Our approach to Responsible Investment
It’s our primary legal duty to invest in the best financial interests of all our members and beneficiaries. We also aim to protect and enhance the value of our investments for the long-term. This is so the scheme has enough funds available to pay benefits when they’re due. We aim to do this by being a responsible long-term investor and a steward of the companies and markets we invest in.
We believe that the way a company is run and overseen, and how it manages its environmental and social risks, such as its approach to climate change or health and safety, will impact the long-term financial returns that it will make for its investors.
That’s why we consider the impact of environmental, social and governance (ESG) issues when we make investments. These are material to the financial performance of our investments when making our investment decisions. See our Stewardship Code Report.
Implementing our strategy
We apply our Responsible Investment strategy across the asset classes in which we invest. This includes our investments in equities, fixed income, property and infrastructure.
We have a large team dedicated to Responsible Investment within USS. They work closely with our in-house investment teams and external fund managers to ensure our strategy is integrated into the decision-making process.
Our Responsible Investment beliefs and ambitions
As a universal owner of assets right across the globe, we have a large, diversified portfolio that represents a slice of the global economy. We therefore can’t cherry pick our way around large systemic risks like climate change, nor can we simply divest from them. Instead, we must address them, together with other universal owners, to minimise the financial impact they can have on our investments.
We believe that by working with other long-term investors to drive change and by embedding Responsible Investment into all our investment activities, we can drive better outcomes for our members. For more on our beliefs and ambitions in this space, see our Responsible Investment Beliefs and Ambition Statement.
How we do it
We actively engage with companies in which we invest on how they go about their business. Being an engaged shareholder is one of the most effective ways of influencing positive change at a company level.
Our active engagement isn’t just limited to the businesses in which we invest. We also engage with policymakers around the world. We encourage them to put in place appropriate policies to address ESG issues across the whole market and raise market standards to protect investor interests. We also address thematic issues, such as climate change at company-specific, market and fund level. You can find out more about this in Responsible Investment activities.
As with most UK pension schemes with a defined benefit section, we cannot exclude companies from our portfolio based solely on ethical or moral grounds. That said, we do take into account the impact of wider risks on long-term performance when we invest. In early 2020, we announced plans to exclude and, where necessary, divest, from companies in sectors that were deemed financially unsuitable for USS over the long-term. Read our latest news update on our first disinvestment, or take a look at our news article for more detail.
In 2021 we announced our ambition to be Net Zero for greenhouse gases by 2050 if not before. Read our news announcement for more information. We have also established interim targets of reducing the carbon intensity of our company related investments by 25% by 2025 and 50% by 2030.
We aim to address material ESG issues through engagement with the companies in which we invest. We seek to act as an active and engaged owner and encourage these companies to make positive changes. Just one example of how our approach has been beneficial is in Royal Dutch Shell’s decision to adopt a new climate change policy.