Stewardship policy

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.

PIC Responsible investment approach document sets out PIC’s approach to addressing Sustainability related risks, ESG 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 the majority of its investments, PIC’s Investment Team 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 sustainability related 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
• Investor Forum
• A4S Sustainability Principles Charter for the Bulk Annuity Process.

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

For the small portion of externally managed investments, PIC works closely with external managers to prioritise topics of engagement with investee companies.

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.

PIC’s Stewardship Policy applies to all of our investments while recognising that the large majority of the portfolio is invested in fixed income

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 Sustainability 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 sustainability-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 sustainability 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: 

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

PICs credit analysts conduct detailed risk analysis for credit-investment decision, to include material sustainability risks and opportunities. The analyst liaises with our Responsible Investing team on their findings to enable targeted engagement with management of our issuers.

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 initial two-year engagement strategy helped inform and develop our five-year engagement strategy which was approved at Board-level and is running from 2025 – 2030. The strategy is split between asset classes and formally expands our focus across six core topics. We have identified key sectors impacted by these topics within PIC’s portfolio to focus our engagement efforts on:

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 will 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 or the Investor Forum 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 2020 (see our latest UK Stewardship Code application) and commits to disclose its stewardship activities in accordance with the Financial Reporting Council’s (FRC) guidelines and the 12 principles outlined in the UK Stewardship Code.

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.

Effective 1st January 2026, the UK Stewardship Code 2026 will be divided into two parts: Policy and Context Disclosure and Activities and Outcomes Report, covering the following 6 principles:

1. signatories integrate stewardship and investment to deliver long-term sustainable value for their clients and beneficiaries
2. signatories identify and respond to market-wide and systemic risks to promote well-functioning financial markets
3. signatories engage to maintain or enhance the value of assets
4. signatories actively exercise their rights and responsibilities
5. signatories integrate stewardship considerations into their selection and oversight of external managers
6. signatories monitor and hold to account stewardship service providers.

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 2026, 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 Sustainability 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.