Pension Protection Fund Responsible Investment Report 2020/21 16 Engagement How the Fund is managed We prioritise We manage around half of our assets in-house, engagements in through a team of portfolio managers across LDI themes of greatest hedging strategies, hybrid assets and strategic cash. importance to us, The remaining 50 per cent is managed by external in sync with our fund managers across a range of vehicles, including own RI strategy. segregated accounts, pooled funds, closed-end funds, co-investments and passive instruments. Our approach to Our engagement approach engagement for the assets we manage Engagement is a driving force behind Engagement in LDI assets our RI strategy and we’ll always exhaust Our objective is to improve the it before considering divestment. However, there’s a real need to boost e昀케ciency and functioning of markets through collaboration on important Case study transparency around engagement, issues with stakeholders and especially in asset classes such as policymakers. As a large participant in Green gilts sovereign debt and private assets, the Gilt market, we regularly engage which could have the greatest potential with the DMO and HM Treasury. for impact. Over the past year, we’ve This involves taking part in annual In October 2020, we supported the express our opinion. We therefore worked hard to improve this and consultations, forums and investor Green+ Gilt Proposal developed by took part in a closed-door working support our managers to engage with roundtables. the III, Green Finance Institute and group organised by the III to the entities in their portfolios. Grantham Research Institute. develop potential metrics and We prioritise engagements in themes measurement frameworks for of greatest importance to us, in sync Green gilts are a sovereign bond environmental and social co- with our own RI strategy. As part of this with an aim to attract private bene昀椀ts reporting. we work closely with our stewardship Taking action: sector capital into the green This year we provided support recovery and social renewal. As part of this, we highlighted provider to de昀椀ne focus areas and and insight on developing the Following the Chancellor’s the importance of ensuring provide feedback on them. More UK’s green gilt issuance. announcement, in the Spring 2021 diversity is considered in the detail on our engagement approach Budget, of at least £15 billion in just transition to a low carbon was provided in last year’s RI report. green gilts issuance, the III was world, as some technology and As a participant in derivatives markets, appointed as Secretariat of the infrastructure industries are still we already have an established new Stakeholder Discussion Forum very heavily male-dominated. We oversight process for our bank on green 昀椀nance, set up by HM welcome the development of the counterparties. However, over the Treasury and the DMO. UK Government Green Financing coming year we’ll be exploring how to Framework, although we believe further embed ESG considerations and While our participation in any such the right requirements must be engagement practices of counterparties issuance will be based on it meeting put in place to report on the use of to strengthen our ongoing assessments our investment requirements, as proceeds and impact. of and reduce counterparty risks related active stewards it’s important to to ESG issues.