Agenda item

This report is a summary of various Environmental, Social & Governance (ESG) engagement and voting carried out on behalf of the Surrey Pension Fund (Fund) by Local Authority Pension Fund Forum (LAPFF), Robeco, and Border to Coast Pensions Partnership (BCPP). Also included is the direct voting record for the Fund over the period.

Speakers:

Mel Butler, Deputy Head of Investment and Stewardship

Tim Manuel, Head of Responsible Investment, BCPP

Key points raised in the discussion:

1.    The Deputy Head of Investment and Stewardship provided some highlights from the quarterly engagement reports, including one area explaining that green hydrogen was a growing trend, used to create green steel; an update was included on SSAB. Sustainable airline fuel was a growing topic of interest, an update was included regarding engagement with Ryanair. BCPP was collaborating with Royal London Asset Management (RLAM) for Just Transition to net zero for UK banks and was engaging with UK water companies. BCPP was chairing a new working group with the Institutional Investor Group on Climate Change to integrate Just Transition into the Net Zero Investment Framework. The Fund voted in 91 resolutions, one resolution on remuneration at Richemont had nearly 24% shareholder dissent.

2.    A Committee member referred to green steel noting that the example provided was greenwashing. The problem was that green hydrogen was not being produced on a large scale. Currently, green hydrogen was just renewable electricity with extra steps.

3.    A Committee member noted that since the last quarter, fossil fuel companies such as BP had backtracked from their sustainability and climate change commitments, having been watered down since 2019. Shell had won its court case in the Netherlands overturning a ruling whereby it must have a plan to reach net zero by 2050. He queried at what point the Fund says that engagement has failed with those companies and further action was needed. The Head of Responsible Investment (BCPP) noted that BCPP was the only large institutional asset manager that was willing to make a public statement noting its disappointment if BP was to do that and such change should go to a shareholder vote.

4.    A Committee member noted BCPP’s limited influence as only one institutional investor with a small portion of BP’s stock and queried how it would lead to any meaningful influence, another Committee member agreed that something more was needed in line with the RI Policy; the Committee should act.

5.    A Committee member queried what the outcome was with BCPP’s engagement with Northumbrian Water, and on the living wage, asked whether the company had committed to clean up Lake Windermere by 2030. The Head of Responsible Investment (BCPP) noted that BCPP publishes an annual Responsible Investment and Stewardship report, that sets out the activities undertaken and outcomes achieved. He noted that through the discussions with Yorkshire Water, it brought forward investment to improve sewage infrastructure around Scarborough Bay, and Northumbrian Water intended to publish a biodiversity action plan setting out how some of its activities would impact local nature. BCPP had requested information about what the water companies were doing.

6.    A Committee member noted that to effectively influence water companies, the shareholders could make modest divestments one at a time; and queried what mechanism was needed to pressurise the companies to act virtuously. The Head of Responsible Investment (BCPP) explained that in BCPP’s experience, having such a divestment programme was not effective. Having proactive conversations with those companies was effective, using the collective weight of all the partners’ investments in discussions; helping those companies understand what best practice looks like and how they compare to their peers.

RESOLVED:

1.    Acknowledged the outcomes achieved for quarter ended 30 September 2024 by LAPFF and Robeco through their engagements.

2.    Noted the direct voting by the Fund in the quarter ended 30 September 2024.

Actions/further information to be provided:

None.