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.