The Universities Superannuation Scheme (USS) has pledged to be more rigorous in its stewardship, and seek tangible outcomes from its engagement with companies it invests in.

Kate Barker, chair of USS, said the scheme has implemented a new Stewardship and Voting Policy.

She said this new approach “may see us vote against reappointment of responsible directors if we believe the company is falling to appropriately manage or address an issue”.

She added that USS expects to do this where, among other things, a company has not disclosed its climate transition plan, does not meet USS’s biodiversity expectations or where executive pay does not align with company performance.

Examples include when:

  • a bank has not publicly disclosed their climate transition plans;
  • an oil and gas company has not disclosed a breakdown of money spent on new, or expanding, projects that will add to their carbon footprint;
  • a UK company does not comply with Section 54 of the Modern Slavery Act reporting requirements.

According to the stewardship report, having the right to vote on decisions made by the boards of the companies in which USS invests is “one of the most effective tools we have for holding them to account, encouraging good governance and driving improvements”.

This means that as part of the scheme’s commitment to being a long-term, active and responsible shareowner, its intention is to vote globally on all the companies it invests in, it said.

The stewardship and voting policy is renewed each year to “ensure continued alignment to USS’s beliefs about good practice in line with USS’s fiduciary duties”, USS added.

The report pointed out that there is academic evidence that an effective use of voting to generate change is to vote against individual directors so this will be the primary approach the scheme adopts.

She said: “This approach is a change from voting more generally against a company’s annual report and accounts and allows us to hold individual directors accountable.”

BP and Shell

Back in March, following announcements from BP and Shell that they would be producing more oil and gas for longer than planned when they announced their respective net zero strategies in early 2020, USS and Border to Coast Pensions Partnership – which have combined £130bn in assets under management – announced they would vote against individual directors at their annual general meetings because of the companies’ reduced emission targets.

In February BP said it would aim for a fall of 20% to 30% in emissions from the carbon in its oil and gas production in 2030 compared to a 2019 baseline, lower than the previous aim of 35-40%.

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