Investing responsibly plays a large part in helping us to pay pensions long into the future as it helps us to manage long-term financial risks and seeks to achieve resilient returns. Across our investments, we believe that the way environmental and social issues are managed, and how companies operate, will impact our long-term, risk-adjusted returns — positively or negatively.
Our position as a Universal Owner means we are exposed to certain market-wide or systemic risks — like climate change and biodiversity loss — that could impact the investment returns we seek.
These are not risks that we can simply invest our way around, they will impact the whole market, across all asset classes. They require action at a system level.
We are a long-term investor with a legal duty to invest in the best financial interests of our members and beneficiaries so we can pay pensions long into the future.
Our responsible investment approach involves us engaging with the assets we own, focusing on sustainability and long-term outcomes, encouraging good corporate governance, and considering how financially material environmental, social and governance (ESG) factors could impact our investments’ value over time.
We also engage with policymakers and regulators in the markets we invest in to seek to contribute to positive real-world outcomes that address systemic risks. We believe we have a role to play in promoting the proper functioning of markets and economies.
More information is in our Statement of Investment Principles as well as our Responsible Investment Beliefs and Ambition Statement.
Our long-term ambition is to be recognised in the UK and globally as a leading asset owner with respect to responsible investment in areas that are key priorities for the scheme.
These responsible investment priorities are set out below:
Climate change is a significant financial risk that is increasingly reshaping the way we look at our investments and their long-term returns. We consider climate change through the lens of physical and transition risks and opportunities at company, sector, country and whole economy level.
We assess nature-related dependencies and impacts as well as risks and opportunities. We consider both how company actions impact nature (and the associated risks and opportunities), and how the companies we invest in depend on nature — the resources and services it provides — to operate.
The rules, processes and practices that determine how a company is run and how investors are protected. We believe these should be based on the principles of fairness, accountability, responsibility and transparency. We look at both the governance of companies and how markets are governed.
Responsible Investment: What it means to us provides more information on our responsible investment priorities, sets out our approach and summarises how we put it into practice.
We appreciate that across society, ethical (and religious) beliefs are hugely important. They can be intensely personal and part of our identity. For example, people might want to avoid investing in companies that extract fossil fuels, provide gambling services, or engage in animal testing for cosmetics — regardless of whether they are legally legitimate and financially sound investments.
Our investments for the Retirement Income Builder — the defined benefit part of our hybrid pension scheme — must reflect our legal duty to invest in the best financial interests of our members and beneficiaries. While we consider all financially material risks, we can only take ethical factors into account where they do not pose a risk of significant financial detriment, and where we believe that members share each other’s views.
Members with Investment Builder savings — the defined contribution part of our hybrid pension scheme — can choose to invest these in a manner that may more closely reflect their own ethical preferences.
Find out more about options for choosing your investments.
We believe that certain issues may pose a risk to investment returns over time, and we will therefore avoid investments with certain characteristics that we regard as a long-term financial risk to the scheme. Some examples of these include tobacco manufacturing and thermal coal mining (where this makes up more than 15% of revenue).
Take a look at our blogs and the following for more on our commitment to responsible investment and our work in this area:
If you're looking for archived reports that are no longer in use, you can find these on our archived responsible investment material page.
Read how we implement our commitments to stewardship and summarise our responsible investment activities and outcomes across all our asset classes.
