ESG & Stewardship: Case studies

Case Study A – Establishing sustainable investment beliefs

XYZ, an investment consultancy, worked with a group of trustees looking after a DB and DC scheme with combined assets around £500m to come up with a set of sustainable investment beliefs. There were four short stages:

1. The facilitation of a brief training session as part of the regular Trustee meeting cycle to give background information on the topic, including the applicable regulation
2. The Trustees individually completed a questionnaire after the training session to elicit their views on 10 core questions covering areas including sustainability, ESG, stewardship and climate change amongst others
3. A 1-hour special workshop was held to discuss the results of the questionnaire, exploring differences and looking to settle on a collective Trustee position
4. The Trustees drafted an over-arching sustainable investment belief statement, with four supporting principles, which was then combined into their overall statement of investment beliefs Key discussion points included where on a spectrum from ‘minimum compliance’ to ‘leading practice’ the Trustees wanted to be, as well as where the Trustees felt they could have most impact as a group given their governance and scheme strategies. The beliefs statement and principles are used by the investment committee when assessing different investment decisions, as well as in their interactions with managers, where they are particularly valuable in determining which managers share similar perspectives and priorities as the Trustees.

Case Study B - Assessment of RI policy implementation

Pension Scheme UVW retains the view that ABC Management are strong in governance, integration, stewardship and ‘intelligent’ voting, backed by an experienced team.

They continue to be a member of the PRI, reporting against the PRI framework each year, as well as producing their own ESG impact report and Active Ownership reports.

The reports contain detailed case studies and updates on RI practices implemented by the manager.

The firm continues to process UVW’s voting instructions for the passive UK equity portfolio. The RI Team override the voting decisions for stocks where we have an active holding in-house to ensure consistency of our voting position. It is worth noting this is a highly unusual arrangement.

In 2018 they undertook a review of ABC’s voting records to compare UVW’S vote instructions with ABC’s proprietary votes. ABC were helpful in providing the data in raw excel format to facilitate analysis.

The data included 1,334 resolutions across 73 UK company meetings voted over 18 months from January 2017 to June 2018. The analysis found disparity in the voting intentions for 16% of resolutions across many agenda items, including remuneration, director elections, auditor elections, the approval of the report and accounts. Whilst they have yet to discuss the results with ABC, they considered the findings would support their view that they reflect the outcomes of their engagements and escalation strategies in their voting intentions.

This view was also informed by their interactions with ABC as peer fund managers in investor collaborations where ABC continue to play a leadership role.