USS is a committed long-term and responsible investor and takes seriously its fiduciary obligations to its members and beneficiaries.
In fulfilling these obligations, USS takes account of a broad range of factors in its investment processes including policies on:
- corporate governance
- long-term economic sustainability
- reputation risks
- other corporate policies
- in conjunction with financial information.
The Scheme’s approach to responsible investing is one of engagement, not exclusion and USS aims to work with companies and managers to encourage responsible corporate behaviour based upon the belief that:
- Management of such issues is good for long‐term corporate performance and
- Better management of these issues protects and enhances the value of the fund's investments.
This approach is widely recognised as one that increases the likelihood of long term value delivery and therefore is in the long term interests of pension fund beneficiaries.
In 1999 USS announced its commitment to a socially responsible and sustainable investment (SRSI) approach. Now known as Responsible Investment (RI) our strategy is based on active engagement with companies whose shares we hold.
The shareholder engagement strategy enables USS to use its influence as one of the largest pension funds in the UK to encourage socially and environmentally responsible corporate behaviour and good standards of corporate governance.
By focusing on a small number of key areas, and working with other large investors where appropriate, USS are able to exert more influence in this direction than by simply divesting from sectors, companies or countries where some of our members may feel the fund should not invest.
Furthermore, in common with other occupational pension funds, our Responsible Investment policy must be consistent with our legal responsibility under trust law. This means treating the financial interests of our members as paramount and managing the fund consistent with proper diversification and prudence.
This is expanded upon in the legal guidance on RI policy and exclusions provided by USS’ lawyers in September 2006:
Legal advice to USS on RI, DLA Piper, Sep06
- Preparing to lift a section of pipe into a trench at Shamkir River Crossing, Azerbaijan. Copyright BP PLC 2004.
USS has significant involvement in a number of important projects, many of which are outlined on this website. The proactive approach taken by USS has led to it playing a founding role in several projects including the Institutional Investor Group on Climate Change, Principles for Responsible Investment, Enhanced Analytics Initiative, International Roundtable on Executive Remuneration and Pharma Futures.
This commitment to collaboration is the best way for investors to share RI expertise and costs. And since numbers add influence, it is also most effective especially when dealing with sector wide issues or major challenges.
Long Term Focus
These projects and achievements illustrate the scheme’s focus on the long term. As a pension fund with liabilities into the future, it is in USS' interest to encourage the companies and markets in which it invests to focus on delivering durable shareholder value.
The challenge of adapting USS’ investment approach to meet this intent should not be underestimated; however, the potential benefits of long-term responsible investment may be seen in a more responsible attitude from the companies and improved investment performance.
RI Strategy
USS regularly undertakes a review of its RI strategy and activities. USS completed a second review of its RI strategy and activities in 2006, which was approved by the Investment Committee in November 2006.
RI Review 2006
RI Strategy 2007 – 2011