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<p>Put simply, voting is one of the tools used by the people who invest your railway pension to help achieve investment returns needed so you have enough to live on when your working days are over. This is because shareholder voting helps them influence for positive change in the working practices of the companies your pension is invested in. </p><p>Your pension is invested in a mix of businesses operating in different industries and countries. When the investment manager, Railpen, decides to invest in a company, it has a number of instruments up its sleeve to help influence for change in certain areas of their business operations. One such instrument is its right to vote at companies’ Annual General Meetings (AGMs).&nbsp; </p><p>Caroline Escott, Senior Investment Manager at Railpen, oversees the company’s voting activities and is a co-author of the 2023 Global Voting Policy. We turned to Caroline to help us understand how voting in the world of pensions works and why its thoughtful execution is of crucial importance to our members’ outcomes</p><p>&nbsp;</p><p>Caroline, let’s start off by providing a bit more clarity around what shareholder voting is in the context of pensions and ultimately, why it matters to Railpen as an investment manager, to the Scheme and to its members.</p><h4><strong>How do you decide how to vote at a company’s AGM? What do you base your vote on?</strong></h4><p>Railpen invests in thousands of companies on members’ behalf. This means that we vote at thousands of company annual general meetings (“AGM”) each year – most of which take place over a concentrated three-month period (March to July). And each company AGM will offer investors the chance to vote for or against on anywhere between 10-30 ‘AGM resolutions’ (on specific issues such as how much to pay the chief executive and the election of company directors). It’s one of our busiest – but also most exciting! – times of year.</p><p>Our voting decisions are informed by various sources and tools. Throughout the year, we meet with our largest companies, as well as those where we have concerns around specific ESG (environmental, social and governance) issues, to further understand their approach and to try to influence them to improve their behaviour in a way that will lead to sustainable financial performance. We call this dialogue “engagement”. When we are voting at these companies’ AGMs, we consider their progress and the nature of our previous discussions and vote accordingly. We see exercising our vote and our engagement with companies as part of a broader influencing approach to try to improve behaviour, so they have to be aligned.</p><p>Sometimes we may request further information from the companies to help us strengthen our decision on how to vote on a particular resolution. </p><p>You can find details of all our voting decisions on our <a href="https://vds.issgovernance.com/vds/#/OTI4OQ==/" data-sf-ec-immutable=""></a><a href="https://vds.issgovernance.com/vds/#/OTI4OQ==/" data-sf-ec-immutable="" target="_blank">website</a>. </p><p>&nbsp;</p><h4><strong>Could you share the top three ‘big picture’ issues for you during this year’s voting season? </strong></h4><p>Our voting decisions (i.e whether we choose to vote for or against the various AGM resolutions) are primarily based on that company’s individual progress on the ESG issues mentioned above. We make sure we take into account their particular circumstances such as how they compare to similar companies or any additional intelligence we may have regarding their willingness to make progress. However, there are definitely some ‘big picture’ themes evidence suggests will financially impact the vast majority, if not all, of the companies we invest in – and which we will be paying close attention to during voting season.</p><ol><li><strong>Workforce treatment and mental health. </strong>I think we can all agree that an engaged, motivated and supported workforce is important for a company’s financial performance. Railpen regularly engages with portfolio companies on workforce issues and ensuring a healthy corporate culture. One of the issues that companies rarely report upon and which we feel still does not receive sufficient attention is workers’ mental health. So from this year, we will be focusing on applying voting sanctions where we feel more needs to be done to support workers’ mental wellbeing during what are challenging circumstances for all.<strong></strong><p><strong>&nbsp;</strong></p></li><li><strong>The climate transition.</strong> We want the companies we invest in to make not just pledges, but progress on net zero.<strong> </strong>Part of the way we assess this is to examine companies’ plans for decarbonisation. If we think these plans lack credibility - &nbsp;for instance if they don’t clearly outline interim targets and milestones, or fail to consider biodiversity loss or the impact on local communities of their activities - then we will consider voting against the company on the resolutions we think will most accurately express our dissatisfaction.<strong></strong><p><strong>&nbsp;</strong></p></li><li><strong>Cybersecurity</strong>. The pandemic hastened the shift towards an increasingly digital world, meaning that cybersecurity risk to our portfolio companies has substantially grown. Railpen has engaged for several years with those companies we deem to face substantial cybersecurity risks, and in this year’s voting season we will be voting against the directors of those companies where we think this risk has not been addressed sufficiently.<strong></strong></li></ol><p>&nbsp;</p><h4><strong>And how do you monitor whether progress is being made on concerns expressed by Railpen at an AGM or at another voting forum? </strong><strong></strong></h4><p>We let our largest portfolio companies know in advance how we intend to vote (and why) and sometimes that triggers a response that gives us additional information regarding their commitments and activities in a certain area. This may then impact how we vote. Furthermore, sometimes signalling our voting intention before the meeting leads to the company committing to the change we are looking for [we give an example of this later!]. &nbsp;</p><p>We also have rolling engagements throughout the year with the companies where we have the largest investments, or where we think there are particular concerns, and we will always discuss our voting decisions at the previous AGM and what we would expect to see from the company to ensure we do not vote against them in following years. We also regularly review documentation and communications from companies to assess whether there have been any changes made.</p><p>&nbsp;</p><h4><strong>Caroline, you’ve been leading Railpen’s voting work over the past couple of years. What’s changed for that time and how is that likely to impact member outcomes? </strong><strong></strong></h4><p>Over the last few years, as well as focusing on a company’s individual ESG risks, we have been increasingly thinking about the big picture themes– like climate change, biodiversity or workforce treatment – which will impact either all or the vast majority of our portfolio companies. As a result, we have been working to more closely reflect our views on these themes in how we vote (as well as in how we use other stewardship tools, like engagement and speaking to policymakers). You can see more in our <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/yl2lq4y3/2023-voting-policy.pdf" data-sf-ec-immutable="" data-sf-marked="" target="_blank">Voting Policy</a>, which we update each year.</p><p>Our investment in a company also gives us other rights beyond voting, and we have been increasingly looking to use these rights in recent years. These rights include the ability to question company directors publicly at the Annual General Meeting (you can see our full list of questions <a href="https://www.railpen.com/knowledge-hub/engagement/agm-statements/" data-sf-ec-immutable=""></a><a href="https://www.railpen.com/knowledge-hub/engagement/agm-statements/" data-sf-ec-immutable="" target="_blank">here</a>) and to organise shareholder resolutions that will ask a company’s other shareholders to express their views on a topic. This year, we have also helped arrange a resolution on climate change at a large US utility firm.<strong></strong></p><p>&nbsp;</p><h4><strong>Can you share with our readers a success story from your experience of using Railpen’s right to vote</strong>?</h4><p>Many more examples can be found in our annual <a href="https://www.railpen.com/knowledge-hub/reports/All?mediatype=All&amp;order=0&amp;term=stewardship" data-sf-ec-immutable="" data-sf-marked="" target="_blank">Stewardship Reports</a> (flick to the section on “Thoughtful Voting”) but a recent one is as follows. </p><p>We had previously engaged with a large and complex non-UK financial services company around its board composition, including the need for a cognitively diverse group of directors who together have the right skills, expertise and appropriate availability to be able to provide effective oversight.&nbsp; One of the directors they had put forward for appointment at the 2022 AGM sat on so many boards and other committees that we felt they would be unable to fully contribute to the oversight of such a complex company. We flagged this issue to the company in advance of the AGM, noting that we were likely to vote against the director’s appointment unless further steps were taken to ensure they could commit enough time. In response, the company issued an announcement that week that the director would be stepping down from some of their other commitments in order to take up this new appointment. We welcomed this and were able to vote in favour of the appointment, but continue to engage with the company to understand how the new director is settling in.</p><p>&nbsp;</p><h4><strong>We are in the lead up to a busy “voting season”, starting this month– what are your expectations and hopes for it and how are you getting ready for it</strong><strong>?</strong></h4><p>The ultimate hope for every voting season is that we won’t have to vote against any company on any of their resolutions, as they are already responding to our engagements and making progress on the ESG issues which matter most to their long-term financial performance! However, this is unlikely to happen for every single one of our thousands of holdings.</p><p>So the objective is that we effectively wield our voting – and other ownership – rights this season to help us influence companies to improve their behaviour, in a way which ultimately helps us secure our members’ futures. The key to a successful voting season is preparation. To this end, we’ve: refined our 2023 Global Voting Policy; made the most of the available systems and platforms to ensure that we have the best possible information at our fingertips to inform each vote; and have a plan – which we are already implementing – for engaging with our investee companies in advance of their AGMs to ensure we are on top of the latest developments and they understand our position (and how we might make our views known through our vote).</p><p>&nbsp;</p><h4><strong>Get familiar with the topic </strong></h4><p>If you are interested in understanding more about Railpen’s global voting positions for the 2023 AGM season, take a look at the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/yl2lq4y3/2023-voting-policy.pdf" data-sf-ec-immutable=""></a><a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/yl2lq4y3/2023-voting-policy.pdf" data-sf-ec-immutable="" target="_blank">2023 Global Voting Policy</a>. </p><p>For a broader take on Railpen’s approach to incorporating ESG factors in its work to protect and enhance the value of members’ pension savings, and the journey to net zero, have a read of the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/52lhtclx/stewardship-report-2021.pdf" data-sf-ec-immutable="" data-sf-marked="" target="_blank">Stewardship Report</a>.&nbsp;</p>

<p>Railpen, the investment manager of the Railways Pension Scheme (RPS), helps members get to grips with how their pension is managed and invested with a new member-focused report.<br></p><p>The <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/34deiw1y/so-member-report-2022_final.pdf" target="_blank" data-sf-ec-immutable="">2022 Sustainable Ownership Review</a> has been written purely for members. This is because we know that many of our members care about how their pension is managed. We also know that they have high expectations about where it’s invested and trust Railpen to do a good job when it comes to choosing where to invest. <br></p><p>There’s an appetite among members to know more about the investment decisions we make and our reasons for choosing to invest or disinvest in a particular company. We realise that the complexity of sustainable ownership remains a barrier for many members to fully understand the bigger picture. This is why we’ve developed our second Sustainable Ownership Review.</p><p><br></p><h3>Written for members, with their help<br></h3><p>Member feedback is extremely important to us and we like to incorporate it in our approach wherever possible. This is why we’ve taken into account feedback received by members of the railways pension schemes. <br></p><p>To support in writing the report, Railpen surveyed members and held focus groups to really understand what would be of most use to them and how they want to be communicated with on sustainable ownership matters.<br></p><p>The 2022 Review provides a comprehensive but straightforward information written in a clear and easy-to-understand way. It is short and snappy, and offers an ample spread of what Railpen has managed to achieve on members’ behalf throughout 2022.</p><p>&nbsp;</p><h3>What our members are telling us<br></h3><p>As with the previous issue of the report (2021 Sustainable Ownership Member Review), when surveyed last year members said the top 3 priorities for them were fair treatment of workers, climate change and fair pay. You also said that governance (how well a company is managed) is really important to you. <br></p><p>To help illustrate some of the work we’ve done in 2022 to address those issues, we’ve provided case studies in the Sustainable Ownership Member Review on pages 10-14. <br></p><p>In terms of how you like us to communicate with you, you said that you want us to continue to use real examples of our work, are interested in the link between what we do on sustainable ownership and how it improves financial outcomes for you as scheme members, want more explanation on the numbers and outcomes we talk about in our reports and want to hear from us more often. <br></p><p>We will continue to take into account your views and feedback and to incorporate it into working practices and the products we develop for you going forward. </p><p>&nbsp;</p><h3>How we address members’ top issues and influence positive change <br></h3><p>We use different engagement methods when trying to influence for positive change at a company. This is evident from our work with NextEra Energy Inc. one of the largest US based utility companies. We wanted NextEra to provide more detailed information on its approach to engaging with policymakers on climate change. We spoke to the company individually, and also used the ownership rights we get as shareholders together with other likeminded investors. After our efforts, NextEra committed to publishing more information on its policy engagement. You can read our case study 'NextEra Energy – working together to make a difference on climate change' on page 11 of the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/34deiw1y/so-member-report-2022_final.pdf" target="_blank" data-sf-ec-immutable="">2022 Member Review</a>.&nbsp;<br></p><p>We also talk about corporate governance* a lot at Railpen and have a process to exclude companies from our portfolio where we identify governance and behaviour concerns. As part of this process, in 2019 we excluded the Japanese optics and medical devices manufacturer Olympus because of concerns about their governance practices. In 2022, following continued engagement, we were pleased to remove the company from our exclusion list as a result of improvements to their board and committee structure. You can read more about the concerns we had and how we addressed them with Olympus on page 13 of the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/34deiw1y/so-member-report-2022_final.pdf" target="_blank" data-sf-ec-immutable="" data-sf-marked="">2022 Member Review</a>.<br></p><p>Our positive work on workforce and worker voice issues (page 10 in the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/34deiw1y/so-member-report-2022_final.pdf" data-sf-ec-immutable="" data-sf-marked="" target="_blank">2022 Member Review</a>) – one of our members’ top concerns – continued in 2022. &nbsp;We also focussed our attention on the topic of fair pay and our Member Review provides a case study, which you can read on page 12, as to how we voted against a company’s’ remuneration approach where executive pay was out of line with how the rest of the employees are rewarded. If you would like to find out more about our voting work, give our <a href="https://member.railwayspensions.co.uk/knowledge-hub/news-and-views/blog/rps-blog/2023/03/27/voting-for-positive-change" data-sf-ec-immutable="" data-sf-marked="" target="_blank">Voting for positive change blog</a> a read. For a more in depth overview of our voting principles, check out our Global <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/yl2lq4y3/2023-voting-policy.pdf" data-sf-ec-immutable="" data-sf-marked="" target="_blank">Voting Policy</a>. </p><p>&nbsp;</p><h3>How we’ll continue to communicate with members on the topics important to them<br></h3><p>Our ultimate aim &nbsp;to achieve a two-way dialogue with members where they feel empowered to ask questions and to challenge us in our thinking remains the same. <br></p><p>We will continue our efforts to show members that we want and need to hear from them so we can make more customer-informed decisions our investment approach and communications. We will do this through various touchpoints we have planned in for the coming months. The next available opportunity will be in January 2024 when we’ll hold some roundtables with a selected cohort of our members. We’ll use this opportunity to dive deeper in their perceptions of our work on sustainable ownership through thought-provoking and engaging conversations. We’ll also look to understand whether the top 3 issues they’ve highlighted previously remain the same or something else has struck them recently. &nbsp;If you have some time to spare and would like to get involved with helping us shape our future sustainable ownership priorities, email us at <a href="mailto:so@railpen.com">so@railpen.com</a> so we can keep you informed of upcoming member events and feedback gathering initiatives. &nbsp;&nbsp;<br></p><p>We welcome all your questions or feedback on the <a href="https://cdn-suk-railpencom-live-001.azureedge.net/media/media/34deiw1y/so-member-report-2022_final.pdf" target="_blank" data-sf-ec-immutable="">2022 Member Review</a> and on any other sustainable ownership-related publication or topic. Please let us know what you think at <a href="mailto:so@railpen.com">so@railpen.com</a> </p><div><br clear="all"><div id="ftn1"><p>&nbsp;</p><p>&nbsp;</p></div><div id="ftn2"><p><a href="https://railpen-my.sharepoint.com/personal/jenny_prodanova_railpen_com/Documents/0.Personal/2023/Member%20sites%20content/Blogs/SO%20Member%20Review%20Blog/20231204_SO%20Member%20Review%20blog_v0_8_CE.docx#_ftnref2" name="_ftn2" title="" data-sf-ec-immutable=""></a>* Good corporate governance is when a company is run by an expert, diverse group of people and is supported by effective systems and processes. This means a company is more likely to be able to thrive over the long-term.</p></div><div id="ftn3"><p>&nbsp;</p></div></div>

<h3><strong style="background-color: rgba(0, 0, 0, 0); color: inherit; font-size: var(--font-size-h3); text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit">Our approach to investing</strong></h3><p>The money you pay into the Scheme (plus any returns), is invested into a wide variety of opportunities, companies and brands, which have been carefully selected to generate financial returns in line with the Trustee’s mission to ‘pay members’ pensions securely, affordably and sustainably’.</p><p>Spreading investments in this way helps to deliver better long-term outcomes for our members and gives greater flexibility and resilience against current and future risks.</p><p>This means that along with financial assets, like stocks and bonds, our investments also include more physical opportunities such as renewable energy, infrastructure, property and development in the UK, and others. These are known as <strong>real assets,</strong> and you can learn more about them below. </p><p>You can also read more about our approach to investing using the following links: </p><p><a href="/knowledge-hub/investments/our-approach-to-investing">Web page: Our approach to investing&nbsp;</a></p><p><a href="/knowledge-hub/news-and-views/blog/rps-blog/2024/06/17/your-pension-is-invested-on-your-behalf">Blog post: Your pension is invested on your behalf</a></p><p><br></p><h3><strong>Investing in Real Assets </strong></h3><p>Investing in real assets provides an opportunity for us to deliver attractive long-term returns for your pension.</p><p>Railpen, the Scheme administrator and the organisation responsible for investing members’ money, has a dedicated Real Assets Team. </p><p>They invest in physical assets, which generate positive, long-term returns for our members, such as&nbsp;<span style="background-color: rgba(0, 0, 0, 0); color: inherit; font-family: inherit; font-size: inherit; text-align: inherit; text-transform: inherit; word-spacing: normal; caret-color: auto; white-space: inherit">commercial and residential property and infrastructure, with a particular focus on positive social and environmental investments.</span></p><p>These types of investments are 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. </p><p>Example investments in this area, include 2 wind farms in Scotland - 1 in South Ayrshire and the other in Argyll and Bute - and 2 biomass investments in Sleaford, England and Port Talbot, Wales, all generating renewable energy to reduce dependence on fossil fuels. </p><p>We have also funded the redevelopment and extension of Monkwearmouth Hospital, an existing mental health facility in Sunderland for the Cumbria, Northumberland, Tyne and Wear NHS Foundation Trust.</p><p>You can read more about our investment in real assets using the following links: </p><p><a href="/knowledge-hub/investments/where-we-invest">Web page: where we invest</a><span style="text-decoration: underline"></span></p><p><a href="https://www.railpen.com/investing/where-we-invest/real-assets/" target="_blank" data-sf-ec-immutable="" data-sf-marked="">Railpen’s real assets page</a></p><p><strong>&nbsp;</strong></p><p><strong></strong><strong></strong></p><h3><strong>Choosing which Real Assets to invest in </strong></h3><p>When making their investment decisions, the Real Assets Team consider a variety of environmental, social and governance factors (ESG). Railpen believe these factors are not only a significant driver of investment outcomes, but also help make a positive contribution to the world our members retire into too. <a href="/knowledge-hub/investments/sustainable-ownership">You can read more about ESG in the Sustainable Ownership section of the member website.</a> </p><p>Alongside its commitment to Sustainable Ownership, Railpen is also a significant investor in something called 'place-based investments’ – investments that seek to secure financial returns for pension scheme members like you, while also seeking to have a positive local impact.</p><p>One such example is in Cambridge, where Railpen has several commercial and retail sites and is currently one of the city’s largest real asset investors. We will be covering Cambridge in greater detail in a separate blog soon, so stay tuned!</p><p>&nbsp;</p>