Strengthening Our investment Escalation Message from Key highlights our stewardship Our progress Our purpose approach and Our approach and exercising Our aspirations for 27 Pension Protection Fund Responsible Investment Report 2022/23 our Chair of the year commitment at a glance and governance incorporating ESG to engagement shareholder rights the coming year Appendices OUR APPROACH TO ENGAGEMENT CONTINUED Forestry – Forestry is one of the few viable nature-based investment solutions in the journey towards a Net Zero Taking action carbon world. Well-managed forests can also increase biodiversity and are more resilient to climate change. Leveraging existing positions and manager relationships We are pleased to see that almost all our assets continue to optimise future investment exposure is a key part to be certi昀椀ed to the highest international standards (FSC of our portfolio management process. This year, we and/or PEFC). The small percentage that is not certi昀椀ed ensured that a restructuring of one of our existing is allocated to new planting sites – and the manager hardwood forestry assets met with our investment is expecting the area to be certi昀椀ed when planting is and ESG requirements. completed – or where ownership restrictions prevent such certi昀椀cation. As well as certi昀椀cation statistics, we The Tasmanian Forestry Trust is a mature ask our managers to report carbon sequestration data 170,000-hectare hardwood plantation in Australia. (all have reported to us). Since there is no standardised We were able to secure long-term direct exposure methodology on this yet, we are still unable to fully to this important asset by forming and leading a aggregate the data. However, we have been working consortium of three pension funds to enable a buy- with an external consultant to establish an assessment out. In this way we were able to meet the liquidity methodology for this asset class. requirements of existing investors. eFront ESG Outreach pilot project Asset Class: Private Assets We anticipate this initiative will go a long way Issue: Improve ESG reporting in private markets to improving the process for private market data Background: We have been closely involved in a collection, especially among smaller managers that haven’t yet built out their own reporting functionality. pilot project led by one of our data solution providers The ultimate aim is to open the product up to over eFront (part of BlackRock) to address the lack of ESG 2,500 private market managers, reaching over 70,000 and climate-related data and reporting from private private companies. companies. We joined the pilot as a limited partner (LP) in late-2021, working with a selection of private equity Next steps: The 2023 update has been signi昀椀cantly and credit general partners (GPs) managing funds with expanded across the eFront platform and increased vintage years from 2015 to collect relevant ESG and eightfold for the PPF’s GPs. This project has been a climate metrics on underlying portfolio companies. useful learning process for our internal investment Action: We have played an active role in the eFront ESG teams. Being able to discuss what is important to other LPs will help guide our development in private market LP working group to guide the project. Initial outreach investing. One realisation is that GPs – the professionals to private equity and credit GPs was made by the eFront who run a private markets fund day-to-day – need coordinators. We then wrote to our selected private to increase their understanding of the importance markets GPs directly and asked our internal heads of each of timely ESG data. Currently the signi昀椀cant lag in desk to discuss the project during their review meetings data distribution is at odds with Sustainable Finance with the GPs and encourage participation. Disclosure Regulation (SFDR) disclosure requirements Outcome: With our encouragement, 60 per cent of our for managers. This in an area that the LP working selected GPs that were contacted in the pilot reported group and eFront intend to focus on this year. portfolio company data – four times higher than the overall response rate. eFront was also able to o昀昀er LPs the option to 昀椀ll some data gaps with sector estimates. As a result, emissions data (whether actual or estimated) was available for just over 90 per cent of our portfolio companies in those funds that responded to the pilot.