Railpen's 2022 Stewardship Report: Taking ownership to drive industry progress

The 2022 report builds on progress by Railpen’s award-winning Sustainable Ownership team, and is aligned with its four thematic stewardship priorities: The Climate Transition; The Worth of the Workforce; Responsible Technology; Sustainable Financial Markets. It showcases practical examples of the scheme acting as a proactive, responsible owner across its investment portfolio.

The report covers Railpen’s first full year in aligning with the Trustee’s updated Investment Beliefs, which include a belief that incorporating and acting upon climate risk and other environmental, social and governance factors is a significant driver of investment outcome and part of the Trustee’s fiduciary duty.

The full report, found here, includes detailed sections on Railpen’s stewardship philosophy and approach, how members’ interests are factored into decisions, the ways in which governance guides effective stewardship, the systematic integration of ESG across asset classes, engagement with portfolio companies, voting and escalation approaches, and efforts made to counter market-wide and systemic risk.

Key highlights from this year’s Stewardship Report include:

1. Leading new initiatives to address gaps in the market: In addition to individual engagement, Railpen regularly works with or develops collaborative engagements where increased action is necessary to drive positive beneficiary outcomes. Over the past 12 months, a number of initiatives were launched or developed, including: the Investor Coalition on Equal Votes (ICEV), the Workforce Directors initiative, and the Institutional Investors Group on Climate Change (IIGCC) Bondholder Stewardship Initiative.
2. Using the full suite of its ownership rights, beyond voting: In 2022, the Sustainable Ownership team demonstrated its commitment to using every tool in the stewardship toolkit to influence for change, not just the right to vote. While thoughtful voting remains a key pillar of Railpen’s stewardship work, the report outlines examples where Railpen leveraged additional approaches such as asking questions of a company’s Board at its AGM and co-filing a shareholder resolution to push for positive outcomes in members’ interests.
   
   
3. Integrating ESG considerations beyond listed equity investments: Reflecting Railpen’s multi-asset investment approach, ESG integration was deepened across asset classes beyond listed equity. In 2022, prioritised asset classes were infrastructure and private markets, with the Sustainable Ownership team partnering with colleagues across the business to identify potential sustainability risks within illiquid assets, as well as ensuring ownership rights are fully utilised to drive progress.
   
   
4. Alignment between Railpen’s stewardship work and operational/internal developments: Discussions between the Sustainable Ownership team and the HR teams on issues including workforce engagement mechanisms and cost of living support allowed a sharing of insights and helped to support progress on these issues both internally at Railpen and with portfolio companies.

Commenting on the report, Michael Marshall, Head of Sustainable Ownership at Railpen said: “We are proud to share the continued progress made and impact achieved by our Sustainable Ownership team over the past year. Whilst we see this work as a long-term and ongoing process, we have made significant strides towards driving improved outcomes through our direct and meaningful engagement, collaboration with other influential voices, widening our ESG considerations across assets, and our willingness to take leadership positions on important themes.

“We see the fiduciary duty afforded to us by members and employers as a significant responsibility. By using the full suite of ownership rights, we have shown our willingness to use every tool available to us to amplify our voice and influence to deliver positive outcomes for the 350,000 members we serve.”

Caroline Escott, Senior Investment Manager at Railpen said: “Railpen and the Trustee were early pioneers of corporate governance, and our stewardship activity seeks to build upon this heritage and to help raise standards in the industry overall. Our work in the past year to set up and launch collaborative engagements on dual-class share structures and climate bondholder stewardship demonstrates our ambitions to provide industry leadership on ESG issues where we feel it will have material impact.

Our report is published at a time when investor voting rights, and broader shareholder protections, are under threat in a debate that underplays the importance of high-quality investor stewardship to successful financial outcomes. We hope that the examples provided in our Stewardship Report of how we use our vote – and other stewardship tools – to achieve real impact on members’ behalf will help make the case for maintaining the strong investor protections and rights that have made the UK the global financial powerhouse it is today.”