Border to Coast Pensions Partnership, one of the UK’s pension pools, has re-appointed Robeco to support its voting and engagement work on behalf of its 11 local government pension scheme (LGPS) partner funds, a mandate worth £20bn (€23.2bn) of equity assets.

The reappointment follows an initial contract awarded around four years ago as Border to Coast made use of Robeco’s ‘active ownership’ service.

Rachel Elwell, Border to Coast’s chief executive officer, told IPE that Robeco helped formulate a specific voting and engagement policy for the pool, working with partner funds to develop it.

Robeco will provide the support needed to implement its voting and engagement policies, ensuring that the pool can continue to effectively use its collective voice to influence companies and drive positive, real-world change as an active steward, it was announced.

Border to Coast’s engagement work has grown significantly in the past four years. Since 2018, the number of voting resolutions increased from 3,000 in 2018/19 to over 12,000 in 2021/22. Border to Coast is responsible for £38.3bn of assets (as at 31 March 2022).

Elwell noted that, looking at best practice, Border to Coast’s approach was very UK-focused, but with Robeco’s help, the pool’s policy is much more globally-focused now, due to Robeco’s experience worldwide.

Rachel Elwell at Border to Coast

Rachel Elwell, Border to Coast

“As a long-term, responsible investor working on behalf of asset owners, it is vital that we make the most of the collective scale we have gained by pooling to use our stronger voice through engagement and to have greater influence as an active owner of the companies in which we invest,” she added.

Peter Walsh, head of Robeco UK, said: “The UK government’s concept behind LGPS pooling was to give these significant asset owners a growing and important voice, and we’re pleased to be in a true partnership with Border to Coast in helping to deliver this vison.”

He added: “ Border to Coast shares our belief that being active owners of the companies in which asset owners and asset managers invests, contributes substantially to both investment results and broader positive societal impact. We look forward to continuing to work collaboratively with them in the next stage of our journey.”

Looking ahead into the next annual general meeting (AGM) voting season, Elwell said Border to Coast is noting several key areas, namely climate change (having announced its net-zero commitments last year), engagement within emerging markets, engagement with banks around climate change (transition financing), and also biodiversity with a global view.

FTSE 350 pension scheme funding stabilises following Gilt market turmoil

Mercer’s Pensions Risk Survey data analysis for November shows that the accounting surplus of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies increased marginally to £31bn at the end of November.

The present value of liabilities rose from £600bn at 31 October 2022 to £627bn at the end of November driven by a fall in corporate bond yields, offset to an extent by falling future implied inflation expectations. Assets outperformed liabilities by rising over the period to £658bn compared to £629bn at the end of October, Mercer found.

Matt Smith, principal at Mercer, said, “The aggregate funding position on an accounting basis appears to have stabilised following the aftermath of the events at the end of September, with a surplus of £31bn at the end of November.”

November saw the release of the Chancellor’s Autumn Statement, which focused on tax increases and spending cuts designed to shore up public finances and reassure markets.

“In contrast to the former Chancellor’s ‘Growth Plan’ in September, the Autumn Statement looks to have had little impact on UK Gilt markets, implying some level of confidence in the government’s new fiscal policy but also highlighting the stark contrast in the handling of the two events and the market’s reaction to them,” he said.

“However, many pension schemes are likely to be working through the next steps in relation to both their investment strategy and their broader funding plans. Next steps will include consideration of The Pensions Regulator’s [TPR] statement of 30 November 2022 on LDI [liability-driven investments] which reinforced the need for sensible collateral and liquidity management,” Smith added.

The Pensions Regulator’s recent statement confirms the need for increased focus and tolerances on LDI, as well as strong governance, but pleasingly they have retained a flexible framework for schemes to work through sensibly,” he said, noting that for pension schemes, this provides a focus for ongoing discussions around risk management.

Mercer’s Pensions Risk Survey data relates to about 50% of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts.

The data underlying the survey is refreshed as companies report their year-end accounts. Other measures are also relevant for trustees and employers considering their risk exposure. Data published by TPR and elsewhere tells a similar story.

Coats UK scheme completes buy-in with Aviva

The Coats UK Pension Scheme has completed a £350m bulk purchase annuity buy-in transaction with Aviva, which will insure the defined benefit (DB) pension liabilities for around 3,700 members, removing the investment and longevity risk of these members from the scheme.

Members will see no change in the amount of their benefits or the way in which they are paid as a result of the transaction, it was announced.

The transaction was instigated by a joint working group of the scheme’s trustees and Coats Group plc management, which was established to build on past risk management actions and set the scheme on a journey towards full insurance.

The scheme trustees were independently advised throughout the process by LCP (de-risking), Redington (investment), and Sackers (legal). Coats was advised by Isio.

Chris Martin, trustee chair of the Coats scheme, said: “The collaboration between the trustees and company and our respective advisers, including the outstanding support from our pensions office, has been absolutely at the heart of being able to deliver this outcome. Aviva’s sustainability commitment, and its alignment with our beliefs, was a key factor in the selection of our buy in partner.”

Jamie Cole, head of bulk purchase annuity origination at Aviva, said: “All parties worked collaboratively on this transaction which secures the benefits for a significant proportion of the scheme’s members and supports the sponsor’s long-term ambition to remove risk from their balance sheet. It is clear that Aviva’s sustainability commitment played an important part as it aligns with Coats’ own views.’’

Jackie Callaway, chief financial officer of Coats Group plc, added: “The completion of the buy-in reflects a constructive and collaborative working relationship between Coats and the trustees, with Aviva helping us to achieve our objectives. I would like to thank all involved for helping us get to this position, which will benefit all stakeholders.”

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