Pension Protection Fund Responsible Investment Report 2020/21 23 Engagement continued Our engagement progress This year, we and outcomes participated in the IIGCC workstream We’ve focused on three themes in particular for engagement during the last year: on setting investor expectations on physical risks. 1. Climate change Climate change is a key pillar of our As a result, we have ESG data available We also engage with companies such Climate Action The company also acknowledged the RI strategy and an ever-increasing through our portfolio system for as Rio Tinto, POSCO and McDonalds – need to enhance next iterations of priority that can a昀昀ect the pro昀椀le 70 per cent of the Fund’s net asset identi昀椀ed by Climate Action 100+ as 100+ focus TCFD risk assessments to include of our investments over the value. Within this coverage, we also large corporate greenhouse gas One of the companies held across consideration of impacts, such as short, medium and long term. have carbon emissions data for emitters – urging them to take a few of our portfolios is the demographic changes and population approximately 30 per cent of the total, necessary action on climate change. multinational retailer corporation movement. Through our stewardship activities, re昀氀ecting the di昀케culty in assigning Walmart. The company is part of the especially those with our managers, sovereign carbon emissions. We have started to examine the Climate Action 100+ list and has been Walmart disclosed the Board’s we seek to drive the progress alignment potential of our investments, engaged on various topics across ESG process for overseeing human capital on climate adaptation and move To drive further visibility, we’ve chosen covering our equity, 昀椀xed income, real themes, such as climate change, management, including the option to towards a net zero future. to focus on each asset class in turn estate and internally managed LDI designate an independent director and in a way that works best for each. strategies. The results of the analysis will Board e昀昀ectiveness and natural We have provided full detail on our further inform our stewardship activities resource stewardship. who has employee engagement work around climate in a dedicated This year, we also participated in and actions that we need to take to responsibilities. It also recognises TCFD report that shows how we IIGCC workstreams on physical drive our issuers to align with the As a result of continuous engagement, the importance of actively increasing assess and manage climate-related risk and welcomed its ‘Investor Paris Agreement. Walmart assessed the risk of potential Board diversity and has committed to implementing changes to rules risks and opportunities across our Expectations on Physical Risks and con昀氀icts between the company’s investment portfolio. Opportunities‘ guide. position on climate change and in director recruitment, ensuring support of the Paris Agreement and minorities representation. Over the past year, we’ve dramatically This gives practical guidance on Taking action: any activities of industry associations improved our oversight by expanding governance, assessing physical risk Over the coming year, we’ll be it is a member of. our ability to produce TCFD-related and opportunity, developing a assessing our entire portfolio metrics and analysis across our resilience strategy and tracking through a climate lens. This will portfolio management systems. metrics. With a focus on our portfolio, give us an independent, objective Net Zero Asset While some managers will implement we are in the process of augmenting benchmark and tangible steps for Managers initiative this across parts of their portfolio to physical risk data to measure exposure moving forward. start with, it’s positive to see them set across the board. 15 of our managers have become targets and we’re looking forward to signatories to the Net Zero Asset 昀椀nding out how they implement the Managers initiative so far, including commitments and track progress. two managers in infrastructure, one in forestry and one in emerging markets.