3. The exercise of voting rights
Responsibility for engagement with the issuers of the Scheme’s underlying investment holdings and the use of voting rights is delegated to the investment managers. The Trustee can therefore only influence engagement and voting policy indirectly. The Trustee expects that the investment managers will use their influence as institutional investors to exercise the Trustee’ s rights and duties as shareholders, including where appropriate engaging with underlying investee companies to promote good corporate governance, accountability and to understand how those companies take account of ESG issues in their businesses.
The investment managers provide regular information to the Trustee on their actions in relation to engagement and use of voting rights. The Trustee is therefore aware of the policies adopted by the investment managers.
4. Engagement activities
Responsibility for monitoring the makeup and development of the capital structure of investee companies is delegated to the investment managers. The Trustee expects the extent to which the investment managers monitor capital structure to be appropriate to the nature of the mandate. The Trustee also considers it to be part of the investment managers’ roles to assess and monitor how the companies in which they are investing are managing developments in ESG related issues, and in particular climate risk, across the relevant parts of the capital structure for each of the companies in which the managers invest on behalf of the Scheme.
Should an investment manager be failing in these respects, this should be captured in the Scheme’s regular monitoring of the investment managers and the Trustee would seek to engage with them to improve the position.
5. Incentivisation arrangements with investment managers
The investment managers are primarily remunerated based on an agreed fixed annual percentage of the asset value for each underlying fund. The Trustee does not directly incentivise the Investment Managers to align the approach they adopt for a particular fund with the Trustee’s policies and objectives. Instead, the investment managers and the funds are selected so that, in aggregate, the returns produced are expected to meet the Trustee’ s objectives. Neither does the Trustee directly incentivise the investment managers to make decisions about the medium to long-term performance of an issuer of debt or equity, or to engage with those issues to improve their performance. The Trustee expects such assessment of performance and engagement to be undertaken as appropriate and necessary to meet the investment objectives of the funds used by the Scheme.
UTC (UK) Pension Scheme | Statement of Investment Principles | 22 August 2023
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