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Universities Superannuation Scheme - USS

PRI reporting framework 2018

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Organisational Overview
Basic information [OO 01 - 09] Asset class implementation gateway indicators [OO 10 - 12] Peering questions [OO LE 01 - INF 03]
Strategy and Governance
Investment policy [SG 01 - 04] Objectives and strategies [SG 05 - 06] Governance and human resources [SG 07 - 08] Promoting responsible investment [SG 09 - 11] Outsourcing to fiduciary managers and investment consultants [SG 12] ESG issues in asset allocation [SG 13 - 15] Asset class implementation not reported in other modules [SG 16 - 17] Innovation [SG 18] Communication [SG 19]
Indirect – Manager Selection, Appointment and Monitoring
Listed Equity and Fixed Income Strategies [SAM 01] Selection [SAM 02 - 03] Appointment [SAM 04] Monitoring [SAM 05 - 07] Outputs and outcomes [SAM 08 - 09]
Direct - Listed Equity Incorporation
ESG incorporation in actively managed listed equities [LEI 01 - 10] Implementation processes [LEI 01 - 10] (B) Implementation: Thematic [LEI 07] (C) Implementation: Integration of ESG issues [LEI 08 - 10] Outputs and outcomes [LEI 12 - 14]
Direct - Listed Equity Active Ownership
Engagement [LEA 01 - 14] Overview [LEA 01 - 02] Process [LEA 03 - 10] Process for engagements run internally [LEA 03 - 04] Process for engagements conducted via collaborations [LEA 05 - 06] Process for engagements conducted with/on your behalf by service providers [LEA 07 - 08] General processes for all three groups of engagers [LEA 09 - 10] Outputs and outcomes [LEA 11 - 14] (Proxy) voting and shareholder resolutions [LEA 15 - 24] Overview [LEA 15] Process [LEA 16 - 20] Outputs and outcomes [LEA 21 - 24]
Direct - Fixed Income
ESG incorporation in actively managed fixed income [FI 01 - 13] Implementation processes [FI 01 - 03] (C) Implementation: Integration [FI 11 - 13] ESG incorporation in passively managed fixed income [FI 14] Fixed income - Engagement [FI 15 - 17] Outputs and outcomes [FI 18 - 19]
Direct – Private Equity
Overview [PE 01 - 02] Pre-investment (selection) [PE 05 - 08] Post-investment (monitoring) [PE 09 - 13] Outputs and outcomes [PE 14 - 15]
Direct - Property
Overview [PR 01] Pre-investment (selection) [PR 04 - 06] Selection, appointment and monitoring third-party property managers [PR 07] Post-investment (monitoring and active ownership) [PR 08 - 14] Overview [PR 08] Property monitoring and management [PR 09 - 10] Property developments and major renovations [PR 11] Occupier engagement [PR 12 - 13] Community engagement [PR 14] Outputs and outcomes [PR 15 - 16]
Direct - Infrastructure
Overview [INF 01 - 02] Pre-investment (selection) [INF 05 - 09] Selection, appointment and monitoring of third-party operators [INF 10] Post-investment (monitoring and active ownership) [INF 11 - 16] Overview [INF 11] Infrastructure monitoring and operations [INF 12 - 14] Infrastructure maintenance [INF 15] Stakeholder engagement [INF 16] Outputs and outcomes [INF 17 - 18]
Assurance
Assurance [CM1 01.1 - 01.7]
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You are in Direct - Listed Equity Active Ownership » (Proxy) voting and shareholder resolutions » Outputs and outcomes

Outputs and outcomes

LEA 21. Percentage of (proxy) votes cast

21.1. For listed equities where you and/or your service provider have the mandate to issue (proxy) voting instructions, indicate the percentage of votes cast during the reporting year.

Votes cast (to the nearest 1%)

98 %

Specify the basis on which this percentage is calculated

21.2. Explain your reason(s) for not voting certain holdings 

          USS does not vote holdings sold between the record date and the date of the shareholder meeting (i.e. we avoid empty voting).

21.3. Additional information. [Optional]

LEA 22. Proportion of ballot items that were for/against/abstentions

22.1. Indicate if you track the voting instructions that you and/or your service provider on your behalf have issued.

22.2. Of the voting instructions that you and/or third parties on your behalf issued, indicate the proportion of ballot items that were:

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
67 %
Against (opposing) management recommendations
24 %
Abstentions
9 %
100%

22.3. Describe the actions you take in relation to voting against management recommendations. 

          Please see our response under LEA 15.4 and 20.3

22.4. Additional information. [Optional]

In the twelve months ending December 2017, USS voted on 6,909 resolutions at 545 events at 472 companies (2016: 7,580 resolutions at 623 events at 521 companies).  

USS supported:

  • 38% of remuneration resolutions (44% in 2016)
  • 61% of auditor appointments (69% in 2016)
  • 52% of sustainability focussed resolutions (59% in 2016)
  • 40% of shareholder resolutions (45% in 2016)

USS voted “against” management’s recommendation on at least one resolution at 425 (90%) of companies (87% 2016).  Dissenting votes and comments for the engagement letters are discussed in advance with the relevant portfolio manager(s).

A letter outlining changes to USS’s UK voting policy was also sent to over 50 UK portfolio companies ahead of the proxy season (see SG 06.1)

With regard to the guidance note on abstentions, we are unable to identify where an abstention vote should be counted as a vote against.

Engagement letters are sent to companies ahead of the meetings in most instances, and translated into Japanese for our Japanese holdings. The letters detail the rationale behind our voting decisions, encourage improvements, and provide introductory information on USS’s approach to stewardship. Over the year, 255 engagement letters were sent to 239 companies (347 letters to 339 companies in 2016).

LEA 23. Shareholder resolutions

New selection options have been added to this indicator. Please review your prefilled responses carefully.

23.1. Indicate if your organisation directly or via a service provider filed or co-filed any ESG shareholder resolutions during the reporting year.

23.2. Indicate the number of ESG shareholder resolutions you filed or co-filed.

1 Total number

23.3. Indicate what percentage of these ESG shareholder resolutions resulted in the following.

Went to vote

0 %
Were withdrawn due to changes at the company and/or negotiations with the company
100 %
Were withdrawn for other reasons
0 %
Were rejected/not acknowledged by the company
0 %
Total 100%

23.4. Of the ESG shareholder resolutions that you filed or co-filed and that were put to vote (i.e. not withdrawn) how many received:

>50%
50-20%
<20%

23.5. Describe the ESG shareholder resolutions that you filed or co-filed and the outcomes achieved.

USS nominated its own candidate for supervisory board membership.  This resolution was ultimately withdrawn when the firm put forward their own candidate who was acceptable.

23.6. Describe whether your organisation reviews ESG shareholder resolutions filed by other investors.

We give careful consideration to all shareholder resolutions including those related to environmental and social issues.  USS supported 40% of shareholder resolutions in 2017.

We pre-disclosed voting intentions for Charles Schwab, Exxon, Pioneer and Occidental.

23.7. Additional information. [Optional]

LEA 24. Examples of (proxy) voting activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

24.1. Provide examples of the (proxy) voting activities that your organisation and/or service provider carried out during the reporting year.

ESG Factors
ESG issue 
          Risk of Human Rights Violations and Political Instability
Conducted by
Objectives

Engagement call with IR and Sustainability team ahead of vote to establish our position on shareholder resolution requesting that the firm complete a Human rights risk report.  The shareholder resolution implied that the political situation in a country of their operations was deteriorating rapidly ahead of elections.
Scope and Process

Call with IR and Sustainability team.
Outcomes

The company were able to give the RI team comfort that the situation was under control and no worse than previous years when elections took place.  The company has a long history of operating successfully in the country. 
ESG Factors
ESG issue 
          Lobbying undertaken by industry body
Conducted by
Objectives

To ensure that the company takes responsibility for lobbying undertaken on its behalf by industry bodies and has a mechanism in place to a) identify such lobbying, b) has a process in place to address such lobbying activity where it is inconsistent with the company's own position c) reviews the benefits associated with being a member of all industry bodies and d) reports this activity to shareholders. 
Scope and Process

Supported shareholder resolution and participated in a collaborative engagement call with the firm.
Outcomes

The company has produced a report that complies with the requests made in the shareholder resolution.
ESG Factors
ESG issue 
          ESG Disclosure
Conducted by
Objectives

To encourage the firm to disclose material E&S data ahead of the company AGM so that this information can be integrated in voting decisions.  Such data is an essential component of integrated reporting.
Scope and Process

Request for timely reporting included in voting engagement letter sent to Chairman.
Outcomes

Requirements have been communicated to the company.  If adequate reporting is not forthcoming we will consider voting against report and accounts in future years.
ESG Factors
ESG issue 
          Board Composition
Conducted by
Objectives

To encourage the firm to undertake a review of board composition.
Scope and Process

Vote against election of directors.  Vote rationale communicated to Chairman via voting engagement letter.
Outcomes

This has escalated to a collaborative engagement with the firm.
ESG Factors
ESG issue 
          Overboarding
Conducted by
Objectives

Removal of overboarded director.
Scope and Process

Vote against director in question.   Vote rationale communicated to Chairman via voting engagement letter.
Outcomes

We are now engaging with the company on this issue.
ESG Factors
ESG issue 
          Composition of Audit Committee
Conducted by
Objectives

Increase independence of the audit committee.
Scope and Process

Vote against non-independent  audit committee members
Outcomes

The company has agreed to move to an independent audit committee
ESG Factors
ESG issue 
          Health & Safety
Conducted by
Objectives

To send a clear message to the company that we welcome the improvements in their sustainability reporting and improvements in their health & safety performance.  It is hoped that positive feedback such as this will help strengthen the mandate of the company's sustainability team and help maintain the company's commitment to this important agenda.   Thus securing the adequate levels of investment in terms of both time and money. 
Scope and Process

Comments included in the voting engagement letter to the Chairman.
Outcomes

It is hoped that health & safety performance will continue to improve in future years.
ESG Factors
ESG issue 
          Bundled director elections
Conducted by
Objectives

The objective of the engagements, was to persuade Swedish companies to permit shareholders the opportunity to vote individually on director elections.

USS considers all directors should be held separately to account and put to a shareholder vote at least once every three years. The scheme does not support bundled or slate elections - where shareholders are only offered one vote to appoint all the directors standing for election on a management or supervisory board. We will raise this with companies when we engage and typically vote against such proposals.

Slate elections have been a particular concern in Sweden, where they remain fairly common.
Scope and Process

This was a collaborative engagement (however there is no option to select this in the 'Conducted By' tab above).

USS supported an initiative led by a Dutch asset manager which identified 11 Swedish companies who have persisted with bundled slate elections, continuing to deny shareholders a vote on individual director elections.

The initiative built upon a previous letter in August 2015, to which USS was also a signatory. A letter was also sent at that time to the Chairman of the Swedish Corporate Governance Board, calling upon the body to address investor concerns about bundled director elections.
Outcomes

Of the 40 companies written to in 2015, 17 companies had unbundled their director elections at their 2016 and 2017 AGMs - demonstrating the effectiveness of the engagement campaign.

We will monitor for the effectiveness of the 2017 letters in the 2018 proxy season.

24.2. Additional information. [Optional]

See answer to LEA 18.2 for an explanation as to how USS has integrated environmental and social decisions into voting.
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