Strengthening Our investment Escalation Message from Key highlights our stewardship Our progress Our purpose approach and Our approach and exercising Our aspirations for 46 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 APPENDICES CONTINUED Building on existing voting criteria around gender Appendix F 6. What escalation processes do you have in place Appendix G diversity – In the UK we support the changes to the FCA’s Stewardship section of our for situations of continued underperformance on Our standard RI external manager listing rules for board diversity and expect companies to the engagement objective? Please give two recent disclose whether they comply – or, if not, why – with the ESG Questionnaire examples of where this has occurred in practice. contract terms following targets: at least 40 per cent of board seats and at least one senior board position (Chair, CEO, CFO or Our ESG Questionnaire is a scored mandatory list of 7. Please also describe in detail your approach to 1.1. The Fund Parties acknowledge the importance SID) held by a woman, and at least one board seat held questions that prospective investment managers must voting shares, and whether your voting actions are that the Board places on principles of corporate by someone from an ethnic minority background. answer on a pass/fail basis to progress through the tender determined internally or outsourced to a proxy voting governance and responsible investment. The Fund process. Below is a sample list of questions within the agency. If the latter, do you ever override the agency’s Parties agree to give appropriate consideration to the In 2023, we consider the following to be minimum Stewardship section of the questionnaire. recommendations? Please give a recent example. relevant principles which may include the Principles expectations and will likely oppose the chair or other for Responsible Investment, to which the Board is a responsible directors if not met: 1. Are you a signatory or do you intend to apply for 8. How do you approach ESG and climate-related ballot signatory. The Fund Parties acknowledge that they signatory status to the revised Stewardship Code in items in your voting decisions? Have you voted against have received, read and understood the Board’s • FTSE 350 boards to comprise at least 33 per cent women 2020, or other national stewardship codes? Yes/No management and/or 昀椀led or supported shareholder Statement of Investment Principles. The Fund Parties and executive teams to have at least one female member. resolutions on ESG or climate issues? If so, please give acknowledge the Board’s need to consider long- • FTSE 100 boards to have at least one member from an a) If you are not a signatory to the Stewardship Code, an example of where you have done this, and your term and systemic risk factors in order to manage ethnic minority background (we will extend this to the please provide rationale. rationale for doing so. risks which are relevant to its long-term investment FTSE 350 from 2024). 2. Please explain how active ownership practices, 9. How do you overcome challenges such as shareblocking horizon and its statutory responsibilities. • Women to comprise at least 25 per cent (FTSE 100) such as company engagement, are integrated into markets or stock lending procedures when looking to 1.2 The Fund Parties will have a process for monitoring or 20 per cent (FTSE 250) of the combined population investment decisions. exercise your votes? current or potential investments in relation to relevant of the executive committee and its direct reports. 3. How do you set objectives, measure progress and report long-term factors including ESG and climate-related 10. What customisation do you o昀昀er to clients on voting In Japan, we are likely to vote against the nomination on the outcomes of your engagement with issuers on decisions, can clients retain votes to determine in concerns. The Fund Parties will ensure that their sta昀昀 committee chair or board chair at TOPIX 100 companies ESG issues? line with their own policies? Please also describe the apply due care and diligence to implementing this if fewer than two directors are female. This builds on the fund-speci昀椀c reporting on all voting that you provide. monitoring process, including considering the extent prior 2022 guideline requiring 10 per cent of directors 4. How do you encourage better disclosure from to which such factors generate investment risks to be female. Below the TOPIX 100, the requirement will corporates, especially regarding climate risks? 11. Please describe what engagement activities you or opportunities. be at least one female director. In Malaysia, following 5. For what percentage of investments (by value, over the carry out from a policy, market-functioning or the updated Corporate Governance Code, our minimum industry perspective. 1.3. The Fund Parties will, in accordance with the Board’s female representation at board level is being increased last year) have you undertaken engagement on climate commitment to responsible ownership set out in its to 30 per cent. Previously 20 per cent of the board was change, environmental, social and governance issues? Statement of Investment Principles, engage in such required to be female. • If percentage > 0, please provide detail on processes activities as are appropriate in the circumstances (e.g. on monitoring processes, engagement strategy) to monitor and in昀氀uence the management of the Executive committee diversity – Following the by engagement topic. issuing entities and other underlying assets, where introduction of executive committee/C-Suite diversity such activity is considered by the Fund Parties to be expectations in 2022, we have extended these requirements • Please provide recent examples of such engagement likely to enhance the value of such securities and in in the UK from the FTSE 100 to the FTSE 350 this year. and your assessment of the e昀昀ectiveness of your the best 昀椀nancial interests of the Fund. Executive committees of companies within the FTSE 100 stewardship activities, e.g. instances of positive change are now expected to comprise at least 25 per cent females at issuers versus the level of in昀氀uence you had on 1.4. The Fund Parties will procure the exercise of any and FTSE 250 executive committees to have at least the issuer. voting rights attached to the Portfolio investments 20 per cent female representation. • If percentage = 0, please explain why engagement on the Board’s behalf, in accordance with the Fund was not undertaken. Parties’ voting policy and any market-speci昀椀c All other gender diversity targets introduced within the US, guidelines approved by the Board. The Board Australia, Denmark, France, Germany, Italy, Netherlands, reserves the right to rescind, upon one day’s Spain and Sweden will stay the same as for 2022. advance written notice, the Fund Parties’ authority to make voting decisions for speci昀椀c companies, issues or time periods. The Fund Parties will use best endeavours to facilitate such Board voting decisions to be implemented. The Fund Parties will have in place appropriate policies to manage any con昀氀icts of interest in relation to voting matters and shall report at least quarterly on all votes involving companies where the Fund Parties or an a昀케liate has a contractual relationship or other material 昀椀nancial interest.