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BT Pension Scheme

PRI reporting framework 2020

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Governance and human resources

SG 07. RI roles and responsibilities

07.1. Indicate the internal and/or external roles used by your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for responsible investment.

Roles

Select from the below internal roles

          Deputy Chief Investment Officer (DCIO)
        

Other description (1)

          Manager selection team.
        

07.2. For the roles for which you have RI oversight/accountability or implementation responsibilities, indicate how you execute these responsibilities.

Board members or Trustees - The Trustee established a Responsible Investment Policy and reviews this annually.  The Trustee Board delegated specific RI governance responsibilities to a sub-committee of Trustee Directors, the Investment Committee (IC).  The IC has delegated authority to oversee the Scheme's responsible investment strategy, which includes ensuring the Scheme's activities comply with and fulfil its fiduciary and regulatory obligations and consideration of emerging, long term risks, such as climate change and technological disruption. Following a review in late 2019, the Trustee Board made a decision to elevate responsibility for responsible investment to the Investment Committee.

CEO, CIO, DCIO (and other members of the BTPSM Management Committee) - The implementation of the responsible investment strategy has been delegated to BT Pension Scheme Management (BTPSM), the executive arm of the Trustee.  The Management Committee of BTPSM is responsible for the oversight of the implementation of the RI strategy, including ensuring that BTPSM has the necessary people, resources and skills to adequately discharge its responsibilities in this area.

Responsible Investment staff - the Head of Responsible Investment for BTPSM both oversees the responsible investment strategy and is integral to ensuring its effective implementation throughout BTPSM and external agents, including external managers and providers of stewardship services.  The Head of RI reports regularly on responsible investment matters to the Trustee via the meetings of the IC.  The Head of RI is also responsible for engaging with other asset owners and third-parties to inform best practice and improve the effectiveness of the Scheme's responsible investment activities.

The Manager Selection team - as part of their ongoing monitoring they ensure that the Scheme's managers are properly integrating RI into their investment processes and activities and have reporting in External managers or service providers - We ensure that, where relevant, external managers embed responsible investment considerations, including ESG factors, into their investment processes. As part of the process, external managers are expected to provide evidence and ongoing reporting on the RI integration process across, for example, fundamental analysis, asset valuation and portfolio construction. 

The majority of the Scheme’s stewardship activities are undertaken by Hermes EOS, one of the world’s largest collaborative stewardship services. Alternatively, a manager may, where engagement is fundamental to the investment strategy and they can demonstrate sufficient capabilities, be appointed to provide stewardship services for their specific mandate.  The Scheme’s stewardship service providers may engage with a company both individually and collaboratively with other investors where they are concerned about company practices and performance. In determining whether and how engagement is taken forward, stewardship service providers are expected to have due regard to the likelihood of success in bringing about change and the level of company exposure. Providers are expected to report the effectiveness of their intervention activities and where appropriate explain how engagement informs investment decisions.  To achieve change service providers may undertake a series of escalating engagement actions depending on the nature of the challenge and the initial reaction of the company’s board to engagement, including meeting with the chairman or other board members, discussions with other shareholders of the company and submitting resolutions and speaking at General Meetings. Hermes EOS and, where applicable, investment managers are mandated to execute all votes for the Scheme’s directly held public securities. Proxy voting activity should not be conducted in isolation but rather as part of a wider engagement strategy. Rather than prescribing specific actions, the Scheme’s agents are afforded a measure of discretion and flexibility.  Agents may adapt their stewardship practices to accepted local market conventions and regional best practice including for example the U.K. corporate governance code and the Hermes EOS U.S. corporate governance principles.

07.3. Indicate the number of dedicated responsible investment staff your organisation has.

1 Number

07.4. Additional information. [Optional]


SG 07 CC. Climate-issues roles and responsibilities

07.5 CC. Indicate the roles in the organisation that have oversight, accountability and/or management responsibilities for climate-related issues.

Board members or trustees

Chief Executive Officer (CEO), Chief Investment Officer (CIO), Chief Risk Officer (CRO), Investment Committee

Other Chief-level staff or heads of departments

Dedicated responsible investment staff

External managers or service providers

Other role, specify (1)

          Manager selection team.
        

07.6 CC. For board-level roles that have climate-related issue oversight/accountability or implementation responsibilities, indicate how these responsibilities are executed.

The Scheme has in place a climate and carbon risk management process, which includes the following components:

Risk Register.  Climate risk is monitored as part of the regular review of the Investment Committee (IC)  risk registers.  Controls include ongoing monitoring by BTPSM of climate and carbon risk (with high risk exposures and incidents reported to the IC), an annual performance review of the Scheme comparing outcomes against expectations and investment beliefs, and regular asset class deep dives that include consideration of responsible investment matters and climate risks.

Scenario analysis.  A range of external publications and information sources are used as tools to help monitor climate change developments.  The Scheme also continues to develop its quantitative scenario analysis (based on the studies done by Mercer in 2011, 2015 and in 2019) and is developing narrative-driven climate change scenarios to help inform the possible implications for the Scheme’s assets under different transition pathways.

Measuring exposure.  The Scheme assesses its exposure to high- and low-carbon assets and also to physical risks.

Managing risk and opportunity.  As part of its integrated approach to responsible investment, the Scheme undertakes three core risk management activities that help mitigate the impact of climate change on the Scheme’s assets:

Integrating ESG factors into investment mandates

Where appropriate, BTPSM ensures that new and existing managers are properly integrating responsible investment into their investment processes.  This means consideration is given to both risks and opportunities relating to environmental, social and governance (ESG) factors in most of the Scheme’s active and passive mandates.

Engagement with companies

Engagement on environmental matters is one of the core client objectives for Hermes EOS and covers a number of important issues including climate change risk, natural resource consumption and pollution.  With respect to climate change, engagement is aimed at ensuring companies appropriately manage the risk and opportunities arising from climate change through board-level oversight, strategic risk appraisal and target setting.

Engagement with policymakers

Hermes EOS also engages on matters of public policy and market best practice.  One of their engagement objectives for 2018 – 2020 is to support collaborative engagement initiatives on climate change by working with the IIGCC, Ceres in the US, the PRI and Climate Action 100+, where Hermes EOS leads or co-leads engagement with 27 companies and supports engagement with a further 14. 

07.8 CC. Indicate how your organisation engages external investment managers and/or service providers on the TCFD recommendations and their implementation.


SG 08. RI in performance management, reward and/or personal development (Private)


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