The Beam UK Pension Plan

Annual Implementation Statement – Scheme year ending 05 April 2021

14 September 2021 

1. Introduction
This document is the Annual Implementation Statement (“the statement”) prepared by the Trustee of the Beam UK Pension Plan (“the Plan”) covering the plan year (“the year”) to 5 April 2021.

The purpose of this statement is to set out:

  • Set out how, and the extent to which, in the opinion of the trustees, the Plan’s engagement policy (required under regulation 23c of the Occupational Pension Schemes Investment Regulations 2005) has been followed during the year;
  • Describe the voting behaviour by, or on behalf of, trustees (including the most significant votes cast by trustees or on their behalf) during the year and state any use of services of a proxy voter during that year.

The Plan makes use of a wide range of investments; therefore, the principles and policies in the SIP are intended to be applied in aggregate and proportionately, focussing on areas of maximum impact.

In order to ensure that investment policies set out in the SIP are undertaken only by persons or organisations with the skills, information and resources necessary to take them effectively, the Trustee delegates some responsibilities. In particular, the Trustee has appointed a Fiduciary Manager, Towers Watson Limited, to manage the Plan’s DB assets on a discretionary basis. The Fiduciary Manager’s discretion is subject to guidelines and restrictions set by the Trustee. So far as is practicable, the Fiduciary Manager considers the policies and principles set out in the Trustee’s SIP. 

The contents of this statement apply to the assets managed by the fiduciary manager. Assets in relation to Additional Voluntary Contributions have been excluded on materiality grounds. 
 

2. Review of and changes to the SIP

The SIP was reviewed and updated once in the Year. The version in place as at the end of the year was dated September 2020 and was updated to reflect new Department for Work and Pensions (DWP) regulations coming into force from 1 October 2020 which required trustees to make additional
statements in relation to their arrangements with asset managers. For the purpose of assessing how the Scheme’s SIP has been followed, the remainder of this statement specifically focusses on the SIP agreed in September 2020. All elements that were included in the previously agreed SIP (dated September 2019) remained in the September 2020 SIP.
 

3. Voting and engagement

As set out above, the Trustee has delegated responsibility to the Fiduciary Manager to implement the Trustee’s agreed investment strategy, including making certain decisions about investments (including asset allocation and manager selection/deselection) in compliance with Sections 34 and 36 of the Pensions Act. 

The Fiduciary Manager is therefore responsible for managing the sustainability of the portfolio and how Environmental, Social and Governance (“ESG”) factors are allowed for in the portfolio.

Consistent with the Trustee’s view that ESG factors can have a significant impact on investment returns, particularly over the long-term, the Fiduciary Manager believes that sustainable investment (SI) forms the cornerstone of successful long-term investment and has fully embedded the consideration of ESG factors in its processes. 

The Fiduciary Manager’s process for selecting, monitoring and de-selecting managers explicitly and formally includes an assessment of a manager’s approach to SI (recognising that the degree to which these factors are relevant to any given strategy is a function of time horizon, investment style, philosophy and exposures). Where ESG factors are considered to be particularly influential to outcomes, the Fiduciary Manager engages with investment managers to improve their processes. 

The policies and processes described above have impacted the Scheme’s investments in numerous ways. Some examples of the investments made by the Scheme with an expected positive ESG impact are outlined below: 

  • Through its investment in the Secure Income Fund, amongst other positive-impact assets, the Scheme has exposure to an Investment into socially beneficial housing for homeless individuals. This investment provides robust cashflows in the form of rental payments supported by local authorities, with a strong certainty of payment. 
  • Through its investment in the Core Diversified Fund, the Scheme accessed an adaptive capped global equities index with an ESG overlay. The strategy adds ESG tilts and exclusions to the portfolio, up-weighting companies with strong current ESG profits and those that have improved, and removing companies that fail to meet minimum ESG standards or disproportionately contribute to material ESG issues such as climate change.

4. Company level engagement and rights attached to investments (including voting). 

The Trustee has not set any specific guidelines around manager voting. As part of the review of the Statement of Investment Principles in September 2020, the Trustee considered and reviewed its stewardship and engagement policies. 

The Trustee has delegated responsibility for the selection, retention and realisation of investments to the Fiduciary Manager, and in turn to the Plan’s investment managers. The day-to-day integration of ESG considerations and stewardship activities (including voting and engagement) are delegated to the Scheme’s investment managers. 

Through the engagement undertaken by the Fiduciary Manager, the Trustee expects investment managers to sign up to local Stewardship Codes and to act as responsible stewards of capital as applicable to their mandates. The Fiduciary Manager considers the investment managers’ policies and activities in relation to Environmental, Social and Governance (ESG) and stewardship both at the appointment of a new manager and on an ongoing basis. The Fiduciary Manager engages with managers to improve their practices and may terminate a manager’s appointment if they fail to demonstrate an acceptable level of practice in these areas. However, no managers were terminated on these grounds during the year. 

The Scheme is invested across a diverse range of asset classes which carry different ownership rights, for example fixed income whereby these holdings do not have voting rights attached. All the Plan’s equity holdings as at the end of the Plan year were held with Towers Watson Investment Management (“TWIM”) through the Core Diversified Fund (“CDF”). The Towers Watson Secure Income Fund invests into investment trusts and limited partnerships managed by third party managers.  These vehicles in turn invest into private holdings in assets such as real estate and infrastructure with no voting rights. Therefore, voting information was only requested from the Scheme’s equity managers accessed through the TWIM CDF with an associated right to vote as an ultimate owner of a stock. Responses received are provided in the table below and cover the period 1 April 2020 to 31 March 2021. Where managers provided multiple examples of “significant votes”, the top three by quoted weight have been shown below.  

Voting table – Equity managers accessed through the TWIM Core Diversified Fund

Voting activity

Number of votes eligible to cast: 16,874

Percentage of eligible votes cast: 100%

Percentage of votes with management: 74.7%

Percentage of votes against management: 24.7%

Percentage of votes abstained from: 0.6%

Percentage of votes contrary to proxy recommendation: 1.1%

Most significant votes cast

Company

SF Holding

Great Wall Motor

Goodman Group

Size of holdings

0.12%

0.12%

0.12%

Resolution

Authority to give guarantees for Company’s wholly owned subsidiary to issue debt financing overseas

Amendments to Articles of Association

Advisory vote to ratify named executive officers’ compensation

Decision /Vote

For

Against

Against

Rationale for decision

The strong volume growth and expansion in overseas market needs the capital support. Management’s track record in capital allocation management allocation is solid. The size and price discount of this equity placement is reasonable.

Shortened notice period as shareholders should be given enough time to consider items before general meetings

This item does not merit support as SSGA has concerns with the proposed remuneration structure for senior executives at the Company

Rationale for classifying as significant

Vote against provider recommendations

Against management

Vote against management

Note: Information in the table above is provided as at 31 March 2021. The managers included represented 35% of the total TWIM CDF allocation as at 31 March 2021.

Industry wide / public policy engagement:

As mentioned in the SIP, the Fiduciary Manager has partnered with EOS at Federated Hermes (EOS) to undertake public policy engagement on behalf of its clients (including the Trustee). This public policy and market best practice engagement is done with legislators, regulators, industry bodies and other standard-setters to shape capital markets and the environment in which companies and their investors operate, a key element of which is risk related to climate change. The Fiduciary Manager represents client policies/sentiment to EOS via the Client Advisory Council, of which WTW are currently the chair. Engagement activities by EOS on public policy over the year included:

  • 52 consultation responses or proactive equivalents (such as a letter), and 173 discussions held with relevant regulators and stakeholders during 2020;
  • Climate Action 100+, an investor initiative aiming to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change, where EOS lead or co-lead 30 engagements and support another 14;
  • Working closely with the Principles for Responsible Investment (‘PRI’), including leading the engagement with Vale on tailings dam failure, and actively involved in other groups, including cyber risk, water stress, cattle deforestation, palm oil, plastics, cobalt and tax;
  • Close collaboration with significant investor initiatives including Investors for Opioid & Pharmaceutical Accountability, Investor Alliance for Human Rights, Plastics Solutions Investor Alliance, 30% Club, and Investor Initiative on Mining & Tailings Safety.

The Fiduciary Manager is also engaged in a number of industry wide initiatives and collaborative engagements including:

  • Being a Tier 1 signatory of the 2012 UK Stewardship Code and submitting its first annual report to the 2020 UK Stewardship Code;
  • Being a signatory of the Principles for Responsible Investment (PRI) and active member of their Stewardship Advisory Committee;
  • Being a member of and contributor to the Institutional Investors Group on Climate Change (IIGCC), Asian Investors Group on Climate Change (AIGCC), and Australasian Investors Group on Climate Change (IGCC);
  • Founding the Coalition for Climate Resilient Investment (with the World Economic Forum);
  • Co-founding the Investment Consultants Sustainability Working Group;
  • Continuing to lead collaboration through the Thinking Ahead Institute and Willis Research Network.

5. Conclusion

The Trustee considers that all SIP policies and principles were adhered to during the year.