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Environment Agency Pension Fund

PRI reporting framework 2020

Basic information [OO 01 - 09] Asset class implementation gateway indicators [OO 10 - 12] Peering questions [OO LE 01 - HF 01]

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 Active Ownership

Overview [LEA 01] Engagement [LEA 02 - 08] (Proxy) voting and shareholder resolutions [LEA 12 - 21]

Confidence building measures

Confidence building measures [CM1 01 - 07]

Export Public Responses

You are in Direct - Listed Equity Active Ownership » Outputs and outcomes

Outputs and outcomes

LEA 09. Number of companies engaged with, intensity of engagement and effort

Indicate the proportion of companies in your listed equities portfolio with which your organisation engaged during the reporting year.

	We did not complete any engagements in the reporting year.	Number of companies engaged (avoid double counting, see explanatory notes)	Proportion of companies engaged with, out of total listed equities portfolio
Individual / Internal staff engagements		9	1
Collaborative engagements		992	65
Service-provider engagements		435	28

09.2. Indicate the breakdown of engagements conducted within the reporting year by the number of interactions (including interactions made on your behalf).

No. of interactions with a company	% of engagements
One interaction	>76% 51-75% 11-50% 1-10% None
2 to 3 interactions	>76% 51-75% 11-50% 1-10% None
More than 3 interactions	>76% 51-75% 11-50% 1-10% None
Total	100%

09.3. Indicate the percentage of your collaborative engagements in which you were the leading organisation during the reporting year.

Type of engagement	% leading role
Collaborative engagements	>50% 10-50% <10% None

09.4. Indicate the percentage of your service-provider engagements in which you had some involvement during the reporting year.

Type of engagement	% of engagements with some involvement
Service-provider engagements	>50% 10-50% <10% None

09.5. Additional information. [Optional]

We attended 9 company AGMs in 2019 to (generally) ask questions on climate change adaptation. Our perception is that this level of attendance is uncommon in the UK (at one AGM we were the only asset owner to ask a question). At almost every AGM the Board commented that they were pleased to see our attendance and welcomed the question. We often had discussions with company representatives after the AGM. We would encourage asset owners to attend AGMs and ask a question of the Board.

LEA 10. Engagement methods

10.1. Indicate which of the following your engagement involved.

Letters and emails to companies

In a minority of cases

In a majority of cases

In all cases

Meetings and/or calls with board/senior management

In a minority of cases

In a majority of cases

In all cases

Meetings and/or calls with the CSR, IR or other management

In a minority of cases

In a majority of cases

In all cases

Visits to operations

In a minority of cases

In a majority of cases

In all cases

Visits to supplier(s) in supplier(s) from the company’s supply chain

In a minority of cases

In a majority of cases

In all cases

Participation in roadshows

In a minority of cases

In a majority of cases

In all cases

Other

(specify)

          Attending company AGMs

In a minority of cases

In a majority of cases

In all cases

10.2. Additional information. [Optional]

Our response to LEA 11.1 includes engagements carried out by our service provider EOS at Federated Hermes.

LEA 11. Examples of ESG engagements

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

Add Example 1

ESG Topic	Water risks Executive Remuneration Climate Change Human rights Company leadership issues Pollution General ESG Diversity Shareholder rights Health and Safety Sustainability reporting Water risks Labour practices and supply chain management Anti-bribery and corruption Deforestation Aggressive tax planning Cyber security Other governance Plastics Other
Conducted by
Objectives	EAPF has a target of a target 20 per cent increase in the response rate of listed companies between 2015 and 2020 to CDP’s Water Program.
Scope and Process	EAPF was a lead on CDP Water non-disclosure. Of 26 companies engaged 1 has begun reporting to CDP.
Outcomes

Add Example 2

ESG Topic	Climate Change Executive Remuneration Climate Change Human rights Company leadership issues Pollution General ESG Diversity Shareholder rights Health and Safety Sustainability reporting Water risks Labour practices and supply chain management Anti-bribery and corruption Deforestation Aggressive tax planning Cyber security Other governance Plastics Other
Conducted by
Objectives	Highlight to companies in which we invest our need for them to be analysing their prepardness for climate change.
Scope and Process	For our active equities we identified those companies which had an AGM in the UK and where possible sent a Pensions Committee member/senior officer to ask a question of the Board at the AGM. In general the question was climate risk based and focused on scenario planning or adaptation.
Outcomes

Add Example 3

ESG Topic	Climate Change Executive Remuneration Climate Change Human rights Company leadership issues Pollution General ESG Diversity Shareholder rights Health and Safety Sustainability reporting Water risks Labour practices and supply chain management Anti-bribery and corruption Deforestation Aggressive tax planning Cyber security Other governance Plastics Other
Conducted by
Objectives	EOS has pressed companies to set science-based targets, conduct climate-risk stress tests, and make enhanced disclosures. It has also asked companies to link executive pay to the achievement of climate change outcomes, and to ensure they do not lobby policymakers or regulators to hinder the achievement of the Paris Agreement goals. In 2019, EOS continued to participate in collaborative investor initiative Climate Action 100+, which targets over 100 of the world’s largest corporate greenhouse gas emitters. The aim is to curb emissions, strengthen climate-related financial disclosures, and improve governance on climate change risk and opportunities. The ultimate goal is to help limit global warming to less than 2°C, consistent with the Paris Agreement.
Scope and Process	EOS took an active role as lead or co-lead engager for 27 companies in this initiative, which has attracted over 370 investors with over $35 trillion under management. In 2019 EOS attended six annual shareholder meetings to promote action on the climate crisis – a mining company, an oil major, a utility, and three car manufacturers. EOS also helped to co-ordinate the work of the Institutional Investors Group on Climate Change’s shareholder resolutions sub-group, identifying companies that could be potential targets for climate change-related resolutions, and the utilities sector sub-group, formulating and co-ordinating engagement strategies for the sector.
Outcomes

Add Example 4

ESG Topic	Human rights Executive Remuneration Climate Change Human rights Company leadership issues Pollution General ESG Diversity Shareholder rights Health and Safety Sustainability reporting Water risks Labour practices and supply chain management Anti-bribery and corruption Deforestation Aggressive tax planning Cyber security Other governance Plastics Other
Conducted by
Objectives	EOS engages on critical human rights issues including eradicating forced labour and child labour in supply chains. Many companies rely on global supply chains to access labour in low-cost regions, but the fragmented and opaque nature of these chains heightens the risk of human rights abuses. Traditional, announced audits may not uncover issues – more robust due diligence is needed. EOS engages with companies across five key areas: forced labour and modern slavery, child labour, living wages and purchasing practices, worker voice and gender-specific issues.
Scope and Process	EOS engaged with a Malaysian palm oil company over several years following NGO and media reports in 2012 of poor labour conditions at the company’s plantations in Liberia and its suppliers in Indonesia. 2013 saw further allegations of poor labour conditions in its supply chain and EOS urged it to provide clarity on how it was investigating and assessing the steps taken to avoid similar issues in the future. EOS continued to raise these concerns in further calls and correspondence over several years, during which the company appeared to be responding positively to consider improved disclosure and stakeholder outreach. During a call in 2017 the company committed to disclosing its migrant worker management process in its sustainability report – a significant improvement on transparency. In 2018 EOS asked the company to align its labour standards programme and move to industry best practices by reporting in line with the UN Guiding Principles on Business and Human Rights. EOS reiterated this request during calls in 2019 with the head of sustainability.
Outcomes

Add Example 5

ESG Topic	Diversity\|Other governance Executive Remuneration Climate Change Human rights Company leadership issues Pollution General ESG Diversity Shareholder rights Health and Safety Sustainability reporting Water risks Labour practices and supply chain management Anti-bribery and corruption Deforestation Aggressive tax planning Cyber security Other governance Plastics Other
Conducted by
Objectives	Despite plenty of evidence that diversity improves company performance, progress has been slower than hoped for in many parts of the world. EOS seeks balanced boards at companies – composed of directors with technical skills aligned with the strategic needs and direction of the company and a diversity of perspectives. This may include across gender, age, ethnicity, nationality, background, skills and experience, to improve decision-making and avoid groupthink. Getting the board right is often the first step towards addressing social or environmental issues to which the company may be exposed, which is why it is a significant feature in EOS’s engagement.
Scope and Process	EOS engaged with a Chinese technology company that offers a range of services via communications and social media platforms. EOS initiated an engagement on board diversity with the company after strengthening its corporate governance principles for mainland China and Hong Kong at the start of 2019. In these principles EOS states that it assesses diversity at both the board and management levels to ensure that the leadership team has a suitable combination of talents. In the first quarter of 2019, EOS met the company’s senior legal counsel and wrote to the chair to call attention to the amended Hong Kong Corporate Governance Code of July 2018. EOS made recommendations on how to specify talent search criteria to encourage fairer and non-discriminatory practices. It also asked the company to consider reflecting the customer base and business needs when selecting board directors, as a good portion of the company's gamers are women. EOS put its principles into action and recommended voting against a member of the nomination committee at the 2019 annual shareholder meeting. It communicated its voting recommendations and rationale to the company, ahead of the vote at a meeting in early May 2019.
Outcomes

Add Example 6

Add Example 7

Add Example 8

Add Example 9

Add Example 10

11.2. Additional information. [Optional]

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