April 2014- Version 3
BTPS Stewardship Policy
The purpose of this document is to articulate the BT Pension Scheme’s (“BTPS” and the “Scheme”) stewardship policy. This Policy will be reviewed annually by the Trustee Responsible Investment Committee, published on the Scheme’s website[1] and submitted to the Financial Reporting Council as the Scheme’s statement of commitment to the UK’s Stewardship Code.
1. Background
BTPS is the largest corporate pension scheme in the UK. As described in the Statement of Investment Principles[2] and the BTPS sustainability policy, the Trustee has a fiduciary responsibility to act in the best long term interests of Scheme members. The Trustee believes stewardship, in the form of proactive exercise of ownership rights and constructive engagement with boards and management, improves discipline, accountability, and long-term risk adjusted returns for Scheme members.
2. Stewardship policy
In discharging its stewardship duties, the Scheme adopts a hybrid approach[3], outsourcing voting and engagement services to Hermes Equity Ownership Services (EOS). Where appropriate, the Scheme also delegates stewardship activities to investment managers which can demonstrate strong capabilities.
As the asset owner, the Scheme’s role is to oversee these activities and to challenge and test the quality of the delivery by its agents. We apply this approach, as appropriate, across all asset classes globally.
3. Engagement and escalation
On behalf of the Scheme, EOS undertakes company-specific engagements with the objective of achieving beneficial and sustained change. EOS applies a holistic approach to analysing company performance, policies and practices based on corporate disclosures, research from the sell-side and Environmental, Social and Governance (ESG) data providers. Reference is made to international best practice guidelines including those of the OECD, ICGN, UN Global Compact as well as the Hermes Responsible Ownership Principles[4].
Among other potential actions, engagement may involve: meeting with executives and non-executive directors; discussions with other shareholders and bondholders; participation in collaborative investor initiatives; and proxy voting engagement activity including submissions of shareholder resolutions at general meetings and speeches in support of these as appropriate. Highly selectively and as a last resort, EOS may publicly escalate its engagements in the media. On rare occasions, in the process of fostering a positive working relationship and building trust, EOS and the Scheme’s investment managers may be required to become insiders. Where this is the case, their activities are governed by strict policies and procedures to ensure that inside information is handled appropriately.
Specific company engagements may become more or less intensive over time and will be escalated according to the nature and severity of concerns and the responsiveness of the company to engagement. EOS reports milestone progress on intensive engagements undertaken on the Scheme’s behalf to the Trustee Responsible Investment Oversight Committee on a quarterly basis. Where appropriate, the Scheme will engage in a dialogue with its active investment managers on company-specific engagements and themes.
In addition to engagement with companies, the Scheme and EOS will engage in regular dialogue with governments and regulators to positively influence public policy outcomes and help set best practice standards for companies in which the Scheme invests.
4. Voting policy
Guided by the BTPS voting policy[5], the Scheme aspires to vote all of its directly held equities and corporate bonds and will support the recommendations of a company’s board unless we have good reason not to do so. EOS’s Stewardship Code disclosure outlines its use of the ISS voting platform.
The Trustee Responsible Investment Committee review the BTPS voting policy annually and details of the Scheme’s voting records can be found quarterly in arrears on the public BTPS website.
BTPS are currently not actively participating in stock lending equities that are under our direct control although stock lending may occur in the Scheme’s pooled investment funds.
5. Collective engagement
The Scheme acknowledges it has a particular responsibility to demonstrate leadership and collaborate with other institutional investors. We support EOS in pooling resources and aggregating its clients’ holdings in companies which gives us scale and increases the likelihood of protecting and enhancing long-term value.
The Scheme directly leads and participates in a range of global collaborative activities including the Principles for Responsible Investment and the Institutional Investor Group on Climate Change. The Scheme is indirectly actively involved other collaborative initiatives including the Council of Institutional Investors and the International and Asian Corporate Governance Networks.
6. Conflicts of interest
The Scheme has established a policy for dealing with potential conflicts with the Sponsor which may arise from its delegated stewardship activities. A register of external public board positions of the Sponsor’s board is maintained and shared with EOS on a quarterly basis. EOS is governed by its own conflict of interest policy[6] which requires that it identifies and manages actual or potential conflicts of interest between itself and its clients, or between different clients of EOS. In the event that conflict occurs between EOS and its client, clients’ interests are put first.
7. Evaluation and Reporting
The Scheme assesses the quality and materiality of stewardship activities undertaken by EOS and its investment managers on a quarterly basis. EOS and the Scheme’s investment managers are expected to provide the Scheme with an AAF 01/06 assurance statement on an annual basis. Scheme members and other stakeholders are provided information on the Scheme’s stewardship activities quarterly in arrears via the public BTPS website.
For further information: Daniel Ingram, Head of Responsible Investment, BTPS Management Ltd. In relation to collective engagement: Colin Melvin ()
1
[1] www.btpensions.net/
[2] www.btpensions.net/155/investment
[3] See NAPF Stewardship Policy www.napf.co.uk/PolicyandResearch/Policy_topics/~/media/Policy/Documents/0272_Stewardship_policy_NAPF_2012.ashx
[4] www.hermes.co.uk/Portals/8/The_Hermes_Ownership_Principles_UK.pdf
[5] www.btpensions.net/151/voting-disclosure
[6] www. hermes.co.uk/Portals/8/Conflicts_of_interest_policy.pdf