Pension Protection Fund Responsible Investment Report 2020/21 25 Voting Our 昀椀rst RI report and our stewardship Our guidelines for voting Where we feel engagement has not policy provide detail on our approach been fruitful, we may vote against to voting in our segregated equities. management on certain resolutions, such as reports and accounts or How we escalate We commit to voting every share we electing individual Board members important issues hold, except when it’s cost-prohibitive or responsible for poor environmental or not possible due to operational reasons. social performance. While EOS votes on our behalf, we Where an engagement is not will review votes across key topics in advance. These key topics are aligned Taking action: progressing at a su昀케cient pace privately with the voting guidelines issued by with the company, there are a range of We’re developing speci昀椀c voting potential escalation strategies that we the PLSA and include: guidelines for the next AGM season can employ, including collaborating with • Board leadership and company to make sure we vote in line with other investors or campaign groups, purpose our key priorities. We will also be • Division of responsibilities, e.g. issuing a public statement or 昀椀ling a separation of chair and chief executive reviewing our policy around shareholder resolution. • Composition and diversity of Boards stocklending and recalling stocks Voting against Board recommendations and executive committee out on loan for voting purposes. is an important tool we can use • Audit, risk and internal control as part of a thoughtful escalation • Remuneration Our criteria for signi昀椀cant votes when necessary. However, we would • Climate change and sustainability Along with the guidance of the PLSA always look to engage with the • Capital structure and allocation company at Board or management • Company strategy, vision and around signi昀椀cant votes, we also use our level to discuss this in advance. business model own criteria to 昀氀ag material votes that we need to scrutinise more carefully. We closely follow the AGMs of companies targeted by Climate Action 100+ and discuss with our managers if Taking action: there is an important vote to be cast on We’ve created a watchlist where our behalf. We are also reviewing the we get particular coverage and new trend of formal shareholder votes on companies’ climate transition plans. have an agreed timescale for However, we recognise the dilemma action to proactively execute that the majority of shareholders votes for signi昀椀cant and material aren’t likely to have reviewed the Taking action: positions in our portfolio. robustness of these plans in thorough For example, we use the Transition Pathway detail. This could lead to them just Initiative’s (TPI) assessments of companies to help Our watchlist includes: ending up supporting management guide our climate-related votes executed via EOS. rather than encouraging a company The TPI provides a useful framework for setting to be as ambitious as possible. stretching but achievable engagement objectives on • Companies where we have over climate change. EOS has had a formal climate 1 per cent ownership of equity change voting policy that uses the TPI management • Companies that we hold directly, quality scoring system since 2019. Over the last year, which we escalate to our CIO the voting policies for certain regions – including for decision Our voting policies for the UK – now consider opposing the chair or other • Companies with speci昀椀c issues, certain regions now directors at companies falling below a Level 4 e.g. practices that are non- consider opposing the management score, up from the previous Level 3 compliant with the UN Global threshold. Compact chair or directors at • Votes related to a speci昀椀c initiative companies with a low that we’re involved in, such as our TPI score. holdings on the Climate Action 100+ list and related shareholder resolutions