Appendix - ESG-related risks, view of members, the exercise of voting rights, engagement activities, manager incentivisation and conflicts of interest
1. ESG-related risks (including climate change)
The Trustee recognises that Environmental, Social and Governance ( ‘ ESG ’ ) issues can and will have a material impact on the companies, governments and other organisations that issue or otherwise support the assets in which the Scheme invests. In turn, ESG issues can be expected to have a material financial impact on the returns provided by those assets. The Trustee delegates responsibility for day-to-day decisions on the selection of investments to its investment managers. The Trustee has an expectation that the investment managers will consider ESG issues in selecting securities and other investments, or will oth erwise engage with the issuers of the Scheme’s underlying holdings on such matters in a way that is expected to improve the long-term return on the associated assets.
In choosing investment managers, the Trustee and its advisers take the following factors into account in the selection, retention and realisation of investments:
Selection of investments: assessment of the investment managers' ESG integration credentials and capabilities, including stewardship.
Retention of investments: developing a process to monitor ESG considerations on an ongoing basis by regularly seeking information on the responsible investing policies and practices of the investment managers.
Realisation of investments: requesting information from investment managers about how ESG considerations are taken into account in decisions to realise investments.
The Trustee also takes these factors into account as part of its investment process to determine a benchmark asset allocation, and considers them as part of ongoing reviews of the Sch eme’s investments.
The Trustee does not currently impose any specific restrictions on the investment managers with regard to ESG issues, but will review this position from time to time. The Trustee receives information from the investment managers on their approach to selecting investments and engaging with issuers with reference to ESG issues. With regard to the specific risk to the performance of the Scheme’s investments associated with the impact of climate change, the Trustee takes the view that this falls within its general approach to ESG issues. The Trustee will continue to monitor market developments in this area in conjunction with its investment adviser.
2. Views of Member and Beneficiaries
The Scheme is comprised of a diverse membership, expected to hold a broad range of views on ethical, political, social, environmental, and quality of life issues (referred to as ‘ non-financial matters ’ in the relevant regulations). The Trustee therefore does not explicitly seek to reflect any specific views through the implementation of the investment strategy.
UTC (UK) Pension Scheme | Statement of Investment Principles | 22 August 2023
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