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Universities Superannuation Scheme - USS

PRI reporting framework 2018

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Process for engagements run internally

LEA 03. Process for identifying and prioritising engagement activities

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

03.1. Indicate whether your organisation has a formal process for identifying and prioritising engagement activities carried out by internal staff.

03.2. Describe the criteria used to identify and prioritise engagement activities carried out by internal staff.

03.3. Additional information. [Optional]

USS Investment Management manages the assets of the USS Pension Scheme, so we do not have a diverse institutional client base with a diverse set of investment mandates and associated  ESG requirements to implement.   ESG’s risks differ across different industries so our engagement approach varies from industry to industry.  However, we consider that each industry in which we invest faces material ESG risks of one form or another.

The USS prioritisation framework for engagement was enhanced during the year. A spreadsheet was developed to identify portfolio companies where the scheme's active portfolio holding triggered any of the following criteria:

  • USS a top 20 shareholder
  • USS ownership above 3% issued share capital
  • Company on external collaborative engagement focus lists e.g. Climate Action 100+, Workforce Disclosure Initiative or a human rights watch list
  • Company is a focus of internal engagement with the portfolio managers
  • Company is a significant portfolio over-weight

This framework acts as guide, our approach to identifying engagement priorities is not rigid.  Each individual engagement is considered on its own merits.

We utilise lessons learned from previous ESG controversies in our engagement, both recent and more dated events.  For example Macondo, Rana Plaza and more recently 

Samarco and Wells Fargo are events that all elicited conversations with companies in our portfolio. Following Samarco we asked all the integrated mining companies in our portfolio about their tailings management processes and about what additional measures they had taken post the disaster.

Engagement has also been prompted by NGO research for example the Viscose Report produced by Changing Markets.

Whilst we are aware that corporations in some jurisdictions are more receptive to investor engagement, we are conscious of the need to encourage transparency in markets where investor engagement is less mature.   We vote at all our global holdings and send a letter explaining the rationale behind our votes to all our actively held companies, regardless of their size, index or country of incorporation.

LEA 04. Objectives for engagement activities

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

04.1. Indicate if you define specific objectives for your engagement activities.

04.2. Indicate if you monitor the actions that companies take during and following your engagements activities carried out by internal staff.

04.3. Indicate if you do any of the following to monitor and evaluate the progress of your engagement activities carried out by internal staff.

other description

          We maintain a spreadsheet which records engagement activity and objectives.  Current engagements are reviewed in weekly team meetings.

04.4. Additional information. [Optional]

We do not have a formal process in place for monitoring or reviewing progress against engagement objectives, but this is something that naturally happens as part of the engagement process and team meetings.   Thorough preparation is undertaken ahead of every engagement and detailed notes are taken during the meeting with conclusions and next steps.  Meeting notes are shared with fund managers (in many cases they also participate in the meeting) via our internal research system hosted on Bloomberg.    

Some engagement meetings are initiated by the companies in our portfolio, and we welcome this proactive approach.  However for these meetings we would not necessarily have a firm objective. Meetings are also arranged to further our understanding of a company’s business model and the risks they face.  As stewards we need to be comfortable with how our portfolio firms manage risks.  Our PM’s meet with companies on a regular basis to discuss strategy and many cases this naturally involves a discussion of ESG related matters.