Our approach to stewardship and collaboration
From joint initiatives to shared ESG frameworks, we believe that collaboration plays a pivotal role in sustainable investment and stewardship, as well as engagement, escalation and voting consistently, to set industry-wide benchmarks and best practice for a more sustainable future.
Our approach to stewardship seeks to deliver financial outcomes at the individual investment level, and to contribute to the transition to a more sustainable society to the benefit of the economy, the environment and society. We believe that this will ultimately deliver better financial outcomes for our clients.
Our stewardship beliefs
We invest in companies with clear ambitions to contribute to a sustainable future, because we believe that companies that manage their sustainability transitions are resilient and will be more valuable in the long run.
Stewardship is a key part of how we invest, but our interpretation of stewardship goes deeper than just investing. We also collaborate with consultations and working groups, providing policymakers and financial institutions with evidence and support so they can take action on sustainability.
Our collaborations
Collective action can lead to a deeper understanding of ESG risks, as well as setting new standards in investment stewardship. It can influence corporate behaviour on critical issues and gives companies access to a broad range of investor perspectives and expertise, aiding their sustainability journey.
Many sustainability problems need to be solved by addressing ecosystems that surround businesses, so engaging with policy makers and governments is an increasingly important component of effective systemic stewardship.
Our collaborative engagement initiatives
Planetary Boundaries
Social Foundations
How we approach stewardship
Our purpose puts our clients’ long-term interests and sustainability at the centre of everything we do and how we work. Through our stewardship and risk management, we aim to create long-term value, benefitting our clients and beneficiaries, promoting accountability and fostering sustainable outcomes. We believe good stewardship encompasses the following principles:
- Collaboration: more efficient and impactful for both investors and companies
- Quality over quantity: we are interested in meaningful engagements and tangible results
- Long-term: successful outcomes can take several months or even years
- Real word impact: we engage on topics that contribute to positive real-world sustainability impact
- Innovation: we encourage innovation (eg. using alternative data sources)
- Integrated: stewardship contributes to investment decisions
- Goal-oriented: we set objectives and work towards those
- Transparency: some engagements may be unsuccessful
We define a sustainable society as one that operates within planetary boundaries with strong social foundations.
Why do we do stewardship?
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Managing systemic risk
As a globally diversified investor aiming to maximize risk-adjusted returns there is a benefit to us using stewardship to reduce systemic risk. These include among other climate change and biodiversity risk, as well as financial and social stability risk. -
Maintain investments while pushing for improvements
For companies we see as adaptive and capable of providing long-term value – but have not yet transitioned – we use influence to engage the company to change. -
Real word sustainability outcomes
We use stewardship to contribute to positive real-world sustainability impact. -
Improving long term risk-adjust returns
By using stewardship activities to encourage improvements to reduce sustainability risks (like climate change) and improve economic resiliency it lowers our systemic portfolio risk and improves our risk-adjusted returns.
Our engagement and voting
We prioritise engaging with businesses most exposed to the systemic risks identified by our Sustainable Investment Framework. We aim to improve their policies and practices by taking a methodical and structured approach, and we exercise voting rights on behalf of clients in line with our comprehensive voting policy. Our investment teams also identify material financial risks to engage with specific businesses.
Escalation
If companies fail to take the necessary action to address financial risks or concerning real-world impacts, we escalate our engagements. This might be through writing to management, voting against management or directors, and co-filing shareholder resolutions. If companies fail to address these concerns, it may lead to reclassification in our framework and exclusion from our portfolios.
Ecosystem engagement and systemic stewardship
Many transitions are unlikely to happen without supportive government policy. So as well as engaging with individual companies, we take a system-wide perspective to address real-world consequences and create change. We do this by engaging with policymakers in areas where we may have some positive influence. The systemic risks identified in our Sustainable Investment Framework are highly interconnected.
Our approach to collaboration
When it comes to stewardship, collaboration reduces the volume of conversations between companies and investors and makes effective use of limited resources. We always take our decisions independently, but we work with like-minded investors on initiatives to target systemic sustainability risks.
If we’re part of an initiative, we aim to play an active role. We’ll lead on engagement with certain companies while relying on partners to effectively engage other businesses. We don’t directly engage with every business in our portfolios, instead we select where we believe we can add most value and can complement what others are doing.
For every company we engage with, we consider their unique context and engage on the material themes related to our Sustainability Strategy, to improve their long-term value and stability. We look at every company’s sustainability performance and how it contributes to environmental and social issues: from implementing the real Living Wage to meet our fairer society ambitions, to targeting our zero-deforestation goals in our Biodiversity Strategy.
Stewardship is a key mechanism for driving real world change and to limit systemic risks in the best long-term interests of our clients’ pension fund members.
More detail on our stewardship and voting policies can be found here.
