Stewardship

1. What are the expectations of trustees of occupational pension schemes included in the recent DWP guidance on stewardship?

The 2022 Department for Work and Pensions (DWP) Stewardship Guidance defines the responsibility for trustees of occupational pension schemes with 100 or more members to understand and consider financially material Environmental, Social and Governance (ESG) factors and stewardship approaches in their schemes’ investments. Trustees are also required to produce an Implementation Statement (IS) and a Statement of Investment Principle (SIP) describing voting and engagement activities in relations to their schemes’ assets. While the guidance does not introduce new regulation, it emphasises the need for trustees to take a more proactive approach to stewardship activities even if often outsourced and delegated to underlying investment managers. The guidance includes both statutory and not statutory requirements. Examples of statutory requirements for trustees are setting their own voting policy or acknowledging responsibility for the voting policies that asset managers implement on their behalf. Similarly, the SIP must cover the trustees’ policy in relation to undertaking engagement activities in respect of investments including “methods by which trustees would monitor and engage with relevant persons”. Relevant persons can be an issuer of debt or equity, an investment manager, another stakeholder or another holder of debt or equity. As examples of non-statutory expectations the guidance mentions that a good strategy could be for trustees to select what the schemes’ stewardship priorities are and summarise these in the SIP, or provide links to their managers’ policies on those stewardship priorities if available. The non-statutory section of the guidance also mentions a number of options for trustees to be advocate for the scheme’s policies, even when invested in pooled funds: such as selecting and appointing asset managers on stewardship factors, setting an expression of wish or join collaborative investor initiatives amongst others.

2. What is Phoenix Group’s vision on stewardship and how can trustees benefit from it?

As a large savings and retirement business, we believe that stewardship is a core tool to ensure corporate management receives feedback, support, and constructive challenge in order to protect sustainable financial performance. Our stewardship strategy builds on our commitment to promote effective voting and engagement activities in the best interest of our clients through direct, collaborative, and delegated activities.

We believe that it is our responsibility and that of our asset management partners to engage with the companies we invest in to drive better behaviour and influence positive change. Our different approaches to engagement will often overlap, as we work in partnership with our asset managers and peers.

We engage in collaboration with other investors to raise concerns and have a more powerful voice. We also follow defined criteria to select the collaborative engagements that we want to be part of on behalf of our clients. We might also choose to conduct direct engagements through our in house stewardship team based on our ESG research and financial exposure. Finally, our asset managers are at the forefront to conduct engagement and voting activities on our behalf.

We have listened to our customers, colleagues, and other stakeholders, as well as carrying out our own analysis to identify key themes to be addressed by our stewardship activities. These are our current ESG engagement priorities:

• Climate change: Climate change presents both risks and opportunities for the companies we invest in
• Human rights: We believe that the responsibility to respect human rights applies to all companies.
• Nature: We recognise the need for companies to protect and restore the planet’s natural resources
• UNGC (UN Global Compact) controversies: We expect companies to adhere to international standards on human rights, labour rights, environmental and climate change issues as well as anti-bribery and corruption efforts

We conduct these activities on behalf of the trustees of occupational pension schemes we have a commercial relationship with by following our stewardship and investment governance frameworks.

We are also pleased to share with our clients that this year, the FRC has confirmed that Phoenix Group is aligned with 12 principles of the UK stewardship code and it is a formal signatory to the code.

3. Can you share two examples of outcomes oriented engagements conducted recently on behalf of your customers?

Our annual stewardship report includes several engagement and voting case studies across asset classes, geographies, sectors and issues. For example, in the 2022 Stewardship Report trustees can read about the work conducted by abrdn to engage with ENEL, an Italian utility company, on remuneration and climate change and how the dialogue has informed the manager’s voting decision. Equally, we have included an interesting case study from another asset manager, LGIM, who has worked collaboratively with other shareholders and an NGO to engage with Sainsbury, the UK food retailer, on employee’s living wages. The manager has decided to file a shareholder resolution with the company to make its requests more formal and urgent. We are committed to share these practical examples of engagements conducted by our managers and our in house stewardship team on an annual basis through our stewardship report.

4. How does Phoenix Group’s approach differ for mandated funds and self-selected solutions?

Trustees can select the fund managers for their insured investments and do this by deciding the default arrangement for their scheme along with any self-select investments available to their members.

The stewardship vision I have just shared covers mandated funds. These are funds managed by asset managers we have an investment management agreement with. We control the investment strategy for these funds, while our asset managers are responsible for day-to-day investment decisions and delegated stewardship activities. We also have a strict selection process for asset managers linked to internal insured funds and we monitor their ESG performance annually. Every year, we evaluate their stewardship approach and consider whether it is meeting our expectations.

In relation to investments through an External Fund Link (EFL) or so called self-selected investments, it is important to note that our processes are different. EFLs are set up and managed by external asset managers who are responsible for setting the investment strategy and guidelines. We do not have direct control over how the funds are managed by the external asset managers, however, we expect these funds to be aligned with our high standards of stewardship. We assess sustainable investment standards of EFLs managers through a combination of tailored due diligence processes, third-party assessments, and ratings. If the managers do not meet our standards, we would look to engage with them further to seek improvement and influence positive change. In the instances when our clients choose these funds and conduct their own due diligence processes, we are happy to work with them and their advisors to help their reviews of the mangers they choose via our platforms. Every year, we track whether EFLs managers are signatories to the PRI and invite them to sign up to the initiative through private letters. In early 2023, we identified six EFL managers that are not PRI signatories and wrote to them. We have made the list of EFL managers that are signatories to the PRI available to clients and trustees through our dedicated client websites.

5. What are the stewardship options mentioned in the DWP guidance Phoenix Group can support trustees on and how?

We aims to support trustees in delivering on their fiduciary duties linked to stewardship by offering several solutions: 

• In reference to collective voting policies, we provide an off-the-shelf stewardship policy template aligned with Phoenix Group Stewardship policy and Global Voting Principles to better leverage on and be aligned with the work conducted by their insurance provider In reference to asset manager engagement and monitoring, we conduct oversight of stewardship practices of asset managers linked to insured funds and EFLs. We also coordinate requests for reporting on engagement and voting activities by relevant asset managers in order to complete Implementation Statements. We can facilitate for example requests to managers to fill in PLSA Voting Reporting Templates and the ICSWG Engagement Reporting Templates
• In relation to collaborative investors initiatives, we offer our clients’ representation in collaborative engagements selected by Phoenix Group’ Stewardship team (for assets of insured funds)
• With regards to expression of wish, if trustees are interested in sending these expressions on voting items to managers for both self-selected and mandated funds, they need to request this service directly to the relevant managers. We can support clients to get in contact with the relevant managers. Phoenix Group is also currently piloting in collaboration with interested occupational pension schemes clients the Tumelo platform for beneficiaries to send expression of wishes to underlying managers. If a client is interested in offering this service to beneficiaries, we can explore opportunities of collaboration.

Phoenix Group has developed its Global Voting Principles which are used to monitor voting activities by a selection of asset managers. Clients are welcomed to provide feedback to Phoenix Group on its publicly available voting principles. It is crucial to note that we are not in a regulatory position to pass through votes to underlying asset managers on behalf of trustees as Phoenix Group is the underlying owner of these assets.

6. How can trustees access more information or get in contact with Phoenix Group for more assistance?

We have made a lot of information available to our clients through our Phoenix Group website and our brands websites for Reassure Life, Phoenix Life, Standard Life and Phoenix CIS.

On our group website, trustees can access our Stewardship Policy, Global Voting Principles, Expectations of companies on key ESG issues and our Stewardship Report.

On our brands’ websites, trustees can access a brief document on the services available to them in the context of the DWP guidance, a customer friendly stewardship policy, links to voting records of relevant asset management partners and examples of outcomes oriented engagements.

If trustees have any further questions on the content of this video and the documentation on our websites or would need any support on channelling reporting requests to asset managers, they are welcomed to get in contact with their account manager from Reassure life, Phoenix life, Standard Life or Phoenix CIS.