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Universities Superannuation Scheme - USS

PRI reporting framework 2018

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Outputs and outcomes

LEA 11. Number of companies engaged with, intensity of engagement and effort

11.1. Indicate the amount of your listed equities portfolio with which your organisation engaged during the reporting year.

Number of companies engaged

(avoid double counting, see explanatory notes)

Proportion (to the nearest 5%)
Specify the basis on which this percentage is calculated

Individual / Internal staff engagements

9999 Number of companies engaged
0 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Collaborative engagements

9999
0 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

Service provider engagements

9999
0 Proportion (to the nearest 5%)

Specify the basis on which this percentage is calculated

11.2. Indicate the proportion of engagements that involved multiple, substantive and detailed discussions or interactions with a company during the reporting year relating to ESG issue.

Type of engagement

% Comprehensive engagements

 

 

Individual / Internal staff engagements

 

 

Collaborative engagements

 

 

Service provider engagements

11.3. Indicate the percentage of your collaborative engagements for which you were a leading organisation during the reporting year.

Type of engagement

% Leading role

  Collaborative engagements

11.4. Indicate the percentage of your service provider engagements that you had some involvement in during the reporting year.

Type of engagement

% of engagements with some involvement
  Service provider engagements

11.5. Additional information. [Optional]

Please note that 9999 was entered into the boxes above as we were unable to enter NA.

We do not consider the number of company engagements to be an appropriate indicator of the quality of engagement. As a result we have no reason to collect those statistics.

USS manages the majority of its assets in house. Given the concentrated and active  nature of USS’s public equity portfolio, the proportion of companies we engage with will be higher than for typical pension funds which tend to have very large passive exposures. 

With regard to question LEA 11.3, whilst USS will regularly participate or lead on collaborative engagements e.g. with other peer international pension funds, we do not track the exact number or wish to report on it.

Please see our comments in LEA 10.2 (and many other sections in the PRI report) for examples of USS's stewardship activities in public equities and other asset classes.


LEA 12. Engagement methods

12.1. Indicate which of the following your engagement involved.

12.2. Additional information. [Optional]

We do not maintain statistics on the type of engagement undertaken.  However, we have participated in all of the engagement types described above and recognise the contribution that each approach can make. 


LEA 13. Companies changing practices / behaviour following engagement

13.1. Indicate whether you track the number of cases during the reporting year in which a company changed its practices, or made a formal commitment to do so, following your organisation’s and/or your service provider's engagement activities.

Do you track number of companies that changed or made a formal commitment to change in the reporting year following your organisation’s and/or your service provider's engagement activities?

13.2. Indicate the number of companies that changed or made a formal commitment to change in the reporting year following your organisation’s and/or your service provider's engagement activities.

Number of companies
% of total portfolio

Individual / Internal staff engagements

999
100 % of total Portfolio

Collaborative engagements

999
100 % of total Portfolio

Service provider engagements

999
100 % of total Portfolio

13.3. Additional information [Optional].

Whilst we track the number of company responses to our engagements and changes in corporate behaviour and disclosure, as noted we do not maintain statistics around engagement responses.


LEA 14. Examples of ESG engagements

14.1. Provide examples of the engagements that your organisation or your service provider carried out during the reporting year.

ESG factors
ESG issue
          Shareholder Rights
        
Conducted by
Objectives

To encourage the company to engage with a potential suitor over a proposed bid.

Scope and Process

USS, presented at Enterprise Chambers Court, proposed Supervisory Board candidate, participated in a joint delegation to the Finance Ministry.  USS also made public statement at both an AGM and an EGM. Meetings with the company were attended by a representative the RI Team and fund manager from the relevant desk.  Whilst this was an individual investment collaboration with other investors took place during the process.

Outcomes

The Board has been refreshed.  The importance of shareholder engagement is now acknowledged by the firm. A debate around shareholder rights in the Netherlands has also been opened up.  USS decided to remain invested and enter into a dialogue with the firm rather than divest.  

ESG factors
ESG issue
          Health & Safety and Impact on the Environment
        
Conducted by
Objectives

To understand the potential financial costs associated with the disaster and to get comfort that the company is delivering on the remediation work promised and that this work is beneficial to effected stakeholders in the locality.   It was also important to get comfort that the company had reviewed its processes and controls around tailings management and made enhancements where appropriate.

Scope and Process

Field trip to site of accident to speak to company representatives on the ground as well as impacted stakeholders including local communities.  Also to review progress of remediation work and future plans.   

Outcomes

Comfortable that the company is taking responsibilities seriously.  Company agreed to change governance committee overseeing remediation projects to ensure greater company representation of stakeholders.

ESG factors
ESG issue
          Health & Safety performance.
        
Conducted by
Objectives

To communicate to the firm our concerns around the number of fatalities they are experiencing and to understand why performance does not appear to be improving despite investment in processes and controls.  Ultimately USS wants to see far fewer accidents and far fewer fatalities.

Scope and Process

Focused engagement call specifically discussing Health & Safety performance to illustrate the significance of this issue to us as investors and to speak directly to those responsible for managing Health & Safety at the firm (IR, H&S Officer and Sustainability team).     The portfolio manager also played a full role in the call which helped to emphasise the financial materiality of the issue.   We also raised concerns in the engagement letter we sent to the Chairman after the AGM. 

Outcomes

Whilst it was evident that the firm had made significant efforts to improve their health and safety performance.   We had some residual concerns around the different health & safety performance of the company in different countries.

Significant improvement in health & safety performance was reported in the 2017 sustainability report. this year.  Which suggests that the company's efforts are paying dividends but there is still more work to be done.

ESG factors
ESG issue
          Transition to a lower carbon economy and impact on electrical utilities.
        
Conducted by
Objectives

The company is a heavy user of coal in its power generation.  USS needed to understand how the company was assessing the risk of stranded assets and the transition to a lower carbon economy.

Scope and Process

Company visit to Japan with other investors and one to one meeting with the company in the UK with the portfolio manager present.

Outcomes

The company did not have a position on climate change beyond 2030.   For a variety of reasons (including concerns around climate change risk) the position was sold. 

ESG factors
ESG issue
          Board Structure and audit tenure
        
Conducted by
Objectives

To convey to the firm our concerns around corporate governance, human capital management and commitments to change.

Scope and Process

Direct engagement with the company with portfolio manager and RI team in attendance

Outcomes

Some additional disclosure but no substantive change.  A collaborative engagement has now been organised by the Investor Forum.

ESG factors
ESG issue
          Remuneration of executive directors
        
Conducted by
Objectives

Influence structure and metrics to align executives' reward to the creation of shareholder value,  to the extent possible given regulatory restrictions in the banking sector

Scope and Process

Several face to face meetings over six months with Chair of the Remuneration Committee and relevant executives; several email / phone call exchanges

Outcomes

Company put a revised remuneration proposal to its AGM in 2017.

ESG factors
ESG issue
          Supply Chain Management
        
Conducted by
Objectives

To understand

  • The company's exposure to viscose in their supply chain
  • The environmental and social risks associated with un-sustainable viscose production. 
  • The potential supply chain impact if viscose supply was disrupted.  
Scope and Process

Research followed by face to face meeting with the firm.

Outcomes

Most of the company's efforts have focused on sustainable cotton which is much more of a potential issue.

The company's exposure to viscose was limited and therefore the risk of supply chain disruption was manageable.  

The company has started to collaborate with the Sustainable Apparel Coalition. Whilst the company has mapped its viscose supply chain, it has not gone beyond tier 1, so efforts in this area are less mature with more scope for development.  We will continue the dialogue on viscose in 2018 when more progress has been made.

14.2. Additional information. [Optional]

Further details relating to the Akzo Nobel shareholder resolution (example 1) can be found by following the link below.

  • https://www.akzonobel.com/for-media/media-releases-and-features/akzonobel-announces-changes-supervisory-board

USS holds the view that not all engagements need to be face to face meetings or have specific deliverables.  We can exert our influence as stewards in a number of ways.  For example, where we have voted against or abstained on resolutions at a shareholder meeting, or where we note areas that are not aligned to our corporate governance policies, we communicate our concerns via a letter to the company Chairman after the vote.  Where appropriate we include comments in this letter about the company’s ESG disclosure and performance,  requesting greater disclosure where necessary.   We also ask questions regarding ESG matters via e-mail.  We consider that we can reach more companies if we adopt this lighter approach with some engagements.  This is particularly true in some of the emerging markets in which USS invests where stakeholder engagement is less developed.  Asking an ESG related question can send a message to companies about the materiality of ESG matters to investors and supports the mandate of sustainability teams within these businesses.


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