Protecting and enhancing long-term value for the Scheme — Stewardship Report 2026

Voting is a key part of being an active steward of the companies we invest in — it’s a tool that helps us hold company management to account, encourage good governance and drive improvements. We vote in line with our members’ best financial interests and where we have made an active decision to own a company, our approach starts from a position of supporting management. Where we have fundamental concerns, for example if a company is failing to meet our expectations around the management of climate risks, we will vote against management.

Meaningful protection of shareholder rights is fundamental to effective stewardship and promotes long-term value creation; it can contribute to better investment outcomes and enhance our ability to pay pensions long into the future.

Given that shareholder rights are at risk of erosion, during the year we undertook a comprehensive proxy voting review. As part of this review, we developed a set of Trustee-owned Voting Principles that govern our approach and ensure voting decisions and behaviours are aligned with the long-term financial interests of our members. The Voting Principles inform detailed Voting Guidance, which is employed by USS Investment Management (USSIM) when it casts votes on the Scheme’s assets.

Climate change is a significant financial risk that is increasingly reshaping the way we look at our investments and their long-term returns.

As discussed in the report, in November 2025, we published a paper entitled The Policy Challenges of the Energy Transition with support from Transition Risk Exeter (Trex). In the paper, we called for collaborative investor action. We also made the case for stronger action from the UK and other governments to provide clear policy frameworks to support each stage of the energy transition. As the transition evolves, what is needed in the early stages of the transition will not be the same as at later stages, nor will it be the same across different sectors. You can read more in our blog.

Following publication of that paper, we hosted an in-person roundtable discussion with eight of our UK asset owner peers. We want to align with like-minded investors to collectively push for stronger policy frameworks that accelerate the UK’s energy transition. We also want to work with international peers and encourage them to also engage with the governments in their countries on the energy transition. We will continue to collaborate with our peers to inform future engagement with policymakers on this issue.

We’ve not just demanded action from others. We are the majority controlling shareholder in the UK’s largest motorway services company, Moto. The Stewardship Report demonstrates that we’ve worked with and supported the company’s energy transition strategy. By investing in electric vehicle charging infrastructure and renewable energy the company wants to be ready for a sustainable, low-carbon future. We continue to work with and support Moto’s management team to drive the energy transition strategy through passenger car electric vehicle and eHGV charging capabilities. We believe this will help ensure the business enhance its value proposition for customers, as well as playing a part in the wider energy transition across the UK.

We assess nature-related dependencies and impacts as well as risks and opportunities. Changes in the natural environment can ultimately pose a financial risk to the Scheme. We consider both how company actions impact nature, and how the companies we invest in depend on nature — the resources and services it provides — to operate. We also consider the different ways in which businesses, through their operations and value chains, have an impact on people. This could be direct — employees, customers, suppliers — or indirect — workers in supply chains, local communities and indigenous groups.

During the year we decided we wanted to understand if water scarcity could pose a financial risk to semiconductor manufacturers. Semiconductor manufacturing is highly water intensive, requiring large volumes of ultra-pure water for cleaning and rinsing of silicon wafers during chip manufacture. Secure access to high-quality water and managing environmental impact are critical to the sector’s long-term resilience. Climate change is also heightening physical risks, with increasing drought risk in key hubs such as Taiwan and the southwestern United States. In addition to physical risks, regulatory and reputational pressures are increasing as wastewater from the manufacturing process can contain heavy metals, chemicals and excess heat.

We engaged with industry experts, reviewed physical risk datasets and engaged with three semiconductor manufacturing companies to discuss their water management policies. While operational disruptions appear unlikely in the near term, we believe that water issues could pose a financial risk and remains a potentially material issue with community impact, pollution risks and long-term climate pressures.