09 Pension Protection Fund Climate Change Report 2022/23 GOVERNANCE AND ACCOUNTABILITY CONTINUED Climate and sustainability training • Climate Action 100+ Net Zero Benchmark constituents where companies have no medium-term targets in place Board ESG credentials Next steps A key governance aim this year was to build internal • Companies expanding coal-昀椀red infrastructure or that knowledge and understanding at the PPF of sustainability, have signi昀椀cant dependence on coal without a su昀케ciently The composition of the PPF Board has always Further training will include improving carbon and especially climate, issues through training and education. ambitious timeline and strategy for coal phase-out been crucial in stewarding value creation while literacy for PPF employees more widely, and a deep Two external speakers were invited to speak to the PPF • For deforestation, companies that score low on the also managing ESG risks. We have a Board member dive on o昀昀setting carbon emissions. Board about their experience and insights, followed by a Forest 500 rankings. with particular ESG expertise, who is also one of panel discussion and Q&A. One speaker gave an overview the members of our Sustainability Strategy Group. We will de昀椀ne more interim targets for the See Appendix F Sustainability Strategy and move into an from a non-昀椀nancial services perspective and the other for our full voting guidelines policy update. The PPF Board is proactive and regularly updated focused on how a listed asset manager is approaching by the ESG & Sustainability Team on the latest implementation phase. sustainability and its commitment to supporting Net Zero. In-house additional review process developments and thinking in ESG, sustainability For UK and other European companies, we now review and climate risk management. A Board strategy away-day included deep-dive interactive any shareholder proposals related to climate change workshops covering ESG materiality assessments, Net Zero internally. Shareholder meetings at companies on our target setting, and communicating sustainability issues to Climate Watchlist are also reviewed internally by the ESG & all stakeholders. Sustainability Team. Both steps will allow additional analysis Our approach to Responsible Investment (RI) and stewardship Upskilling of the Investment team on climate has continued around the progress being made against our internally-set throughout the year. The ESG team presented the results targets. A vote against management may be necessary if Our RI framework puts our core beliefs into practice: of the Paris Portfolio Alignment Project, including baseline we consider there has been inadequate progress on climate and subsequent progress. Executive Committee and Board strategy and management. members were also invited to attend. RI Framework Sustainability Strategy Enhancing voting guidelines accountability Strategic and oversight Governance & direction Risk Metrics & This year saw the publication of the PPF Sustainability accountability & policy management transparency In order to measurably track and encourage progress on Strategy, another critical development to help ensure the climate action, we use the Transition Pathway Initiative’s Fund’s longevity, enable us to lead by example and catalyse Management Quality assessment of companies (TPIMQ). the growth of a more sustainable pensions industry. Priorities We are also informed by the Climate Action 100+ Net Zero The Sustainability Strategy is a result of collaborative e昀昀orts, Company Benchmark and guided in our voting by industry starting at PPF Board level and cascading down to internal initiatives around Net Zero alignment for both asset owners Sustainability Working Groups. We have established a and our asset managers. clear line of leadership and accountability for developing, For 2023 voting decisions, we increased the TPIMQ delivering and evaluating the strategy. Climate Change Stewardship Reporting score thresholds for climate-related voting guidelines, This gives the PPF Board ultimate oversight with the authority particularly for: to approve and amend the strategy as deemed necessary. • European and Australian companies in speci昀椀c sectors As detailed in the panel on page 07, a Sustainability Strategy Climate & sustainability Engaging with (coal, oil, gas, utilities and autos) Group (SSG) has been created to steer development of the policies & strategies fund managers Internal ESG dashboards strategy and de昀椀ne what success looks like. Climate stewardship Engaging with issuers Investment Committee & Board reporting Climate risk assessments Voting of shares External RI reporting & sustainability reporting Climate Collaborative engagement External climate reporting opportunities & public policy