Pension Protection Fund Responsible Investment Report 2020/21 12 ESG integration Our approach to We amend our approach depending Setting new standards for upon the asset class or strategy, how stewardship ESG integration directly we’re invested in it and the ESG best practice is still developing, level of control we’ve been granted. so we work extensively with our external managers and incentivise We insist on a high level of responsible In line with our RI strategy, and detailed conduct from our underlying issuers, them to develop their processes in our 昀椀rst RI report, we embed and seek to avoid investing in issuers in line with our RI principles, for material ESG considerations right that contravene international example by setting time-bound across our investments and our work conventions or norms for controversial commitments in legal documents. with external managers, from selection activities that are rati昀椀ed into UK law, Owing to our size, we have the through to ongoing monitoring and for example the production of speci昀椀c reporting. controversial weapons. opportunity to encourage improvements in ESG integration around the globe. We also engage with our underlying We implement this through a small We see this as an area where we issuers and use our voting powers to exclusion list, which is applied across can in昀氀uence and help set new advocate for ESG principles. our Fund to the extent possible. standards for the industry, particularly The Fund’s targeted strategic asset in private markets which have less As outlined in our full stewardship allocation is as follows: developed stewardship practices. policy, we strive to extend our Listed equities historically have most activities across our entire portfolio. established stewardship practices, but – as shown in our strategic asset allocation chart – they make up a PPF strategic asset allocation (31 March 2021) smaller part of our investments. In asset classes where good stewardship isn’t fully established yet, we consider the 6% best and most e昀케cient approaches. Our regular review meetings with our fund managers often include education around these methods and emerging developments. 40% 42% Diversity and inclusion is a topic 13% that we’re focusing more on at the organisational level of our Liability hedging instruments Return-seeking assets fund managers. Over the last Hybrid assets Cash two years, we have been including questions relating to this in our tender documents, which form part of the overall ESG assessment.