assets to other managers.
As part of the policy, the scheme’s trustee has set out clear objectives regarding its responsible investment approach, and how it intends to use its scale and influence as one of the largest UK asset owners toward this objective.
The scheme’s trustee has said that climate change, nature and human rights are its three stewardship priorities going forward.
Fund managers will be expected to support The People’s Pension in achieving their emissions reduction targets, which are set out over the short, medium and long term:
- Net zero greenhouse gas (GHG) emissions by 2050.
- Halving its GHG emission intensity by 2030 for the scheme’s growth assets.
- 30 per cent GHG emissions intensity reduction by 2025 for the developed equity portion of the portfolio.
The document also includes new net zero voting guidelines which The People’s Pension expects its fund managers to implement.
It details when to vote against company directors in fossil fuel reliant sectors on both the supply and demand side, and on deforestation. The guidelines represent a targeted approach to voting and company engagement, to achieve the maximum potential for impact.
People’s Partnerships head of responsible investment Leanne Clements says: “Our new RI policy has both our members’ views and interests at its heart. With stewardship firmly under the microscope and the clock running down on critical issues such as climate change, now is the time to be bolder and braver in terms of what we expect of our fund managers.
“Gone are the days of “tea and cake” engagement – what we want from our fund managers is evidence of a targeted approach to engagement, routed in a robust theory of change to achieve maximum impact.
“We want to see evidence that limited stewardship resources are being employed in the most effective way possible, and that fund managers execute robust voting escalation strategies. As an important complement to our portfolio construction approach on climate change, we recognise the need to achieve real-world emissions reductions in priority sectors through targeted engagement.”
The People’s Pension chair of the board of trustees Mark Condron adds: “The main objective is to drive better investment outcomes for our members and our stewardship objective is to encourage investee companies to behave in more responsible and sustainable ways.
“Hard working pension savers expect asset owners such as us to ensure that their money is invested responsibly, and this report outlines how we are doing just that. Our approach is to ensure both financial value and resilience of our members’ savings, which is why the requirements we have of fund managers are so robust.”
