Railways Pension Scheme manager updates voting policy

The manager has also enhanced its position on dual-class share structure, fair pay and the treatment of gig economy workers, and modern slavery for next year.

In its ‘Global voting policy 2023’, published on December 5, Railpen set out its engagement and voting priorities, and how it will take voting decisions at AGMs in 2023.

As well as reflecting Railpen’s ongoing commitments to corporate governance themes of board composition and effectiveness, remuneration and alignment of incentives and shareholder rights, and risk and disclosure, the new policy introduces voting policies on cyber security, climate transition plans and biodiversity, and mental health.

On climate transition, the policy states that a good transition plan should “set out a company’s decisions on decarbonisation and adaptation in a comparable way, with clear quantification of interim targets and milestones; focus on material actions, activities and accountability mechanisms; account for biodiversity loss, natural capital impact and social impact as key externalities; clearly link targets, financial planning and capital allocation; and, where offsets are used, adhere to best practice principles”.

In addition, Railpen will consider voting in support of resolutions that encourage companies to address the drivers of biodiversity loss. 

The manager will use its own proprietary frameworks as well as the UK Transition Plan Taskforce’s best practice guidance to assess climate risk.

Within the realm of cyber security, Railpen will explicitly ask companies to disclose the governance and oversight structures in place to identify and manage cyber risks. The manager will also call on companies to provide timely reporting of any cyber security breaches and the measures taken in response. 

On workforce treatment and mental health, Railpen stated that it expects portfolio companies to engage meaningfully with their workforce and demonstrate a healthy corporate culture in the context of its business model and strategy. To cover the growing number of workers operating in the gig economy, the policy extends to indirectly employed workers (third party, self-employed, casual or seasonal).

In future years, it will apply voting sanctions on portfolio companies that have made insufficient progress on disclosures around, and activities on, mental health.

“For 2023, we will continue our workforce treatment focus through intensifying our scrutiny of companies’ approach to fair pay during the cost-of-living crisis, as well as their work to support good mental health during what continues to be difficult circumstances for all,” senior investment manager Caroline Escott said.

She continued: “This year we have also explicitly flagged our expectation that portfolio companies look after their entire workforce, including both directly  and indirectly employed workers – and effectively communicate to shareholders the steps they are taking to do so.

“Our previous research with the Chartered Institute of Personnel and Development, the Pensions and Lifetime Savings Association and the High Pay Centre found that many of even the largest UK companies fail to appropriately discuss their support for indirectly employed workers.

“This is an issue for many firms, but especially for those in the ‘gig economy’ – where it is particularly important for investors to be able to gauge the rights granted and level of support provided to workers.”

Railpen also noted that in 2023 it will consider pre-declaring voting intentions on specific resolutions.

“In the 2023 AGM season, we will continue to exercise our votes on those resolutions where we believe our vote will have the most impact. We take our role in enhancing the long-term investment returns of our beneficiaries extremely seriously, and doing so in a way that benefits the world around us and the needs of our members now and in the future,” head of sustainable ownership Michael Marshall said.

This article first appeared on MandateWire.com