UTC (UK) Pension Scheme - Annual Report and Financial Statements (Including Chair's Statement)
United Technologies Corporation (UK) Pension Scheme
Implementation Statement for the Year to 31 December 2024
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1. Purpose of
This Implementation Statement has been prepared by UTC Pension Trust Limited as Trustee of the United Technologies Corporation (UK) Pension Scheme (“the Scheme”) and sets out:
Implementation Statement
• How the Trustee’s policies on exercising rights (including voting rights) and engagement policies have been followed over the year.
• The voting behaviour of the Trustee, or that undertaken on its behalf, over the year to 31 December 2024.
• A discussion of prescribed matters related to assets held in respect of benefits provided on a defined contribution basis.
The Statement has been produced in accordance with the Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018, the Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019 and the guidance published by the Pensions Regulator.
The Trustee has produced a Statement of Investment Principles (‘SIP') dated 22 August 2023 , as required by Section 35 of the Pensions Act 1995, and a copy is available on request. No relevant changes were made to the SIP during the year to 31 December 2024.
2. How voting and engagement
During the year to 31 December 2024, the Scheme, via the UTC Common Investment Fund, invested in:
• Pooled funds in respect of its return-seeking assets.
policies have been followed
• Segregated mandates containing corporate bonds and Liability Driven Investment (‘LDI’) holdings, intended to manage risks associated with the nature of the Scheme’s liabilities.
The Trustee delegated responsibility for carrying out voting and engagement activities to the Scheme’s investment managers, in line with the policy set out in the Scheme’s SIP.
The Trustee received information on the stewardship and engagement activities of their investment managers during the year and was satisfied that the policies followed by the managers were reasonable and in alignment with the Trustee’s own policies. No remedial action was required during the period.
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3. Voting
The Scheme’s equity investments are held through pooled funds. The investment managers of these funds vote on behalf of the Trustee.
undertaken on behalf of the Trustee
The Trustee has not, to date, set specific stewardship priorities for the investment managers on the basis that it is comfortable with the general approach adopted by the managers. Given this, and the fact that the Trustee delegates responsibility for carrying out voting activities to the managers, the Trustee does not take an explicit view on which votes undertaken on behalf of the Scheme are more significant than others. The table below provides a summary of the voting activity undertaken by each manager during the year, together with information on their key voting priorities and information on the use of proxy voting advisors. On the grounds of materiality, voting undertaken in respect of any listed property vehicles held through secure income funds have not been disclosed.
Fund
Does the manager use a proxy voting advisor?
Key voting priorities
% of votes cast as a proportion of total possible votes
LGIM index-tracking equity funds
99%
A proxy voting advisor (ISS) is used by LGIM, but LGIM actively direct a significant proportion of clients’ voting rights.
Improving corporate management of environmental, social and governance issues, including board remuneration and diversity.
Ruffer Absolute Return Fund
100%
A proxy voting advisor (ISS) is used by Ruffer, but Ruffer actively direct a significant proportion of clients’ voting rights.
Improving corporate management of environmental, social and governance issues, including board remuneration.
BlackRock Dynamic Diversified Growth Fund
94%
BlackRock’s proxy voting process is managed by the BlackRock Investment Stewardship team (BIS).
Board quality, environmental risks and opportunities, corporate strategy and capital allocation, compensation that promotes a longer-term view, human capital management.
Examples of votes flagged as being significant by LGIM, Ruffer and BlackRock have been provided in Appendix 1 . Examples of engagement activities undertaken on behalf of the Scheme are given in Appendix 2 .
Further details of the voting activities of the Scheme’s main equity manager, LGIM, can be viewed via this link: https://www.lgim.com/uk/en/capabilities/investment-stewardship/
Additional information on the investment managers’ voting activities can be provided to members on request.
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4. Benefits
The Scheme is primarily a defined benefit pension arrangement in which the majority of members’ pension and other benefits are based on formulae linked to service and earnings with a sponsoring employer.
provided on a defined contribution basis
The Scheme holds assets that provide benefits on a defined contribution basis in respect of a historical bulk transfer of assets and liabilities (known as “TACC Benefits”). In addition, the Scheme also holds a relatively small amount of assets in respect of Additional Voluntary Contributions (“AVCs”) that provide benefits on a defined contribution basis.
Members are given a range of options to select from in investing funds arising in respect of TACC Benefits and AVCs. The Trustee regularly reviews the associated providers and funds offered to members. There is no default arrangement applying to TACC Benefits or AVC funds.
In addition, specific defined benefits for certain members are subject to an underpin calculated with reference to the returns on a notional portfolio set by the Trustee from time to time. There are no assets invested on behalf of members in respect of such underpins.
5. How the SIP has been followed
In the Trustee’s opinion, and in relation to assets backing benefits provided on a defined contribution basis, the SIP has been followed over the year in the following ways:
• The Trustee offers a range of fund options, which give members a reasonable choice to build an investment strategy.
• The Trustee periodically monitors the performance of providers and funds to ensure that they are meeting their stated objectives.
• The Trustee delegates management of Environmental, Social and Governance related issues and risks to the providers of the funds offered to members.
Prepared by UTC Pension Trust Limited
5 March 2025
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Appendix 1(i) – Examples of managers’ illustrations of significant votes - LGIM
LGIM
Vote 1 (UK equities)
Vote 2 (North American equities)
Company name
Shell Plc
Apple Inc.
Date of Vote
21 May 2024
28 February 2024
Fund’s holding as at the date of the vote (as % of portfolio)
7.7%
5.8%
Summary of the resolution
Approve the Shell Energy Transition Strategy
Report on Risks of Omitting Viewpoint and Ideological Diversity from EEO Policy
How the manager voted
Against
Against
Rationale for the voting decision
While LGIM acknowledges the substantial progress Shell has made in terms of climate- related disclosures in recent years, they cannot support the company’s current approach. LGIM view positively the commitments made to reduce emissions from operated assets and oil products, the strong stance on tackling methane emissions, and the pledge to halt frontier exploration activities bey ond 2025. However, the recent revisions to Shell’s Net Carbon Intensity (NCI) targets, combined with the ambition to expand its gas and LNG business this decade, raise significant concerns. LGIM expects Shell to provide clearer evidence that these plans align with an orderly transition to net-zero emissions by 2050. Specifically, they seek greater transparency regarding the expected lifespan of the assets the company plans to develop further, the flexibility in revising production levels across a range of scenarios, and concrete actions across the value chain to enable customer decarbonization. Moreover, LGIM requires further clarity on Shell’s lobbying activities in regions where hydrocarbon production will play a major role, more detailed guidance on capital expenditure allocated to low-carbon initiatives beyond 2025, and the application of responsible divestment principles in asset sales. Given that portfolio changes are a significant lever in Shell’s decarbonization strategy, it is crucial that the company ensures these principles are rigorously applied to support a genuine transition.
LGIM believes that a vote against this proposal is warranted, as the company has already provided shareholders with adequate disclosure regarding its diversity and inclusion efforts and nondiscrimination policies. Additionally, incorporating viewpoint and ideology into Equal Employment Opportunity (EEO) policies does not align with standard industry practices.
Outcome of the vote
The resolution passed
This resolution failed
Implications of the outcome
LGIM will continue to engage with their investee companies, publicly advocate their position on this issue and monitor company and market-level progress.
Criteria on which the vote is considered significant
LGIM is publicly supportive of so called "Say on Climate" votes. LGIM expect transition plans put forward by companies to be both ambitious and credibly aligned to a 1.5C scenario. Given the high-profile of such votes, LGIM deem such votes to be significant, particularly when LGIM votes against the transition plan.
LGIM views gender diversity as a financially material issue for their clients, with implications for the assets LGIM manage on their behalf.
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Appendix 1(ii) – Examples of managers’ illustrations of significant votes – Ruffer
Ruffer
Vote 1
Vote 2
Company name
Banco Santander SA
Bank of America
Date of Vote
21 March 2024
24 April 2024
Fund’s holding as at the date
of the vote (as % of portfolio)
0.16%
0.15%
Summary of the resolution
Governance – Remuneration
Environmental – Energy transition
How the manager voted
For
Against
Rationale for the voting decision
Santander proposed a 5% pay uplift in the base salary of its CEO and Executive Chair. Ruffer voted to approve the remuneration policy, despite ISS’s recommendation to vote against, as Ruffer believes the uplift is not material. In fact, Ruffer finds that this uplift may reflect an attempt to catch up with industry peers. Although ISS flagged the potential for the policy to exacerbate existing pay-for-performance concerns, Ruffer believes the remuneration policy is sensible, and the pay increase is not large enough to relinquish Ruffer’s support of management.
Among the several shareholder proposals on the slate at the 2024 AGM, Ruffer voted against ISS’s recommendation and in line with management regarding the request for a report on the clean energy supply financing ratio. This was because Ruffer believes Bank of America is committed to its Net Zero targets and provides much of the necessary data to support this. While Ruffer supports enhanced disclosures more broadly, the proponent’s required ratio is already available via a third -party (Bloomberg). Hence, in support of greater uniformity within the responsible investing space, Ruffer feels that a vote against this proposal was the best option, rather than having the company itself calculate this ratio with a possibly varying methodology.
Outcome of the vote
The resolution passed with 74.5% votes for.
The resolution failed.
Implications of the outcome
Ruffer will continue to monitor company performance to ensure the remuneration policy is appropriate.
Ruffer will monitor how the company progresses and improves over time, and continue to support credible energy transition strategies and initiatives which are currently in place, and will vote against shareholder resolutions which they deem as unnecessary.
Criteria on which the vote is considered significant
Ruffer defines significant vote as: any vote against management or against an ISS recommendation, any vote in breach of criteria included in Ruffer’s internal voting guidelines, any shareholder resolution, any climate related resolution, any management-proposed climate-related resolution or dissident shareholder slate (US only).
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Appendix 1(iii) – Examples of managers’ illustrations of significant votes – BlackRock
BlackRock
Vote 1
Vote 2
Company name
DowInc.
Tesla, Inc.
Date of Vote
11 April 204
13 June 2024
Fund’s holding as at the date of the vote (as % of portfolio)
Not provided
Not provided
Summary of the resolution
Commission Audited Report on Reduced Plastics Demand
Declassify the Board of Directors
How the manager voted
Against
For
Rationale for the voting decision
BlackRock believe that the company already has policies in place to address these issues.
BlackRock believe that directors should be elected annually to discourage entrenchment and allow shareholders sufficient opportunity to exercise their oversight of the board.
Outcome of the vote
Fail
Pass
Implications of the outcome
Not provided
Not provided
Not provided
Not provided
Criteria on which the vote is considered significant
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Appendix 2 – Examples of engagement undertaken during the year to 31 December 2024
LGIM: APA
What was the issue?
APA is Australia's largest energy infrastructure company. Since 2022, LGIM have been engaging with the company as part of its Climate Impact Pledge campaign. APA was selected as a 'dial mover' company due to its scale and influence across the energy sector, believing that the company’s actions could have a broader, positive impact beyond its direct corporate scope. In their engagement, APA was identified as lagging in meeting LGIM’s expectations regarding climate - related lobbying activities, which was highlighted in the company’s qualitative assessment. In early 2022, LGIM communicated its expectations for management proposed ‘Say on Climate’ votes, which would enable sharehol ders to influence corporate climate action. LGIM expects credible transition plans in line with the Paris Agreement, aiming to limit global warming to 1.5°C, including the disclosure of Scope 1, 2, and material Scope 3 emissions, as well as short, medium, and long-term GHG emissions reduction targets. When APA brought its climate transition plan to a vote, LGIM could not support it because it lacked Scope 3 targets. The company committed to finalizing these targets by 2025. Following the vote, LGIM engaged with APA to understand the challenges the company faced in meeting these expectations, building the relationship through continued dialogue. LGIM’s engagement with APA has been well received and they are happy that the company has taken the issue very seriously and acted to attempt to resolve the situation in a proactive and pragmatic manner. Following multiple discussions with investors, in early 2024, during a meeting with APA, the company confirmed that it would include a Scope 3 goal in the 2025 update of its Climate Transition Plan. They also presented their proposed pathway for reducing Scope 3 emissions. APA acknowledged that feedback from investors, including LGIM, who had voted against the original plan in 2022, played a significant role in their decision to commit to a Scope 3 target. This outcome underscores the effectiveness of LGIM’s engagement strategy, which aligns with its voting policy, to drive progress toward decarbonization. LGIM looks forward to continuing its engagement with APA as the company works toward its net- zero goals.
What did LGIM do?
What was the outcome?
Ruffer: ArcelorMittal
What was the issue?
ArcelorMittal, a global leader in steel production, faced significant scrutiny over health and safety practices, particularly following a fatal incident at a mine in Kazakhstan. Additionally, concerns have been raised over the company’s approach to decarbo nization and the effectiveness of its strategies in reducing carbon emissions. These issues prompted Ruffer to engage with the company on both fronts, including its response to the tragedy and its broader climate-related goals.
What did Ruffer do?
Ruffer’s engagement sought to address the following key points:
What was the outcome?
ArcelorMittal’s response to the fatal incident included offering financial support to the deceased’s family and assisting the government of Kazakhstan in its inves tigation. The company acknowledged that safety performance had worsened during the pandemic but claimed improvement outside the Commonwealth of Independent States. However, despite promises of an independent safety audit, the company has yet to appoint an external party to conduct this review, with no firm timeline beyond a vague suggestion of an update by the 2024 AGM. This is insufficient, and Ruffer expects more immediate and concrete action.
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BlackRock: Walt Disney
What was the issue?
The Walt Disney Company (Disney) is a diversified global entertainment company with operations in three business segments: Entertainment, Sports and Experiences. The Walt Disney Company (Disney) faced contested director elections and shareholder proposals at the 2024 AGM. Shareholders raised concerns about governance, strategy, and executive compensation. BlackRock has been engaging with Disney for years regarding these issues.
What did BlackRock do?
As part of their engagement, BlackRock focused on:
1. Assessing the company's long-term strategy and financial performance.
2. Discussing board composition and succession planning.
3. Evaluating the shareholder proposals based on their potential impact on long-term shareholder value.
BlackRock engaged with both Disney's management and dissident shareholders to understand their positions. They also conducted extensive discussions with Disney’s leadership, including joint meetings with active portfolio managers.
What was the outcome?
BlackRock supported Disney's management nominees for the board, believing their strategy was well-defined, and that the management was addressing performance issues and making necessary governance changes. Regarding the shareholder proposals, BlackRock voted against all of them, considering them redundant given Disney's existing practices and disclosures. BlackRock’s support of Disney’s management was based on the company’s positive financial results and ongoing efforts to resto re investor confidence.
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