Railpen builds on 2021 momentum with Stewardship Report

Railpen, which manages the £37 billion railways pension schemes, has published its Stewardship Report for 2021 as part of its commitment as one of the first wave of signatories to the 2020 UK Stewardship Code.

The report (which you can download here) details Railpen’s progress on its ongoing work to protect and enhance the value of members’ savings through effective stewardship, ESG integration, and the journey towards Net Zero.

Produced by Railpen’s pioneering in-house Sustainable Ownership team, with support and case studies from across the organisation, the report builds on the inaugural 2020 report and demonstrates the progress and positive action taken throughout the year to address Railpen’s four thematic stewardship priorities between 2021-2025: The Climate Transition; The Worth of the Workforce; Responsible Technology; Sustainable Financial Markets.

The report benefits from Railpen’s strong heritage in Sustainable Ownership and firm belief that it is a key contributor to its purpose ‘to secure our members’ future’. The report provides concrete examples of, and useful insights into, the implementation of its stewardship approach, which is enabled by and delivers against the Trustee’s investment beliefs.

The key highlights from the report, include sections and case studies on:

  • Engagement successes: Railpen recognises the value of effective engagement with portfolio companies and undertakes targeted dialogue with priority firms, both publicly listed and private, via both individual and collective engagement. The report provides examples of Railpen’s outcome-driven engagement approach on issues such as climate change (through the Climate Action 100+ coalition), workforce disclosure (including via research with the CIPD, the PLSA and the High Pay Centre) and fair pay practices, as well as Railpen’s leadership in pulling together collaborative initiatives on dual-class share structures and workforce directors.
  • 2021 voting record: Railpen believes that the direct exercise of voting rights is a vital opportunity to influence corporate behaviour, providing public sanction or support for a company’s conduct. Railpen voted against, withheld, or abstained on at least one occasion in nearly 60% of the circa 1700 meetings it voted at in 2021. The report also provides voting case studies on: the evolution of Railpen’s approach to voting on diversity (beyond gender); use of voting as an escalation tactic on board leadership and composition; and Railpen’s approach to ‘Say on Climate’ resolutions.
  • Public policy as a stewardship tool: As a universal asset owner, Railpen’s portfolio is affected by system-wide themes such as climate change, Covid-19 and workforce treatment. This is why thematic stewardship, including public policy work, constitutes a significant part of Railpen’s approach to active ownership. The report discusses how Railpen has engaged with policymakers on climate change, audit reform and schemes’ approaches to managing social risks and opportunities.
  • Stewardship on behalf of members: Railpen engages regularly with its Trustee Board and its Pensions Committees on sustainable ownership issues, ensuring its approach is closely aligned with the Trustee’s investment beliefs and approach. In 2021, Railpen built on this dialogue by setting up a Sustainable Ownership Client Forum, as well as undertaking direct member engagement – through surveys, roundtables and a dedicated 13-page member report – to better understand members’ views on sustainable ownership issues and how they would like Railpen to discuss its work in the future.

Commenting on the report, Michael Marshall, Head of Sustainable Ownership at Railpen said: “We’re proud of the positive strides in our stewardship and engagement efforts in the last year, building on the strong foundations laid in 2020 and aligning ourselves with the causes that we believe support our members’ best interests.

“Our 350,000 members are firmly at the heart of everything we do on stewardship and beyond. Stewardship is a core part of our fiduciary duty, and we are committed to using our strong position, expertise and heritage in sustainable ownership to tackle some of the biggest issues facing corporations, investors and wider society both today and into the future.”

Caroline Escott, Senior Investment Manager at Railpen commented: “Asset owners like Railpen have a significant role to play in driving real change through our stewardship activity. Our commitment to being a leading force in tackling climate change is a good example of this, with our carefully considered Plan to reach net zero by 2050, and our proactive company engagement and voting activity demonstrating how we are backing up our words with action.”   

“By focusing our efforts on the issues of material importance to our members’ interests, such as climate change, workforce treatment and board composition, we are committed to driving tangible outcomes using every stewardship tool at our disposal. This includes meaningful and well-targeted direct and collective engagement activity, intervening in policy debates, and thoughtfully exercising our vote to make our voice heard on material ESG issues.”