Kingsland Pension Scheme
Engagement policy implementation statement for the year ended 30 June 2020
During the year ended 30 June 2020, the Schemes investment strategy was implemented in line with the principles set out in the Scheme’s Statement of Investment Principles.
Changes to the Statement of Investment Principles:
Adoption date: August 2020
Changes made: Update to Statement of Investment Principles following the appointment of LGIM as the Fiduciary Manager and implementation of the new investment strategy.
Adoption date: June 2020
Changes made: The Trustees amended the Statement of Investment Principles to formalise the policy on ESG in line with the updates to the DWP regulations.
The Trustee’s policy is to delegate responsibility for the exercising of rights (including voting rights) attaching to investments to the investment manager, Legal and General Investment management (LGIM) and to encourage the manager to exercise those rights in accordance with the Statement of Investment Principles. Kingsland Pension Scheme invests through pooled fund arrangements and so acknowledges that the investment manager exercises those rights in accordance with their own corporate governance policies on behalf of all investors in its funds. In doing so LGIM takes account of current best practice including the UK Corporate Governance Code and the UK Stewardship Code.
The Trustee has considered LGIM’s stewardship activities in relation to the specific funds the Scheme holds having received specific training from LGIM on the topic. The Trustee reviewed LGIM’s approach to stewardship and are comfortable with the activity taken on the Scheme’s behalf.
The Trustee concludes that, based on these considerations, LGIM has followed the requirements of the SIP.
LGIM’s voting decisions are made internally within LGIMs Corporate Governance team, and independently from the investment teams. They are primarily based on LGIM’s global corporate governance and responsible investment principles, which set out their global approach to key governance issues. LGIM has supplementary regional policies which set out their approach to more specific regional or country issues taking into account specific market regulation or best practice. LGIM discloses monthly voting records on their website. The reports are published at the end of each month. Additionally, for votes that have received significant press attention, LGIM produces summaries of the firm’s positions. The full voting record can be found on LGIM’s website linked here: https://documentlibrary.lgim.com/documentlibrary/library_55458.html
LGIM does not outsource any part of its strategic voting decisions; however ISS (Institutional Shareholder Services) is used for the customisation of LGIM’s voting policy, the execution and processing of the voting instruction. LGIM aims to minimise abstentions. Since 2011, it has not abstained in the UK. In other markets, LGIM seeks to minimise abstentions unless it is technically impossible to vote. LGIM regularly engages with the proxy execution agent ISS via direct meetings and through our participation in consultations on regional voting policies.
LGIM summarises its voting record across all markets each quarter. This information is available on request.
Examples of LGIM’s engagement activities:
Active ownership, which is a broader topic than voting in isolation, forms a key part of how LGIM conducts responsible investing. This is reflected in the following activities that are conducted on behalf of the Kingsland Pension Scheme
- Company engagement
- Using voting rights globally, with one voice across all active and index funds
- Addressing systemic risks and opportunities
- Seeking to influence regulators and policymakers
- Collaborating with other investors and stakeholders.
The examples below demonstrate some of the specific activities undertaken by LGIM in this regard during the year.
- Climate change – LGIM supported more shareholder resolutions on climate change than any of the world’s 20 largest asset managers.
- Financial inclusion and income inequality – LGIM opposed 35% of pay packages globally (compared to 34% in 2018), and in the UK, LGIM voted against 17 chairs of remuneration committees.
- Lobbying – LGIM were a top supporter of resolutions on political lobbying transparency compared to the world’s 10 largest asset managers.
- Diversity – In 2019 LGIM worked to improve gender diversity at board, executive and management level.
- Good governance – LGIM promoted strong governance for long-term success by voting against 159 directors in the UK over independence concerns.
- Mergers and acquisitions – LGIM worked to protect investors’ interests amid deal making using voting rights. Of the 1,728 shareholder proposals that LGIM voted on relating to reorganisations and mergers, LGIM opposed 16%.
- Shareholder activism – LGIM will engage with activist shareholders and support their proposals – but only if they can unlock value for the benefit of clients.
- Culture – LGIM engaged some of the largest technology firms to discover how they manage their culture.
Significant votes for the Scheme during the year
In determining significant votes, LGIM takes into account the criteria provided by the Pensions & Lifetime Savings Association (PLSA). This includes but is not limited to:
- High profile vote which has such a degree of controversy that there is high client and/or public scrutiny
- Significant client interest for a vote
- Sanction vote as a result of a direct or collaborative engagement
- Vote linked to an LGIM engagement campaign
The most significant votes for the Scheme during the year have been summarised below:
How LGIM voted: For
The resolution proposed by Barclays sets out its long-term plans and has the backing of ShareAction and co-filers. We are particularly grateful to the Investor Forum for the significant role it played in coordinating this outcome.
How LGIM voted: For
In addition to facing a full slate of proxy proposals, in the two months leading up to the annual meeting, Amazon was on the front lines of a pandemic response. The company was already on the back foot owing to the harsh workplace practices alleged by the author of a seminal article in the New York Times published in 2015, which depicted a bruising culture. The news of a string of workers catching COVID-19, the company’s response, and subsequent details, have all become major news and an important topic for our engagements leading up to the proxy vote. Our team has had multiple engagements with Amazon over the past 12 months. The topics of our engagements touched most aspects of ESG, with an emphasis on social topics:
- Governance: Separation of CEO and board chair roles, plus the desire for directors to participate in engagement meetings
- Environment: Details about the data transparency committed to in their ‘Climate Pledge’
- Social: Establishment of workplace culture, employee health and safety
The allegations from current and former employees are worrying. Amazon employees have consistently reported not feeling safe at work, that paid sick leave is not adequate, and that the company only provides an incentive of $2 per hour to work during the pandemic. Also cited is an ongoing culture of retaliation, censorship, and fear. We discussed with Amazon the lengths the company is going to in adapting their working environment, with claims of industry leading safety protocols, increased pay, and adjusted absentee policies. However, some of their responses seemed to have backfired. For example, a policy to inform all workers in a facility if COVID-19 is detected has definitely caused increased media attention.
How LGIM voted: Against
In June 2019, under our annual ‘Climate Impact Pledge’ ranking of corporate climate leaders and laggards, we announced that we will be removing ExxonMobil from our Future World fund range, and will be voting against the chair of the board. Ahead of the company’s annual general meeting in May 2020, we also announced we will be supporting shareholder proposals for an independent chair and a report on the company’s political lobbying. Due to recurring shareholder concerns, our voting policy also sanctioned the reappointment of the directors responsible for nominations and remuneration.