Strengthening Our investment Escalation Message from Key highlights our stewardship Our progress Our purpose approach and Our approach and exercising Our aspirations for 34 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 Engaging with issuers through The PPF is a member of the following initiatives PRI Votes on Slavery – We were a continuing member of Science-Based Targets (SBT) Campaign – The CDP investor collaboration • We’ve been a signatory to the Principles for Responsible the Votes on Slavery initiative for its 2022 campaign, run SBT Campaign was launched in October 2022, attracting Investment (PRI) since 2007; our Head of Alternative by the PRI. This initiative focused on FTSE 350 companies support from 318 昀椀nancial institutions and multinational Acting collaboratively with other investors to address that lacked disclosure compliant with UK modern slavery 昀椀rms, including the PPF, representing $37 trillion in assets industry, regulatory or company-speci昀椀c issues has become Credit sits on the PRI’s Private Credit Committee (our legislation. Of the 44 companies highlighted, 41 became and spending. a core pillar of our stewardship approach, given the scale, Head of ESG & Sustainability concluded a four-year term compliant during the course of 2022, with the remaining in昀氀uence and e昀케ciency it can deliver. As part of our e昀昀orts on the Infrastructure Advisory Committee in January three due to disclose after the year-end. The campaign called on over 1,060 of the world’s highest- to maximise the collective voice of the investment industry, 2023) and we’re members of its Collaboration platform. impact businesses to set emissions goals in line with the we are members of initiatives and engagements around a • The Occupational Pensions Stewardship Council We monitored progress through the 2023 voting season Paris Agreement. The 2022–23 campaign resulted in 77 1 number of themes that are important to us. (OPSC) was created by the DWP to promote and and were prepared to use our votes to signal concern on targeted companies , joining the ranks of 5,100+ companies facilitate high standards of stewardship of pensions non-compliance where necessary. We will continue to committed to using SBTs to align their business with the support this campaign as modern slavery is a key theme Paris Agreement. They represent 0.2 gigatonnes in CO e Given there are so many industry initiatives to address assets. The council provides UK pension schemes 2 environmental and social challenges, we prioritise support with a forum for sharing experience, best practice and in our 2023 voting guidelines. emissions and $2.9 billion in market capitalisation, which for projects in markets where we’re already active or where research, and providing practical support. It also enables Climate Action 100+ – The PPF is a signatory to Climate is respectively 3 per cent and 12 per cent of the 2022 CDP we can see rules are being developed to improve a market’s opportunities for schemes to collaborate on stewardship corporate database. functionality and reduce systemic risks. We discuss this activities such as shareholder resolutions, climate Action 100+, the largest-ever investor engagement initiative more on page 35. change and corporate governance. on climate change. Involving around 700 investors in IIGCC’s Net Zero Engagement initiative (NZEI) – 33 markets, who collectively hold half of the world’s We joined the IIGCC’s Net Zero Engagement initiative (NZEI) • As an investor member of the IIGCC, we’ve been an assets under management, it aims to put pressure on the launched in spring 2023. This collaborative programme active member of its Net Zero Stewardship Toolkit, world’s largest greenhouse gas emitters, responsible for aims to scale up and accelerate climate-related corporate Acting collaboratively with the Asset Owner Working Group and Proxy Advisory approximately 80 per cent of global industrial emissions. engagement, supporting investors to align more of their Working Group. We also participate in its collective Largely as a result of Climate Action 100+, 75 per cent (52 investment portfolio with the goals of the Paris Agreement. other investors to address responses to consultations. per cent in 2021) of targeted companies have made Net • We encourage greater disclosure of environmental Zero commitments and 91 per cent (72 per cent in 2021) industry, regulatory or impact by companies, governments and other now report in line with TCFD recommendations. The company-speci昀椀c issues has institutions by supporting organisations such as majority of these companies feature in our passive portfolio. the global disclosure systems provider CDP. Engagement through Climate Action 100+ has informed become a core pillar of our analysis of company progress when voting at AGMs. stewardship approach. Key industry collaborations during It also contributes to our own Climate Watchlist of the year high-emitting companies. Find it, Fix it, Prevent it – This group focuses on modern CCLA Mental Health project – This project analysed and slavery within businesses and their supply chains. ranked corporate disclosure on mental health policies and For example, on climate change, we actively participate in Developed by CCLA, a leading manager of charitable practices. During the year under review, the project focused the programmes run by the Institutional Investors Group on assets, and supported by a coalition of investor bodies, on a list of global companies that scored poorly in its index. Climate Change (IIGCC) – see right – and have contributed academics and non-governmental organisations (NGOs), We led engagement on 昀椀ve of these companies, which are to key projects during the year under review. We also work the initiative is designed to harness the power of the based in the US, Europe and Asia. We achieved dialogue closely with UK policymakers and market stakeholders, such investment community on a key issue. For the year under with two of the companies contacted. As a relatively new as the Pensions and Lifetime Savings Association (PLSA), review, the initiative’s focus industry was the construction engagement initiative, we are monitoring company progress the UK Debt Management O昀케ce and the Department for sector. Investor members collaboratively engaged with in this area. Work and Pensions. We are involved with a range of investor UK-listed construction companies on modern slavery risks, organisations to help drive industrial and legislative change including the PPF which is the lead investor for a FTSE 100 Collaborations for the coming year to encourage higher levels of stewardship and greater construction company. We expect the majority of the campaigns above to continue disclosure of ESG risks across the investment industry or over the next year. In addition, the PPF joined the following within speci昀椀c sectors. The aim of the project is to highlight issues to the sector in collaborations in 2023: question, better understand the challenges modern slavery poses to the industry, share best practice and explore potential remedies. 1 As of end of May 2023.