Leading master trust The People’s Pension1 has strengthened the expectations of its investment managers in its new Responsible Investment policy.

The £26 billion pension scheme’s newly published Responsible Investment policy2 sets out the minimum requirements and ongoing expectations that it has for its fund managers.  As part of its minimum requirements, fund managers are expected to have a commitment to net zero and adequate stewardship resourcing.  If these minimum requirements are not met, the Scheme’s Trustee has warned it will put their relationship under review, which could result with them moving their 6.7 million members’ assets to other managers.

The new policy also underlines The People’s Pension’s commitment to working with industry-wide groups such as Nature Action 1003 and Climate Action 100+4. The Scheme believes these groups are the best way to collaborate with others, to improve stewardship and engagement levels on behalf of retirement savers and other investors, and most importantly, expects the same commitment of its fund managers.

As part of the policy, the Scheme’s Trustee has set out clear objectives regarding its Responsible Investment approach. The policy sets out specifically how The People’s Pension plans to use its scale and influence as one of the largest UK asset owners toward this objective and the areas that it has prioritised.

The Scheme’s Trustee has said that climate change, nature and human rights are its three stewardship priorities going forward.

Fund managers will be expected to support The People’s Pension in achieving their emissions reduction targets, which are set out over the short, medium and long term:

• Net zero greenhouse gas (GHG) emissions by 2050.

• Halving its GHG emission intensity by 2030 for the Scheme’s growth assets.

• 30% GHG emissions intensity reduction by 2025 for the developed equity portion of the portfolio.

The document also includes new net zero voting guidelines which The People’s Pension expects its fund managers to implement5. It details when to vote against company directors in fossil fuel reliant sectors on both the supply and demand side, and on deforestation.  The guidelines represent a targeted approach to voting and company engagement, to achieve the maximum potential for impact. 

Leanne Clements, Head of Responsible Investment at People’s Partnership, which provides The People’s Pension to 6.7 million UK members, said: 

“Our new Responsible Investment policy has both our members’ views and interests at its very heart. With stewardship firmly under the microscope and the clock running down on critical issues such as climate change, now is the time to be bolder and braver in terms of what we expect of our fund managers. 

“Gone are the days of “tea and cake” engagement – what we want from our fund managers is evidence of a targeted approach to engagement, routed in a robust theory of change to achieve maximum impact.  We want to see evidence that limited stewardship resources are being employed in the most effective way possible, and that fund managers execute robust voting escalation strategies.  As an important complement to our portfolio construction approach on climate change6, we recognise the need to achieve real-world emissions reductions in priority sectors through targeted engagement.” 

Mark Condron, Chair of the Board of Trustees at The People’s Pension, said:

“The main objective is to drive better investment outcomes for our members and our stewardship objective is to encourage investee companies to behave in more responsible and sustainable ways. Hard working pension savers expect asset owners such as us to ensure that their money is invested responsibly, and this report outlines how we are doing just that. Our approach is to ensure both financial value and resilience of our members’ savings, which is why the requirements we have of fund managers are so robust.”