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Stewardship policy


1.1 Introduction

This Stewardship Policy is designed to set out PIC’s approach to stewardship within its investment portfolio including the responsible allocation, management, and oversight of capital to create long-term value as we fulfil our purpose, leading to sustainable benefits for the economy, the environment, society and all our stakeholders (in line with the FRC’s definition of stewardship).

The following sections set out: 

  • PIC’s approach to stewardship 
  • governance
  • engagement
  • escalation
  • conflicts of interest
  • reporting

1.2 PIC’s approach to Stewardship

PIC’s purpose is to pay the pensions of its current and future policyholders, PIC does this through sound risk management and excellence in asset and liability management.

This Stewardship Policy is aligned with PIC’s purpose, investment process, and business philosophy. Throughout the investment process, PIC is focussed on making good quality long term investments, which minimise defaults and generate the inflation-linked, predictable long-term cash flows required to pay our policyholders’ pensions.

Stewardship safeguards the long-term interests of our policyholders by promoting a focus on sustainable and resilient investments that align with our long-term financial objectives. We look beyond short-term market fluctuations, taking into account the broader economic, social, and environmental implications of our investment decisions.

The PIC Responsible Investment Approach document sets out PIC’s approach to addressing ESG risks, integration process (both for directly and indirectly managed investments), and investment restrictions. ESG factors are actively incorporated into the investment process for all investments including public corporate credit, sovereign debt, municipal bonds and privately sourced debt.

PIC is a signatory to the United Nations’ Principles for Responsible Investment (“UNPRI”), as are all of PIC’s key external asset managers helping manage the main public credit. As a signatory to the UNPRI PIC is committed to enacting the following six principles, recognising that it invests mostly in fixed income rather than equities:

  1. incorporate ESG issues into investment analysis and decision-making processes;
  2. to be active owners and incorporate ESG issues into our ownership policies and practices;
  3. to seek appropriate disclosure on ESG issues by the entities in which we invest;
  4. to promote acceptance and implementation of the Principles within the investment industry;
  5. to work together to enhance effectiveness in implementing the Principles;
  6. and to report on activities and progress towards implementing the Principles.

For externally managed investments, PIC works closely with external managers to conduct dialogue with investee companies. Our external managers have significant resources and scale to focus on ESG risk areas and PIC currently receives quarterly ESG updates from each external manager covering ESG risk, engagements and controversies in addition to regular portfolio performance updates.

In addition to being signatories to the UNPRI, we encourage our key external asset managers to be signatories to the FRC UK Stewardship Code (or equivalent) and participants in the Asset Managers Net Zero Initiative. In cases where these external managers are not signatories to these initiatives, we request an explanation clarifying their reasons for choosing not to participate.

For our direct investments, for example in private debt or real estate, PIC undertakes direct engagements with organisations both at the point of capital raise and during the tenure of the investment. We expect our investee companies to respond to our engagement requests and to openly discuss any concerns. PIC actively engages with companies to address ESG issues, advocate for sustainable business practices, and encourage long-term value creation.

Stewardship involves collaborating with other investors to promote best practices and drive positive change. PIC is a member of several industry initiatives and a supporter of organisations such as:

  • Association of British Insurers (ABI) Climate Change group;
  • Net Zero Asset Owners Alliance (NZ AOA);
  • UN PRI Advance Collaborative Engagement initiative on Human Rights;
  • Task Force on Climate-related Financial Disclosures (TCFD);
  • The Good Economy’s Sustainability Reporting Standards for Social Housing.

Collaboration with other investors through these initiatives can amplify our influence and enhance our ability to shape corporate behaviour.

PIC’s Stewardship Policy applies to all of our investments while recognising that the large majority of the portfolio is invested in fixed income. Where PIC does have equity ownership, it endeavours to engage in voting activity and will increasingly do so if its equity ownership grows over time.

We believe that as bondholders we can exert influence over management of issuing companies and will engage with them as necessary to ensure, at a minimum, compliance with this policy. 

1.3 Governance

PIC supports stewardship through its strong internal governance structure. We have Board-level responsibility for PIC’s responsible investing and stewardship activities.

The Board approves PIC’s Sustainability Policy and the Board-level Investment and Origination Committee approves the standalone Stewardship policy. PIC’s overall approach to sustainability is set by the Board. The Board has delegated the day-to-day implementation of PIC’s Sustainability Strategy to senior management within the firm including an Executive Committee Sustainability Champion (PIC’s Chief Strategy Officer). ESG in investments including stewardship activities is the responsibility of the Chief Investment Officer and Head of Responsible Investing while accountability for Climate Risk sits with the Chief Risk Officer.

The Responsible Investing team is accountable for ensuring that this Stewardship Policy is embedded in the company and the dedicated resource within the team, the Investment Stewardship Manager, helps support stewardship activities and drive PIC’s engagement strategy forward.

The Risk team provides oversight of PIC’s risk profile, including climate and other ESG-related matters. Stewardship is a key component of PIC’s approach to address these concerns, and therefore the Risk function assist the business in identifying, managing and reporting risks, which includes inappropriate or ineffective application of stewardship. This is done in a manner proportional to the nature, scale and complexity of the risks in the context of PIC’s risk profile.

1.4 Engagement

ESG engagement describes the interaction between investors and issuers. Given PIC’s very long-term investment horizon, it is in our interest to work with companies to ensure more sustainable practices so that they maintain strong industry positioning, healthy credit ratings and stable cash flows over time.

PIC has implemented active engagement with investee companies across public credit, private debt and real estate investments on material sustainability issues. This is an integral part of our ESG integration approach  to help ensure long term ESG risks, such as climate and social risks, are accounted for within the issuer’s operations which may influence its ability to meet its financial obligations.

We enact engagements with investee companies through four main channels: 

  • via our external managers
  • directly by PIC analysts
  • third party specialists (such as Buro Happold for Real Estate assets)
  • collaborative engagements

PIC aims to work closely with external managers and voices any particular concerns to be engaged on. The key external managers who help manage the public credit portfolio are also involved in thematic ESG research which helps identify important emerging or prominent topics and recognise sector leaders and laggards. These are reported directly to PIC through quarterly engagement meetings. Larger-scale industry engagements with identified laggards are done by our managers. This research, together with findings from engagements, complements PIC’s forward-looking analysis and helps us ensure our portfolio is correctly positioned for any long-term industry changes.

The Responsible Investing team identifies any concerns that should be of particular focus for engagement and keep these under regular review. Our priority areas vary by investment asset class as described in our engagement strategy below.

PIC’s engagement strategy which received Board-level support is currently rolled out over two years between 2023-2025. The strategy outlines the following priority areas for engagement:

  External managers PIC direct External consultants Collaborative
Environmental topic Climate related engagements with our highest emitting public credit investments Various Climate relate topics  including climate data reporting and alignment to Net Zero Environmental factors within the Built Environment specifically such as Net Zero Carbon, Biodiversity and Climate Change N/A in this initial 2yr strategy
Social topic Modern Slavery, Labour Standards & Human Rights (including in the supply chains) Modern Slavery, Labour Standards & Human Rights (including in the supply chains) Social factors within the built environment such as Health and Wellbeing, community impact and Social Value UN PRI – led engagement on Human Rights within Mining, Utilities and Renewables sectors

Acknowledging our finite resources, we identify and prioritise areas that are both severe and material to us, focusing our efforts where we can have the greatest influence. We achieve this by assessing and considering:

  1. the most material sustainability risks for our investment portfolio (such as, for example, Climate Change, a Just Transition and Human Rights issues);
  2. sections of our portfolio where we can benefit from direct conversation with issuers and can therefore exert the greatest influence (such as in the case of many of our real estate investments).

1.5 Escalation

If improvements by issuers are not made despite multiple engagement efforts within a period of 18 months, PIC and its asset managers will then consider forms of escalation. Escalation is relevant to both internally and externally managed investments.

It is PIC’s expectation that its asset managers will escalate the ESG concern in a proactive and effective way and they are mandated to report back any new information or evidence to PIC.

Possible escalation activity may include collaboration with groups such as the ABI’s Climate Change group or Net Zero Asset Owners Alliance engagement groups. Divestment will be considered as a last resort if escalation has not been successful.

1.6 Conflicts of interest

PIC has a comprehensive Conflicts of Interest Policy, which all employees must comply with. It encompasses both investment and stewardship activities, ensuring that potential conflicts of interest are appropriately addressed and managed throughout the investment and stewardship processes.

1.7 Reporting

PIC is a signatory to the UK Stewardship Code (see our UK Stewardship Code application) and as a signatory it transparently discloses its stewardship activities in accordance with the Financial Reporting Council’s (FRC) guidelines and the 12 principles outlined in the UK Stewardship Code. The Code comprises a set of 12 ‘apply and explain’ principles for asset owners, supported by reporting expectations that indicate the information that organisations must publicly disclose to become a signatory.

The UK Stewardship Code has a focus on reporting stewardship activities and outcomes. PIC will demonstrate how it has practiced stewardship during the reporting period to fulfil its policies and objectives.

The UK Stewardship Code is organised into four main sections, covering the following 12 principles:

Purpose and governance
1. Purpose, strategy and culture
2. Governance, resources and incentives
3. Conflicts of interest
4. Promoting well-functioning markets
5. Review and assurance
Investment approach
6. Clients and beneficiary needs
7. Stewardship. Investment and ESG integration
8. Monitoring managers and service providers
9. Engagement
10. Collaboration
11. Escalation
Exercising rights and responsibilities
12. Exercise rights and responsibilities

As part of our commitment to stewardship, we commit to annually re-submit an application to the FRC to become signatories to the UK Stewardship Code, providing evidence of our firm-wide practices during the relevant calendar year.

In addition to adhering to the UK Stewardship Code, we disclose a selection of our engagement activities in our ESG report. Furthermore, we have established engagement targets in alignment with the Net Zero Asset Owners Alliance, focusing on engaging with 20 of the highest emitters on an annual basis. These target engagements are detailed in our annual TCFD report.

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