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26 May 2022

USS publishes Stewardship Code Report 2022

Reporting season is once again upon us, and this year marks the second iteration of our Stewardship Code Report. We became a signatory to the new Stewardship Code last year, and to retain this status, we submitted a 2021/22 report to the FRC at the end of April 2022. The Code comprises a set of 12 ‘apply and explain’ Principles for asset managers and asset owners, and our report must evidence how we have applied them over the previous year.

The report sets out our belief that Responsible Investment should be applied across the asset classes in which we invest, and that our approach centres on effective stewardship of all our assets. The pensions being promised to our members today will need to be paid decades into the future, so it is in USS’s interests to encourage the companies, assets and markets in which we invest to focus on delivering sustainable investor value over the very long term. The report sets out how we do this.

We took a principle-by-principle based approach to the report again this year. The Principles encompass four themes: Purpose and governance, Investment approach, Engagement and Exercising rights and responsibilities. We set out in detail how we are acting as stewards of the assets we own, along with the key engagements and collaborative initiatives we’re involved in. We’ve incorporated a wide range of case studies into the report, covering our Private Markets Group (PMG) assets as well as what we’re doing in Private Equity and Global Emerging Markets (GEMs) to help bring our approach to life. We also set out how we’ve collaborated with other investors on high emitting companies like Cemex, as well as engaging with companies on important human rights issues such as exposure to the military Junta in Myanmar or the Uyghur Muslims in China.

Central to the report is our Net Zero strategy, including our ambition to be Net Zero in carbon by 2050 if not before. We’ve already taken three important steps on this journey: setting interim targets, introducing a climate tilt to our developed market equity portfolio and announcing a sustainable growth mandate which will invest in climate solutions.

The FRC will now assess our report and confirm how we score against each of the Principles later this year, at which point the full list of signatories and reports are published on its website. Once listed, organisations must report annually to remain signatories to the Code. We believe the report gives a compelling account of how we seek to be an agent of positive change in delivering against our responsibilities and commitments, for the benefit of current and future members, their families and communities, and to society as a whole.

Of course, producing reports like this (and the now-mandatory TCFD Report which we’ll be publishing alongside our annual Report and Accounts this summer) mustn’t detract from the need to continue to take action on ESG issues. We’ve made a great start towards achieving our Net Zero ambition and will absolutely continue to strive to be a leader in this space.