Railpen, the asset manager of the £37bn (€41.4bn) railways pension schemes, has published its 2021 Sustainable Ownership Review, a report based on direct member feedback that explains how it encourages portfolio companies to address governance and sustainability issues in support of long-term investment outcomes.
The compact report, a follow-up to Railpen’s detailed Stewardship Report published in May 2022, clarifies Railpen’s work using straightforward language, bringing it to life with case studies, and is complemented with a jargon buster to support members’ understanding.
Railpen – a signatory of the Financial Reporting Council’s UK Stewardship Code – asked members over 2021 and 2022 what areas they were most concerned about in order to draft the review. The top three included: fair treatment of workers, climate change and fair pay.
The members surveyed were interested in hearing more about how Railpen addressed these concerns, and other issues, and wanted more real life examples, and relatable information which better explained the numbers and outcomes referred to in Railpen reports.
John Chilman, chief executive officer of Railpen, said: “Our job is to protect and grow the value of our members’ assets to ensure they can retire securely. We do this by investing in companies that we believe will do well in the long-term.”
The review highlighted executive pay at Rio Tinto, for instance, and how Railpen utilised its voting rights to influence fair pay – a common occurrence at annual general meetings where 59% of the time Railpen voted against, abstained, or refused to support company management, most commonly in respect of executive pay and quality of board directors.
The review also noted Railpen’s activity on the treatment of workers, the transparency companies provided on information like health and safety, diversity and employee turnover, and the ways Railpen is advocating for greater disclosure through policy and regulatory change.
“We believe the most successful companies in the long-run are well-run, treat their suppliers, customers and workers fairly and seek to address all the risks and opportunities related to how their business works – which include ESG issues,” Chilman said.
“They can adapt their business models to deal with major threats or issues, such as the COVID-19 pandemic, climate change or an ageing population. Our size means that we have a responsibility to take the lead on sustainability initiatives, activities and policies, and we are pleased with our progress so far,” he added.
Railpen is also creating and launching major collaborative engagement campaigns, which include the Investor Coalition for Equal Votes, a collective investor initiative to push back against unequal voting rights at companies.
The review also mentioned Railpen’s net zero engagement approach: creating a detailed, proprietary framework for identifying priority companies, assessing these companies’ alignment to the Paris Agreement, encouraging them to make progress on specific engagement objectives, measuring progress and then using this feedback to shape further engagements with the firm.
Within the report Railpen used a case study to discuss progress on one of the 41 companies Railpen engaged with as part of its Net Zero Engagement Plan.
Christine Kernoghan, chair of The Railway Pensions Trustee, said: “As well as engaging with the companies we invest in on our members’ behalf, we continue to listen to our members through research and insights. Our Sustainable Ownership Review combines data, real stories and the issues which are most important to our members within a compact, accessible report.”
She added: “It’s vital we work closely with members, understanding their views and shaping our approach and communications around their needs. It is clear that our members care about how we invest and consider climate and social issues highly important. Our members trust us to invest responsibly, to be active stewards, and to be accountable, all of which we’re able to demonstrate in this review.”
Railpen will survey members again later in 2022 to understand whether views have changed.