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<p>&nbsp;</p><p>At the Railways Pension Scheme, we always endeavour to ensure your pension is invested sustainably. </p><p>We work hard to consider relevant environmental, social and governance (ESG) factors into the full range of investments we make. </p><p>This is because we believe that companies with good corporate governance practices and engaged shareholders are more likely to achieve the best, long-term financial performance that members need. </p><p>Strong governance tends to ensure effective management of all relevant risks and opportunities, including those related to environmental and social factors. By actively engaging with these companies, it is possible to have a positive influence. This helps us to enhance long-term investment returns for members.</p><p>We always examine environmental, social and governance (ESG) factors when considering investment decisions as they are considered crucial to the long life and success of a company. Companies that follow high quality environmental, social and governance standards are more likely to outperform others in the long-run.&nbsp; </p><p>In order to achieve the wisest balance, we consider investment opportunities in four ways: </p><ol><li>How does it improve our investment returns?</li><li>How does it reduce our investment risk? </li><li>How does it affect the future world our members retire into?</li><li>How does it impact our reputation as a responsible investor? </li></ol><p>Here are some examples of where we have invested recently: </p><ul><li>&nbsp;<span style="background-color: rgba(0, 0, 0, 0); color: inherit; font-family: inherit; text-align: inherit; text-transform: inherit; white-space: inherit; word-spacing: normal; caret-color: auto; font-size: inherit">In 2017 we invested in Community Fibre, a UK-based broadband provider offering superfast broadband in dense urban areas.</span><p><br></p></li><li>In 2018 we invested in Two Chairs, a mental health therapy platform intended to offer in-person psychotherapy at clinics. They use modern technology on their platform to match therapists with clients for better outcomes. <p>&nbsp;</p></li><li>In 2019, we invested in a mixed-use development site in Dartford with five high quality detached warehouse units. This is expected to create around 400 new jobs and will have excellent sustainability credentials expected to achieve BREEAM Excellent. BREEAM is the world’s leading sustainability assessment method for infrastructure and buildings<p>&nbsp;</p></li><li>In 2020 we purchased the majority interest in an onshore wind farm in Scotland, Carraig Gheal Wind Farm.&nbsp; This investment is expected to generate renewable energy over the next 30 years and help the decarbonisation of the UK energy supply.<p>&nbsp;</p></li><li>In 2020 we co-invested in Sleaford Renewable Energy Plant, a biomass facility in Lincolnshire.&nbsp; The plant has been operational since 2014 and converts local straw into heat and energy, as a renewable source of power.<p>&nbsp;</p></li><li>In 2021, we invested in MIPS, a company that makes a patented Brain Protection System for helmets that mimics the brain’s own protection system, offering a scientifically-proven element and much better protection than current products. </li></ul><p>&nbsp;Our Sustainable Ownership team has played a leading role in a number of investment industry initiatives aimed at raising industry standards. Team members sit on several government working groups such as the Pensions Climate Risk Industry Group, which produces guidance for other pension schemes to help them consider climate investments, and the Occupational Pension Schemes Council, which supports schemes to become good stewards of members’ savings. </p><p>We recognise that members and employers trust us with a significant responsibility, and that the decisions and actions we take affect members’ future lives and wellbeing. We are proud of this responsibility, take it very seriously and are committed to and passionate about improving the lives of members.</p><p>For more information on how your contributions are invested and the people behind your pension, visit our earlier blog “From payslip to pension” <a href="https://member.railwayspensions.co.uk/knowledge-hub/news-and-views/blog/rps-blog/2021/05/28/from-payslip-to-pension" data-sf-ec-immutable="" data-sf-marked="">here</a>.</p>

<p>With the start of the new financial year, now might be a good time to get to grips with your pension. You may even feel that the time has come for you to take control of the way your money is invested and to make sure the investments are doing good. Either way, you may find it difficult to know where to begin. </p><p>Seeking the answers, we lift the curtain on how we invest your money sustainably with the help of Michael Marshall, Head of Sustainable Ownership at Railpen. From de-mystifying the investment jargon to tips for people who want their investments to do well – Michael explains it all.</p><p>&nbsp;</p><p><strong>Michael, ‘sustainable ownership’ seems to be a common term in many different financial areas. What’s the best way to explain what it is with regards to pensions? </strong></p><p>Firstly, let’s acknowledge that there’s far too much jargon around. Readers might have heard of ‘ESG’, ‘RI’, ‘SRI’, ‘Impact investment’, ‘Ethical Investment’, ‘Sustainable Investment’, ‘Active Ownership’, or some other term. </p><p>At Railpen we use the term ‘Sustainable Ownership’ to describe the work we do to incorporate sustainability into the way we invest and oversee our members’ money. It comprises a range of activities that our sustainable ownership professionals undertake, as we’ll come to later in the blog.</p><p><strong>&nbsp;</strong></p><p><strong>Why do we invest members’ money sustainably? </strong></p><p>Research suggests that when businesses face sustainability challenges, and fail to manage those challenges successfully, they could suffer in a number of ways: customer loss, higher operating costs, regulatory intervention, product recalls, lawsuits, less productive workforce, or loss of social license to operate. </p><p>There’s also evidence to suggest that companies that are well governed are more resilient than poorly governed companies. As investors responsible for other people’s money, it’s important that we identify whether companies are prone to risks that could affect the value of the investment we have made. That’s why we apply our sustainable ownership framework to our investment portfolios.</p><p>&nbsp;</p><p><strong>And, how does Railpen, as the investment manager of the RPS, ensure it invests members’ money sustainably?</strong></p><p>There’s a range of things we do, but I’ll mention just three here. As a quick aside, our work in this area helped us win the Investment &amp; Pensions Europe award for our approach to ESG (environmental, social, and governance issues). &nbsp;<br></p><p data-list="0" data-level="1">(1)&nbsp; Sometimes we choose not to invest in a company, or a set of companies, where we think the sustainability challenges are excessive and where they are unlikely to be well managed. We currently have an exclusion list covering companies that make controversial weapons (such as cluster munitions), thermal coal companies (thermal coal miners and coal power generators), and companies that have shown excessively poor conduct (for example where workforce fatalities have occurred and sufficient remedial steps have not been taken). <br><br>(2)&nbsp; When we are considering whether to invest in a company, a member of our team undertakes sustainable investment analysis to identify the sustainability risks faced by the company, and what the company is doing about them. This analysis in some cases leads to a decision not to invest in a company.<br></p><p data-list="0" data-level="1">(3)&nbsp; As investors we have certain rights at the companies we invest in. This can include the right to ‘engage’ a company – where we meet the company’s board or management to explain our expectations about some particular issue – and the right to vote at company Annual General Meetings (AGMs). These rights enable Railpen to influence companies for the better, and to hold boards and executive management to account. You can find out much more about how we vote in the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/dlopqu3s/voting-policy_2022.pdf" data-sf-ec-immutable="">Railpen Voting Policy</a> and the <a href="https://vds.issgovernance.com/vds/#/OTI4OQ==/" data-sf-ec-immutable="">vote disclosure portal</a> on the Railpen website. </p><p>That was a heavily condensed version of what we do – interested readers should take a look either at our detailed <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/52lhtclx/stewardship-report-2021.pdf" data-sf-ec-immutable="">Stewardship Report</a>, or our shorter briefing for members which we call the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/v5fbm4vu/railpen-sustainable-ownership-review-2020.pdf" data-sf-ec-immutable="">Sustainable Ownership Review</a>. </p><p>&nbsp;</p><p><strong>Many members choose a ‘hands off’ approach and leave it to Railpen to decide where to invest their money. How do you decide where to invest? </strong></p><p>As I mentioned above, we have some exclusion lists that tell us where not to invest, and we undertake sustainability analysis of the companies we do invest in to avoid companies that might face sustainability challenges or have poor corporate governance. </p><p>Beyond that, our portfolio managers seek to exploit investment themes, and one very powerful theme is the climate transition. As the global economy decarbonises over the coming decades, this is likely to produce an array of investment opportunities. We were an early starter here. </p><p>We started to integrate climate change into our investment decision-making process in 2016. Two years later, we signed the Global Investor Statement on Climate Change, supporting The Paris Agreement's goal of keeping global temperature rise below 2˚c. We decided to vote against companies which lack climate expertise, and auditors and companies who ignore the impact of climate change on their financial accounts. In 2020, we published our <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/inhpqhuj/so-climate-related-disclosure-report_2020.pdf" data-sf-ec-immutable="">Climate-Related Disclosure</a> which tells you exactly how our plans on climate change are going.</p><p><strong>&nbsp;</strong></p><p><strong>What options do we have for members who want to be involved in the process and want to make sure their pension money is invested sustainably? </strong></p><p>Members paying into Defined Contribution arrangements are invested in funds that are managed either directly by Railpen, or by another underlying fund manager that has been carefully chosen by Railpen. </p><p>When Railpen is managing the investments directly, we apply our sustainable ownership framework, which we think leads to a portfolio of investments with strong sustainability characteristics - a portfolio our members can be proud of. </p><p>When an external party is the underlying investment manager, they will have had to meet Railpen’s sustainability standards in order to be appointed, and these standards need to be maintained through the manager’s tenure. </p><p>For example, Railpen has published a <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/dyiflcd5/railpen-net-zero-plan_2020.pdf" data-sf-ec-immutable="">Net Zero Plan</a> – a roadmap outlining how we intend to get to net zero GHG emissions by 2050 or sooner. We also require external investment managers to sign up to this too. </p><p>As a result, we believe the line-up of investment options available to members are well aligned with robust sustainable outcomes. </p><p>There’s loads of really useful information, clearly laid out in the <a href="3D6DC2A3-467E-4ADE-9F2C-C19BA2652B4E">Paying into IWDC</a> section of the website.&nbsp;&nbsp;<a href="https://member.railwayspensions.co.uk/in-the-scheme/paying-into-iwdc/invest-in-your-future" data-sf-ec-immutable=""></a></p><p>&nbsp;</p><p><strong>Lately, we’ve been hearing more and more about ‘greenwashing’ and companies overstating their credentials when it comes to investing sustainably. Can you explain what this means?</strong></p><p>Greenwashing is when companies claim to be doing ‘good’ things when in fact they’re not, or exaggerating the good that they actually do, or use diversion tactics to distract their stakeholders from important sustainability issues. </p><p>When we analyse or engage a company we aim to see through greenwashing by drawing on independent sources of information, comparing and contrasting several sources, using “materiality maps” to make sure we’re focussed on the issues that matter, and cross referencing companies with their competitors to get a side by side comparison. </p><p>We also develop common assessment frameworks that allow us to verify a company’s claims – such as their claims to be aligned with ‘net zero’ – against a robust set of criteria. </p><p>&nbsp;</p><p><strong>Michael, what would you say to all members of the RPS who have some or all of their pension invested on their behalf? </strong></p><p>We feel privileged to have the responsibility for supporting so many RPS members to achieve their long- term financial goals. We invest solely for our members, and aim to deliver sustainable returns in support of Railpen’s purpose: to secure our members’ futures.</p><p>&nbsp;</p><p><strong>And finally, what tips would you give to newbies who want their investments to do well but also to ensure their money is used to address environmental, social and governance (ESG) issues?</strong></p><p>Firstly, investors are required to produce substantial amounts of information each year on ESG issues, so look out for that, read it, and get in touch with us if you’d like to know more. </p><p>Secondly, use the mechanisms available to engage with Railpen. We often conduct member surveys and focus groups on sustainability topics. If you’re interested, express an interest in taking part by joining our <a href="/knowledge-hub/news-and-views/platform">member advisory group Platform</a>.</p><p>Thirdly, have patience. Sustainability is all about the long term. Good sustainable investments might prove themselves over several years rather than being overnight winners. The same is true for companies that are starting from a low base, but have a plan to transition towards sustainability. It is our experience that patience often pays off, whilst short termism can be an ineffective strategy.&nbsp;</p>

<p>You and your employer both pay money into your pension while you’re an active member of the Railways Pension Scheme (RPS). That money is then invested for your future, and can have an impact on the world around you too.&nbsp;</p><p>Railpen is the company responsible for investments </p><p>While<a href="/knowledge-hub/the-trustee"> the Truste</a>e has overall responsibility for the Scheme and your money, they entrust a company called <a href="https://www.railpen.com/" target="_blank" data-sf-ec-immutable="">Railpen </a>to look after it and invest your pension contributions on the Scheme’s behalf. </p><p>This in itself won’t have a direct impact on how much you’ll get in retirement. But Railpen are tasked with investing your pension in a way that helps to ensure it can be paid securely, affordably and sustainably. </p><p>Railpen recognises this is a significant responsibility and strives to give members like you the best possible outcomes in retirement, while also having a positive impact on the world you will retire into. </p><h3>Your pension is invested for the long term</h3><p>An 18-year-old who joins the rail industry today may not retire for 40 or so years. By then the world is likely to be a very different place to the one we live in today. </p><p>With this in mind, Railpen takes a long-term and patient approach to investing. This also means it can access investment opportunities on your behalf that aren't always available to other pension schemes.  </p><h3><span style="background-color: rgba(0, 0, 0, 0); color: inherit; font-family: &quot;Open Sans Condensed&quot;, sans-serif; font-size: var(--font-size-h3); font-weight: bold; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit">Your pension is invested in different ways</span></h3><p>Railpen invests primarily in 2 ways. It invests in:</p><ul><li>financial assets</li><li>real assets</li></ul><p>In this context, an asset is something that has the potential to grow in value over time like stocks, bonds and property (we’ll get on to these shortly).</p><h3>Your pension is invested in financial assets</h3><p>Railpen invests in financial assets through both public and private market opportunities. </p><p>Think of the public market as a financial marketplace where companies (that have satisfied set criteria) can raise money by selling stocks to investors. Companies in the public market are also knows as ‘listed companies’ and almost anyone can purchase shares in them. </p><p>By contrast, private market investing (as the name suggests) doesn’t happen on a public exchange. Historically, private markets have been fairly exclusive but they are now much more accessible. </p><p>Public investors can buy and sell at any time, while private investments focus more on the long term.</p><h3>Your pension is also invested in real assets</h3><p>As well as financial assets, like stocks and bonds, your pension money is invested in areas like renewable energy, infrastructure, property investments and development in the UK, and others. These are called real assets.</p><p>These types of investments are fairly relatable because they are something we can see, hear, even touch in our day-to-day lives – like the houses we live in, where we go to work or shop and even solar farms that provide green energy to local communities. &nbsp;</p><p>Investing in real assets provides an opportunity for us to deliver attractive long-term returns for your pension. </p><h3>Railpen considers a range of factors when deciding where to invest your pension</h3><p>Before Railpen decides where to invest your pension, they consider a range of factors. Along with the potential for good returns, this also includes any environmental, social and governance (ESG) factors which present both risks and opportunities. </p><p>Put simply, ESG are a set of standards that are used in the world of investments to measure the following:</p><ul><li>A company’s impact on society</li><li>It’s impact on the environment</li><li>How credible and transparent its working practices are</li></ul><p>Railpen seeks to invest in companies that perform well against ESG factors to help us deliver investment returns for our members. But not only that, Railpen engages with and uses its influence to enhance the value of the money it invests on your behalf. </p><p>They also look for ways to have a positive impact on the communities in which your pension money is invested. This means that ultimately by saving for a pension with the Scheme, you are not only saving for your future, but you are also potentially helping to contribute to a better world, perhaps without even realising it.<br></p><h3>Find out more about where, and how, your pension is invested</h3><p>We’ll be going into more detail about how Railpen invests your pension money in forthcoming blogs, including a more detailed look at Real Assets and the company’s recent investments in Cambridge. </p><p>In the meantime, you can find out more in the investments section of the website and on Railpen’s own website using the links below. </p><ul><li><a href="https://member.railwayspensions.co.uk/knowledge-hub/investments" data-sf-ec-immutable="">RPS website – investments section</a></li><li><a href="https://www.railpen.com/investing/" data-sf-ec-immutable="">Railpen website – investing section</a></li></ul><p>You can also discover more about Railpen’s approach to sustainable investments in <a href="https://www.railpen.com/knowledge-hub/reports/stewardship-report-2023/" data-sf-ec-immutable="">Stewardship Report 2023 at Railpen.com</a>. A shortened version of this report, focussing on the areas members have said is important to them, will be released later this year. <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/34deiw1y/so-member-report-2022_final.pdf" data-sf-ec-immutable="">You can read the 2022 version here</a>.&nbsp;</p><div><div><div id="_com_1"><p>&nbsp;</p></div></div></div>