Pension Protection Fund Responsible Investment Report 2020/21 19 Engagement continued EOS carries out engagement through a four-step process. As shown below, it begins with raising a concern which it Engagement in follows up diligently until it achieves a measurable outcome. The process can span a few quarters. pooled vehicles Due to current operational barriers in Engagement milestone process of our external provider extracting shareholder rights, we must generally accept that our managers 4 will carry out stewardship activities The company for pooled equity investments. In 3 implements a strategy most cases, fund managers engage or measures to and vote on our behalf concerning The company develops address the concern. investee companies in these funds. 2 a credible strategy to However, our new quarterly reports The company achieve the objective, from our managers give us oversight 1 acknowledges the or stretching targets of engagements, votes and outcomes. Our concern is raised issue as a serious are set to address the with the company at investor concern, concern. Fixed income the appropriate level. worthy of a response. Engagement carried out by debtholders has a way to go, partly due to limited in昀氀uence in some areas – however, it is developing and becoming increasingly Progress important. We believe we can reach better outcomes in these asset classes Case study through long-term relationships and by encouraging managers to keep pursuing The IPDD – engaging on deforestation their stewardship agenda. Engagement across sovereign Several of our credit managers However, investors noted that debt and emerging markets are part of the Investors Policy recent policies appear to be Sovereign debt is a fundamental Dialogue on Deforestation (IPDD) moving the country further away asset class for every asset owner initiative – a global investor-led from deforestation goals. They and a pillar of a well-functioning engagement under the Tropical urged the president to engage economy. Engagement in emerging Forest Alliance. The initiative with other stakeholders to 昀椀nd markets is crucial where dialogue aims to halt deforestation and constructive solutions to the with governments takes a concerted mitigate investment risks in threat of illegal deforestation. e昀昀ort over time. Investors’ voices are vulnerable geographies, focusing also vital for pressing topics such on Brazil and Indonesia. To In Indonesia, the work is in earlier as the transition to a low carbon combat deforestation, the IPDD stages – laying out the scene that economy and deforestation. engages with key individuals and there’s a lot of investor demand government agencies to hold them to drive progress on deforestation We welcome the evolution of tools and accountable, head o昀昀 unwelcome and responsible land management. data sets that deepen the ability of legislation and push for supply We receive regular updates from investors to measure climate-related chain transparency. managers who are members of and other ESG risks in relation to the initiative and continuously sovereign bonds. We encourage our In Brazil, the initiative has already encourage further dialogue at managers to contribute knowledge and made considerable progress local and state government level. resources to drive progress forward. through active dialogue with local and municipal governments.