This implementation statement describes the actions taken over the past year and how they relate to the intentions we have set out in the Scheme's Statement of Investment Principles (the "SIP").
The Scheme's assets are held in pooled investment funds (via the Mobius Life investment platform) and the day-to-day management of these investments (in cluding the responsibility for voting and engaging with companies) is delegated to the fund managers of the pooled investment funds (the 'fund managers').
The fund managers of the pooled investment funds are Legal & General Investment Management (LGIM), BNY Mellon Investment Management (BNYM) and BMO Global Asset Management (BMO).
As Trustees of the Scheme's assets, we are responsible for the selection and retention of the funds. Analysing the voting and engagement activities, which we include details on below, is a useful exercise to help us ensure they remain appropriate and are consistent with the managers' stated policies in this regard. We will engage with the fund managers should we have any concerns about the voting and/or engagement activities carried out on our behalf. In the opinion of the Trustees the policies in the SIP, relating to voting and engagement, have been followed during the year.
During the year to 30 September 2020, the Trustees updated the SIP to ensure they met new regulations that came into effect from 1 October 2020.
Changes to investment strategy
During the year the Trustees decided to implement a change to the investment strategy designed to reduce risk and improve return expectations. Risk was reduced by using Liability Driven Investment (LDI) funds to better manage interest rate and inflation risk and diversifying sources of growth, this enabled a higher overall allocation to return-seeking assets. The change in strategy involved disinvestment of the LGIM passive equity and corporate bond funds and subsequent investment into the LGIM World (ex UK) Equity Index Fund (GBP currency hedged), LGIM Dynamic Diversified Fund, BNYM Global Dynamic Bond Fund and two BMO Dynamic LDI Funds. This change to the investment strategy was based on advice received from their investment consultant. The information below is based on the funds used under the new investment strategy.
Voting and engagement
Details on voting and engagement activities provided by LGIM, BMO and BNYM are set out below. In order to produce this statement we have asked LGIM, BMO and BNYM some questions on their policies, actions and examples relating to their voting and engagement activities. We have then reviewed these and summarised their responses for the purposes of this statement.
LGIM have provided information relating to the World (ex UK) Equity Index Fund (GBP currency hedged) and the Dynamic Diversified Fund, as these funds hold equities for which they have voting rights.
The BNYM Global Dynamic Bond fund does not hold equities and given that bonds do not confer voting rights, there was no voting carried out in relation to this fund. However, BNYM does undertake engagement activities in respect of its bond holdings and we have included an example below.
The BMO LDI Funds do not hold equities and given that these investments do not confer voting rights, there was no voting carried out in relation to these funds. However, BMO does undertake engagement activities with counterparty banks on relevant issues, where applicable. BMO report on this on a bi-annual basis, therefore the information provided covers the year to 30 June 2020.
LGIM voting and engagement activities
LG/M's voting and engagement activities are driven by ESG professionals and their assessment of the requirements in these areas seeks to achieve the best outcome for all our clients. Our voting policies are reviewed annually and take into account feedback from our clients.
All decisions are made by LG/M's Investment Stewardship team and in accordance with our relevant Corporate Governance & Responsible Investment and Conflicts of Interest policy documents which are reviewed annually. Each member of the team is allocated a specific sector globally so that the voting is undertaken by the same individuals who engage with the relevant company. This ensures our stewardship approach flows smoothly throughout the engagement and voting process and that engagement is fully integrated into the vote decision process, therefore sending consistent messaging to companies.
LG/M's Investment Stewardship team uses ISS's 'ProxyExchange' electronic voting platform to electronically vote clients' shares. All voting decisions are made by LGIM and we do not outsource any part of the strategic decisions. Our use of ISS recommendations is purely to augment our own research and proprietary ESG assessment tools. The Investment Stewardship team also uses the research reports of Institutional Voting Information Services (/VIS) to supplement the research reports that we receive from /SS for UK companies when making specific voting decisions
To ensure our proxy provider votes in accordance with our position on ESG, we have put in place a custom voting policy with specific voting instructions. These instructions apply to all markets globally and seek to uphold what we consider are minimum best practice standards which we believe all companies globally should observe, irrespective of local regulation or practice.
We also believe public transparency of our vote activity is critical for our clients and interested parties to hold us to account. In determining significant votes, LG/M's Investment Stewardship team takes into account the criteria provided by the Pensions & Lifetime Savings Association consultation (PLSA).
LGIM Dynamic Diversified Fund
LGIM were eligible to vote on 56,426 resolutions. They voted on 99.1 % of the resolutions. Votes for: 84%, Against 16%, Abstained: <1 %. In 11 % of occasions LGIM voted against the recommendation provided by a proxy advisor (ISS).
Most significant votes
LGIM provided the following examples in response to our request to provide details of their most significant votes: