26 Pension Protection Fund Responsible Investment Report 2021/22 OUR APPROACH TO ENGAGEMENT CONTINUED Engaging with issuers through The PPF is a member of the following initiatives: Key industry collaborations during the year To support the campaign, we are currently encouraging investor collaboration • We’ve been a signatory to the United Nations-supported Climate Action 100+ – The Pension Protection Fund over 700 non-disclosing companies in our listed portfolios Principles for Responsible Investment (PRI) since is a signatory to Climate Action 100+, the largest-ever to respond to CDP, either by us leading engagement or Acting collaboratively with other investors to address 2007; our Head of ESG sits on the PRI’s Infrastructure investor engagement initiative on climate change. Involving supporting it. We will assess the progress made on the industry, regulatory or company-speci昀椀c issues has become Advisory Committee and we’re members of its around 700 investors in 33 markets who collectively hold campaign once the annual reporting period closes and a core pillar of our stewardship approach, given the scale, Collaboration platform. half of the world’s assets under management, it aims results are published at the end of 2022. in昀氀uence and e昀케ciency it can deliver. As part of our e昀昀orts • The Occupational Pensions Stewardship Council to put pressure on the world’s largest emitters, which Addressing ESG risks in intensive farming – During the to maximise the collective voice of the investment industry, (OPSC) was created by the UK’s Department for Work are responsible for approximately 80 per cent of global year we became a member of the FAIRR Initiative. This is we are members of initiatives and engagements around & Pensions to promote and facilitate high standards of industrial emissions. Largely as a result of Climate Action a collaborative investor network that raises awareness of a number of themes that are important to us. Given there stewardship of pensions assets. The council provides UK 100+, 52 per cent of targeted companies have made Net the ESG risks and opportunities brought about by intensive are so many industry initiatives to address environmental pension schemes with a forum for sharing experience, Zero commitments and 72 per cent now report in line livestock production. and social challenges, we prioritise support for projects best practice and research, and providing practical with TCFD recommendations. The majority of these in markets where we’re already active or where we can support, which we have found very useful. It also enables companies feature in our passive portfolio. There is extensive evidence that ESG issues can signi昀椀cantly see rules are being developed to improve a market’s opportunities for schemes to collaborate on stewardship PRI Votes on Slavery – We were a member of the 2021 impact the 昀椀nancial performance of companies involved functionality and reduce systemic risks. We discuss this activities such as shareholder resolutions, climate change Votes on Slavery collaboration initiative run by the PRI in industrialised animal agriculture. The success of these more on page 27. and corporate governance. during the year. This initiative achieved close to a 100 per companies is, therefore, contingent upon longer-term • As an investor member of the Institutional Investors cent success rate in encouraging compliance with the s54 environmental, social and regulatory trends, and the ability Group on Climate Change (IIGCC), we’ve been an active reporting requirements of the UK Modern Slavery Act for for companies to successfully anticipate and navigate member of its Net Zero Stewardship Toolkit group since FTSE 350 companies. Only two companies, out of the 61 we these changes. We expect to be involved in future investor Acting collaboratively with last year (see case study below). We also participate in its engaged with, remained non-compliant by December 2021. collaborations by the group. other investors to address collective responses to consultations. As a result of its success, the UK Home O昀케ce asked that • We encourage greater disclosure of environmental the initiative continue to pressure FTSE 350 companies in industry, regulatory or impact by companies, governments and other institutions 2022. We will continue to support this campaign as modern company-speci昀椀c issues has by supporting organisations such as the global disclosure slavery is a key theme in our 2022 voting guidelines. systems provider CDP. (See CDP Non Disclosure Investor expectations letter on Net Zero aligned audits become a core pillar of our Campaign below.) –EOS co-signed a letter to the French entities of Deloitte, stewardship approach. • The Emerging Markets Investors Alliance (EMIA) enables EY, KPMG, and PwC following the publication of an analysis institutional emerging market investors to support good of carbon-intensive companies’ 2020 昀椀nancial statements governance, promote sustainable development, and by Carbon Tracker. This showed that the auditing of French improve investment performance in the governments companies lagged behind other countries and did not meet For example, on climate change, we actively participate in and companies in which they invest. Our Head of ESG investor expectations for audit 昀椀rms or directors on Net the programmes run by the Institutional Investors Group is involved in the Asset Owner Advisory Council for Zero accounting, as set out in a paper published in 2020. on Climate Change (IIGCC) and have contributed to key the alliance. Indeed, no audits provided the visibility EOS sought on the projects focused on Net Zero frameworks and physical risks. • We have been closely involved in the development of a potential 昀椀nancial implications of a 1.5°C transition pathway, We also work closely with UK policymakers and market Carbon Emissions Template through the Investment which global leaders have committed to deliver. The letter stakeholders, such as the Pensions and Lifetime Savings Association, the Association of British Insurers and the requested that the companies act immediately to ensure Association, the UK Debt Management O昀케ce and the Pensions and Lifetime Savings Association to help fund investor expectations are met in compliance with existing Department for Work & Pensions. We are involved with a managers calculate and report their carbon emissions regulations and standards. range of investor organisations to help drive industrial and to asset owners using a standardised data template. Collaborations for the coming year legislative change to encourage higher levels of stewardship We actively shared our own extensive work with our and greater disclosure of ESG risks across the investment managers to establish our quarterly ESG reporting CDP Non-Disclosure Campaign – CDP is a global not- industry or within speci昀椀c sectors. templates. Our latest Climate Change report refers for-pro昀椀t that helps companies and cities disclose their to this in more detail. environmental impact. The CDP Non-Disclosure Campaign aims to persuade non-responsive companies to take action and respond to its questionnaires, depending on which of CDP’s three focus areas (climate change, water security and deforestation) are material to their business activities or supply chains.