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Stewardship, voting and engagement
We carry out stewardship of investments to support returns for our members and the sustainability of these returns by taking into account social and environmental impacts
Stewardship, voting and engagement
What is stewardship?
Stewardship is the responsible allocation, management and oversight of our members’ investments to create long-term value for them. This includes engagements, exercising voting rights and responsibilities, setting expectations, monitoring and holding our investment managers to account. This is carried out by the Trustee of the Smart Pension Master Trust, along with their sub-committees and the Smart Pension in-house teams. External advisers provide analysis, research and advice on the investment options offered through the pension scheme.
What is voting?
When a fund invests in a company and owns shares in it, the fund acquires the right to vote on company matters at shareholder meetings. Often, this voting is carried out by the fund manager or their appointed ‘proxy’ firm on behalf of the entire fund. We have specific expectations in our Trustee’s policies, set out for our managers to follow, and where possible, we have set our own voting guidelines that they will follow for the proportion of investments in the fund held by our pension scheme. This is sometimes referred to as ‘split’ voting. Member feedback is encouraged and will feed into the beliefs set out in the policies. You can view our policies here contact the Trustee here.
What is engagement?
Engagement is any communication with an investment manager or a company which is invested in, through one of the Smart Pension investment funds. Engagements are carried out through collaborative initiatives or by external investment managers on behalf of the Trustee and members. The aim of engaging is to bring about a positive change of approach, policy or behaviour.
Our approach
Delivering positive social and environmental changes
We carry out robust stewardship so that the funds we offer improve environmental, social and corporate governance issues in the world around us, as well as financial returns. Investments allocations, engagements and votes can influence the way in which companies and projects operate and how they consider environmental and social factors. This means we prefer to invest in funds, vote and engage with fund managers and companies to make material sustainability improvements, though we may exclude some companies where we don’t see any potential for improving in their practices or their effect on nature, climate and people.
Shaping our future
Our strategy towards climate and nature focuses on investing in line with a low-carbon transition, preventing nature loss and encouraging action to be taken to align companies with a more sustainable approach and future. We aim to offer funds that are committed to a fair and just transition to a low carbon economy, recognising that emissions will not be able to be reduced overnight. While not all funds are restricted to companies which have adequate policies or plans in place today, there is the potential for their improvement. Some companies of today will be our companies of tomorrow, and by influencing them now, we can help shape the future.
Achieving the greatest impact
We aim to select external investment managers who align with our beliefs, vote in line with these and engage with companies on important environmental and social issues. Where possible, we appoint managers with Trustee-directed split voting capabilities, which means the manager will follow the Trustee’s voting policy rather than their own. We also aim to choose funds which reduce their financed carbon intensity over time. We continue to engage or steward in relation to other important issues as they arise. Prioritisation is important to help us optimise our resources, time and efforts to achieve the greatest impact.
On this page, we have set out our ongoing stewardship and engagement focuses. We have taken a variety of considerations into account, including current market risks and where our managers could go further and have an impact, along with our own ability to influence behaviours.
The Trustee
The Trustee sets out their beliefs in relation to responsible investing, including climate and nature, in various policies. The Voting and Engagement Policy specifically sets out an approach to engagements and an escalation procedure, when no improvements are being seen. The Trustee’s activities and efforts on stewardship and engagement are reported on in their UK Stewardship Code and Voting and Engagement Report.
Our focus areas
Nature loss
Nature is deteriorating globally and biodiversity is declining fast, mainly due to the changing use of sea and land, the direct exploitation of animals and plants, climate change, pollution and invasive non-native species. We have joined Nature Action 100, which is a global investor engagement initiative focused on driving greater corporate ambition and action to reverse nature and biodiversity loss. In line with our view that prioritisation is important, our investment allocations and wider engagements relating to nature address two particular areas; biodiversity loss and deforestation.
Biodiversity loss
Biodiversity loss is the degradation of the variety of plant and animal life in the world, which in turn worsens climate change, adversely affects food and medicine supplies, increases the chance of disease and threatens the extinction of species, including humans. We can help to stop and even reverse biodiversity loss by investing in solutions and engaging with companies which are causing harm to our biodiversity.
We currently invest in biodiversity solutions through the Smart Sustainable Growth Fund and Smart Sustainable Growth Plus Fund, which aims to invest in companies across four of the United Nations’ Sustainable Development Goals; 6– Clean Water and Sanitation, 12 – Responsible Consumption and Production, 14 – Life Below Water and 15 – Life on Land.
Deforestation
Smart Pension supports taking action to prevent commodity-driven deforestation in our invested companies. Deforestation is caused by agricultural processes, poorly planned infrastructure and illegal logging. Forests contain much of the world’s biodiversity, offer a food source for species, home and livelihoods for people. Deforestation is one of our priority engagement areas - read more about it in our paper below.
Diversity, Equity and Inclusion
We define DEI as:
- Diversity: the presence of difference within a given context, such as an organisation.
- Equity: people have fair access, opportunity, resources and power to thrive. The goal is to move beyond historical and systemic barriers to achieve greater fairness of treatment and outcomes.
- Inclusion: actions taken to understand, embrace and leverage the unique strengths and facets of identity for all individuals so that they feel welcomed, valued and supported.
Our processes and structures
We consider diversity, equity and inclusion within our own processes and structures and when appointing and reviewing our investment managers.
We recognise that there tends to be more attention on diversity than equity and inclusion. Equity and inclusion are needed to offer the potential for equal outcomes for people.
Collaborating with our peers
Efforts to address DEI are not widespread across industries and geographies and therefore we see this as an area that could benefit from a higher focus. We are a member of the Diversity Project, which is a cross-company initiative championing a truly diverse, equitable and inclusive UK investment and savings industry.
We aim to collaborate with our peers to encourage best practice and help drive progress in the industry. It is important to us at Smart Pension that our employees and members feel represented and trust us. This creates an environment for better decision making, more innovation and better outcomes for our pension scheme members.
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Managers’ votes
Our external equity investment managers disclose how they vote on specific company resolutions. These disclosures are made for all companies in which the managers invest, not only the Smart Pension investment funds.
See the fund factsheets for more details on the Smart Pension funds.
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