Investing for the long term
USS is a committed long-term and responsible investor, and takes seriously its fiduciary obligations to its members and beneficiaries.
As a pension fund with liabilities into the future, it is in USS’s interest to encourage the companies and markets in which it invests to focus on delivering durable shareholder value. We believe this means management must consider long term risks to performance, including environmental, social and governance (ESG) factors. Whilst the challenge of integrating ESG factors into USS’s investment approach should not be underestimated, the potential benefits of responsible investment should be realized through improved long term corporate and investment performance.
Objectives, Scope & Beliefs
Building on USS’s Statement of Investment Principles and Investment Beliefs, the fund’s RI objectives are to:
- Work with companies to prevent value-destruction as a result of poor corporate management of extra-financial factors via active engagement with companies.
- Identify mis-priced assets and ensure that factors that could affect long-term return, short-term volatility or USS’s reputation, but not taken into account by ‘mainstream’ analysis, are internalised in the USS investment process.
- Respond proactively to the evolving expectations of our institutions, our members, and UK society about the responsibility of pension funds and the assets the Fund owns with regard to these factors. This is with the proviso that this does not conflict with our fundamental fiduciary duty or corporate identity.
- Ensure USS plays its role as a Universal Investor. Here, the Fund has an interest in minimising externalities and market failures (e.g. pollution or weak corporate governance controls) that would affect economic performance. USS aims to raise standards across the market to improve the financial and ESG performance of all our investments.
Strategy & Implementation
USS first developed a responsible investment (RI) policy in 1999 which was followed in 2000 by the appointment of an in-house responsible investment adviser. Further to the most recent review of RI in 2006 – click here for details – the fund adopted the following RI Strategy in 2007. The strategy seeks to protect and enhance the long term value of the fund by ensuring USS is an active and responsible investor.
USS's Responsible Investment Strategy 2007-2011
USS’s RI strategy covers all asset classes, in all markets managed by the fund including: equities, fixed income, real estate, alternative assets classes, and assets managed by external fund managers. It outlines three core areas of activity:
- Integration of extra-financial issues into investment decision making
- Engagement and voting
- Market wide activities and public policy
To help implement the strategy, USS has a dedicated RI team with five experienced professionals.