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The Trustee of the Pearson Pension Plan (the “Plan”) is required to produce a yearly statement to set out how, and the extent to which, the Trustee has followed its Statement of Investment Principles (“SIP”) during the year, as well as details of any review of the SIP during the year, subsequent changes made with the reasons for the changes, and the date of the last SIP review. Information is provided on the last review of the SIP in Section 1 and on the implementation of the SIP in Sections 2-11 below.

The Statement is also required to include a description of the voting behaviour during the Plan year by, and on behalf of, the Trustee (including the most significant votes cast by trustee or on their behalf) and state any use of the services of a proxy voter during that year. This is provided in Section 12 below.

This Statement is based on and uses the same headings as the Plan’s SIP (in line with the latest available version at the time of writing, dated 14 October 2021). This Statement should be read in conjunction with the SIP. View the latest version of the SIP here.

1. Introduction

The SIP was reviewed and updated during the Plan year on 14 October 2021 to reflect the following changes agreed from the 2020 DC investment strategy review:

  • the allocation to the new white-labelled short duration credit fund within the lifecycle arrangements;
  • the allocation to the new white-labelled blended fund, the Annuity targeting fund, within the annuity lifecycle;
  • the addition of the BMO responsible global equity fund to the self-select range;
  • the closure of the Jupiter ecology fund to new members but to keep it open for existing members and their future contributions and
  • the change of default arrangement to the drawdown lifecycle (in place of the cash lifecycle) for members who make Additional Voluntary Contributions (“AVCs”). This does not apply, however, to AVC benefits where the member has no assets already invested in the drawdown lifecycle through the Money Purchase or Auto Enrolment sections, or is a DB member with AVC benefits but no assets in these aforementioned DC sections.

As part of this SIP update, the employer was consulted and confirmed it was comfortable with the changes.

The Trustee has, in its opinion, followed the policies in the Plan’s SIP during the year.

2. Investment objectives

2.1. Defined Benefit (“Final Pay”) Sections

Progress against the long-term funding target was reviewed as part of the quarterly monitoring reports. The Trustee was also able to view the progress on an ongoing basis using a tool provided by the Scheme Actuary to the Plan, which shows key metrics and information on the Plan.

2.2. Money Purchase and Auto Enrolment Sections (Defined Contribution (“DC”) Sections)

As part of the performance and strategy review of the DC default arrangements in the prior Plan year which began on 10 June 2020 the Trustee considered the DC Section membership demographics, projected pot sizes at retirement and the variety of ways that members may draw their benefits in retirement from the Plan. This review also considered the range of alternative strategies and funds that members may choose from.

Based on the outcome of this analysis, the Trustee concluded that the relevant default strategies remained appropriate to meet the long and short-term investment requirements of the majority of DC and DB AVC members and have been designed to be in members’ best interests reflecting the Plan’s member demographics.

The drawdown lifecycle is the current default arrangement for both DC Sections. Following the strategy review, the drawdown lifecycle also became the default arrangement for members who make AVCs and have assets invested

in the drawdown lifecycle through the DC sections. For members whose needs may not be met by their section’s default arrangement, the Trustee has made available the two additional lifecycles, the cash lifecycle or the annuity lifecycle. The latter targets annuity purchase at retirement. The cash lifecycle remains the default arrangement for members who make AVCs and do not have assets invested in the drawdown lifecycle through the DC sections, and for DB members who make AVCs but have no benefits in the DC sections.

The Trustee also provides members with access to a range of self-select fund investment options covering all major asset classes, which it believes are suitable for this purpose and enable appropriate diversification. These fund options are set out in the Plan’s SIP. Following the DC strategy review, the Trustee added the BMO responsible global equity fund and the BlackRock short duration credit fund to the self-select range in October 2021 and removed access to new members to the Jupiter ecology fund. However, members who had previously selected the Jupiter ecology fund have been allowed to remain invested. The Trustee continues to believe the range of funds offered are suitable. The Trustee monitors the take up of these funds and take up has been broadly in line with the market.

The Trustee reviewed the membership demographics, choices, behaviours and trends as part of the last formal strategy review which started on 10 June 2020.

3. Investment strategy

3.1. Final Pay Sections

Following discussion at the Plan’s Investment Committee meeting in November 2021, the Trustee agreed to consider adding an allocation to trade finance to the Final Pay section. Following the end of the period covered by this Statement, the Trustee agreed to the allocation, and at the time of producing this Statement the Trustee was in the process of implementing this mandate and updating the SIP accordingly.

The Trustee monitors the asset allocation as part of the quarterly monitoring reports, and it is understood that the allocation to each asset class will vary, due to market movements. In Q4 2021, the Trustee carried out a c.£54m top-up of the Aegon short duration credit portfolio, using surplus cash that had built up in the Aegon portfolio and the LGIM sterling liquidity fund.

3.1. Defined Contribution Sections

The Trustee, with the help of its advisers, reviewed the strategy and performance of the default arrangement over the course of several meetings during 2020 and 2021. The Trustee concluded, based on analysis of member demographics and projected pot sizes, that drawdown remains an appropriate retirement target as the default for DC Section members. The Trustee also concluded from its analysis that targeting Cash at retirement remained appropriate for DB AVC members; however, they decided that members with both DC and DB AVC assets would be best suited in the default arrangement targeting drawdown at retirement. The Trustee also reviewed the de- risking phases of the default arrangements and considered the impact of changing the risk profile of the de-risking phases. The Trustee agreed to reduce the expected risk in the run up to retirement by replacing the allocation to long-dated corporate bonds with an allocation to short-duration credit in all three of the lifecycles. Within the self- select range, the Trustee agreed to add the BMO responsible global equity fund and close the Jupiter ecology fund to new members. These changes were implemented during the 2021 Plan year.

As part of this review the Trustee made sure all the Plan’s default arrangements were adequately and appropriately diversified between different asset classes and that the self-select options provide a suitably diversified range to choose from. For the lifecycles, this included the drawdown lifecycle as a default for members with DC assets, the cash lifecycle as the default for members with DB AVC assets, and the annuity lifecycle which is a legacy default since (members were defaulted into this strategy in 2018 as part of the last full strategy review). Within the self- select fund range, the Plan’s BlackRock sterling liquidity fund is also deemed a default for governance purposes from May 2020, following the redirection of all property fund contributions due to a suspension of the Threadneedle Pensions Property Fund. The redirection of future contributions ceased when the fund reopened in September 2020 however members had to make a selection to move any contributions redirected over the period of the suspension.

4. Considerations in setting the investment arrangements

When the Trustee agreed to consider adding an allocation to trade finance to the Final Pay Section in November 2021, it considered the investment risks set out in Appendix 2 of the SIP. It also considered a wide range of asset classes for investment, taking into account the expected returns and risks associated with those asset classes as well as how these risks can be mitigated.

Following developments in investment markets and a review of recent evidence of the financial materiality of climate-related risks and related discussions, the Trustee is now reviewing its DC Section investment manager mandates to understand the extent to which Environmental, Social and Governance (“ESG”)/ climate factors are incorporated in the funds currently available in the DC Section of the Plan, and where enhancements can be made.

5. Implementation of the investment arrangements

The Trustee appointed BlackRock and BMO in October 2021 to manage short duration credit and sustainable equity mandates of the DC section for the Plan over the period. The Trustee obtained formal written advice from its investment adviser, LCP, before investing in the funds and made sure the investment portfolio within the funds were adequately and appropriately diversified. Before appointing BlackRock and BMO, the Trustee received information on the investment process and philosophy, the investment team and past performance. The Trustee also considered the managers’ approaches to responsible investment and stewardship.

The Plan’s investment advisers monitor all the investment managers on an ongoing basis, through regular research meetings. The investment advisers monitor any developments at the managers and informs the Trustee promptly about any significant updates or events they become aware of that may affect the managers’ ability to achieve their investment objectives. This includes any significant change to the investment process or key staff for any of the funds the Plan invests in, or any material change in the level of diversification in the funds. No significant concerns have been raised in relation to the Plan’s current investment managers over the year.

The Trustee regularly invites the Plan’s investment managers to present at Trustee meetings, where the Trustee and its consultants seek to engage and challenge the managers where appropriate. For example, in March 2021, the Trustee met with BMO to discuss the responsible global equity fund.

The Trustee was comfortable with all of its investment manager arrangements over the year. The Trustee is also currently reviewing investment options that incorporate ESG and/or climate-related matters, to determine if they would be suitable for inclusion in the DC Sections of the Plan.

The Trustee monitored the performance of the Plan’s investment managers on a quarterly basis, using the quarterly monitoring reports. Both the Final Pay report and the DC Section report showed the performance of each manager over the quarter, 1 year and 3 years. Performance was considered in the context of the manager’s benchmark and objectives.

To 31 December 2021, most managers had produced performance broadly in line with expectations over the long-term. The Trustee reviewed any underperformance experienced by the Plan’s funds. The Jupiter ecology fund has been removed from the available fund range which members can make new selections from, although members who previously held an investment in the fund have been permitted to remain invested. The MFS global equity fund’s underperformance over the period has largely been due to an underweight to the large technology stocks relative to the index which performed particularly well over the period. The Trustee continues to monitor performance.

The Trustee undertook a value for members assessment in April 2022 for the Plan year to 31 December 2021 which considered a range of factors, including the fees payable to managers in respect of the DC Section which were found to be reasonable when compared against schemes with similar sizes mandates.

During the year the Trustee also carried out an annual assessment of the Final Pay investment managers’ fees. Overall, the Trustee believes the investment managers provide reasonable value for money, and the Trustee continues to work with its investment adviser to achieve competitive fees for its investment mandates.

6. Realisation of investments

6.1. Final Pay Sections

The Trustee reviewed the Plan’s net current and future cashflow requirements on a half yearly basis The Trustee’s policy is to have access to sufficient liquid assets in order to meet any outflows whilst maintaining a portfolio which is appropriately diversified across a range of factors, including a suitable balance between both liquid and illiquid assets.

The Trustee receives income from the Plan’s illiquid property and infrastructure investments, which is retained in the Trustee bank account and used towards paying benefit payments. The Trustee also receives income from the bonds held in the Aegon short duration credit portfolio. This is retained as cash within the Aegon portfolio, so that it can be used to help meet benefit payments if required, or reinvested back into the portfolio if not.

6.2. Defined Contribution Sections

It is the Trustee’s policy to invest in funds that offer daily dealing to enable members to readily realise and change their investments. All of the DC Section funds which the Trustee offered during the Plan year are daily priced.

7. Consideration of financially material and non-financial matters

As part of its advice on the selection and ongoing review of the investment managers, the Plan’s investment adviser, LCP, incorporates its assessment of the nature and effectiveness of managers’ approaches to financially material considerations (including climate change and other ESG considerations), voting and engagement.

As part of the Plan’s quarterly monitoring reports, the Trustee reviewed LCP’s responsible investment (RI) scores for the Plan’s existing managers, which are based on LCP’s latest Responsible Investment Survey.

During 2021, the Trustee was satisfied with its reviews of the RI scores and no further action was taken.

The Trustee invested in two new pooled funds in the DC section, the BlackRock short duration credit fund and the BMO responsible global equity fund, on 27 October 2021. In selecting and appointing these managers, the Trustee took into account how responsible investment is incorporated into each of the shortlisted managers’ investment approach. In particular, the BMO responsible global equity fund was selected due to its ESG-focused investment process, which includes using its influence as an investor to encourage best practice management of ESG issues throughout engagement and voting.

The DC section includes an equity investment option as a choice for members who wish to invest in a fund focused on ESG risks. At this time, the Trustee does not believe there are any ESG-focused investment options available that meet its needs in any asset classes other than equity but will keep this under review. The Trustee also continues to review investment options that incorporate ESG and/or climate-related matters, to determine if they would be suitable for inclusion in the DC Sections of the Plan.

8. Voting and engagement

The Trustee reviewed reports from their managers on voting and engagement activities on their behalf. Details of the managers voting processes, voting behaviour and most significant votes over the year is provided in section 12.

9. Investment governance, responsibilities, decision-making and fees (Appendix 1 of SIP)

As mentioned in Section 5, the Trustee assessed the performance of the Plan’s investments on an ongoing basis as part of the quarterly monitoring reports it receives.

The performance of the professional advisers was presented to the trustee on a quarterly basis at the trustee meetings.

The Trustee has put in place formal objectives for its investment adviser and reviews the adviser’s performance against these objectives on a regular basis, with the last review being carried out in June 2021.

The Trustee carries out an annual evaluation of how its board and committees are run. In 2021, the Trustee was very satisfied with the results of this evaluation, and the Trustee believes it is well placed to fulfil its role as Trustee to the Plan.

10. Policy towards risk (Appendix 2 of SIP)

Risks are monitored on an ongoing basis with the help of the investment adviser.

The Trustee maintains a risk register and this was discussed at the October Audit and Risk Committee (“ARC”) meeting and at the Trustee board meeting immediately following this ARC meeting.

The Trustee’s policy for some risks, given their nature, is to understand them and to address them if it becomes necessary, based upon the advice of the Plan investment adviser or information provided to the Trustee by the Plan’s investment managers. These include credit risk, equity risk, currency risk and counterparty risk.

With regard to the risk of having insufficient assets in the Final Pay Sections to cover liabilities, the required return for the Plan to meet expected benefit payments on the Long Term Funding Target basis was monitored as part of the quarterly monitoring reports, along with the best estimate expected return of the Plan’s current investment strategy.

With regard to mismatching risk, the Plan’s interest and inflation hedging levels were monitored on an ongoing basis in the quarterly monitoring report and periodically rebalanced.

With regard to the risk of not meeting members’ reasonable expectations in terms of pension proceeds on retirement for the DC Sections, the Trustee makes use of equity and equity-based funds, which are expected to provide positive returns above inflation over the long term. These are used in the growth phase of the default option and are also made available within the self-select options. These funds are expected to produce adequate real returns over the longer term.

Together, the investment and non-investment risks set out in Appendix 2 of the SIP give rise generally to funding risk. The Trustee formally reviewed the Plan’s funding position as part of its annual actuarial report to allow for changes in market conditions. On a triennial basis the Trustee reviews the funding position allowing for membership and other experience. During the year, the Trustee was in the process of reviewing this as part of the 1 January 2021 Valuation. The Trustee also informally monitored the funding position more regularly, on a quarterly basis at Trustee meetings and the Trustee Directors also have the ability to monitor this daily.

The following risks are covered earlier in this Statement: diversification risk in Sections 3 and 5, investment manager risk and excessive charges in Section 5, illiquidity/marketability risk in Section 6 and ESG risks in Section 7.

11. Investment manager arrangements (Appendix 3 of SIP)

There are no specific policies in this section of the Plan’s SIP, which sets out details of the Plan’s investment managers and their investment guidelines. During the period covered by this Statement, the Trustee updated this section to take into account changes to the DC investment managers, and to better reflect the Trustee’s arrangements with its existing managers.

12. Description of voting behaviour during the year

All of the Trustee’s holdings in listed equities are within pooled funds and the Trustee has delegated to its investment managers the exercise of voting rights. Therefore, the Trustee is not able to direct how votes are exercised and the Trustee itself has not used proxy voting services over the year.

In this section we have sought to include voting data on the Plan’s funds, in line with the Pensions and Lifetime Savings Association (PLSA) guidance. In order to take a pragmatic approach, we have only included funds that hold a significant proportion of their assets in equities and that represent a significant proportion of the overall DC assets. Therefore, we have only included funds used in the DC default strategy given the high proportion of DC assets invested in these funds:

  • BlackRock World Equity Index Fund;
  • BlackRock Fundamental Equity Index Fund;
  • BlackRock Minimum Volatility Index Fund;
  • BlackRock World Emerging Markets Equity Index Fund;
  • Baillie Gifford Multi Asset Growth Fund;
  • Schroders Dynamic Multi Asset Fund; and
  • Newton Real Return Fund.

If Plan members require any further information on voting behaviour for a fund not set out in the Implementation Statement, please send a message on the ‘Contact Us’ page of the Plan website and the pensions team will supply any further information, to the extent available.

In addition to the above, the Trustee contacted the Plan’s Final Pay Section investment managers that do not hold listed equities, to ask if any of the assets held by the Plan had voting opportunities over the period. The Trustee also contacted the Plan’s buy-in providers, L&G and Aviva, to ask if any of the assets held to back members’ insured liabilities had any voting rights over the period. These managers and annuity providers all confirmed that none of the assets in question had material voting opportunities over the period that were not simply votes on fund terms.

12.1. Description of the voting processes


BlackRock’s approach to corporate governance and stewardship is explained in its Global Principles document (available on its website) which describe its philosophy on stewardship, its policy on voting, its integrated approach to stewardship matters and how it deals with conflicts of interest.

The BlackRock Investment Stewardship team and its voting and engagement work continuously evolve in response to changing governance related developments and expectations. BlackRock’s voting guidelines are market-specific to ensure BlackRock takes into account a company’s unique circumstances by market, where relevant. BlackRock informs its vote decisions through research and engages as necessary. Its engagement priorities are global in nature and are informed by BlackRock’s observations of governance related and market developments, as well as through dialogue with multiple stakeholders, including clients. BlackRock may also update its regional engagement priorities based on issues that it believes could impact the long-term sustainable financial performance of companies in those markets. BlackRock welcomes discussions with its clients on engagement and voting topics and priorities to get their perspective and better understand which issues are important to them. As outlined in its Global Principles, BlackRock determines which companies to engage directly based on its assessment of the materiality of the issue for sustainable long-term financial returns and the likelihood of its engagement being productive. BlackRock’s voting guidelines are the benchmark against which it assesses a company’s approach to corporate governance and the items on the agenda to be voted on at the shareholder meeting. It applies its guidelines pragmatically, taking into account a company’s unique circumstances where relevant.

BlackRock aims to vote at all shareholder meetings of companies in which its clients are invested. BlackRock does not support impediments to the exercise of voting rights and will engage regulators and companies about the need to remedy the constraint. Whilst BlackRock does subscribe to research from proxy advisory firms, ISS and Glass Lewis, this is just one among many inputs into its voting decision process. Other sources of information BlackRock uses include the company’s own reporting, its engagement and voting history with the company, the views of its active investors, public information and ESG research.

Baillie Gifford

All Baillie Gifford’s voting decisions are made by its Governance & Sustainability team in conjunction with investment managers. Baillie Gifford does not regularly engage with clients prior to submitting votes; however, if a segregated client has a specific view on a vote then it will engage with them on this.

Thoughtful voting of Baillie Gifford’s clients’ holdings is an integral part of its commitment to stewardship. Baillie Gifford believes that voting should be investment led, because how it votes is an important part of the long-term investment process, which is why its strong preference is to be given this responsibility by its clients. Its Governance and Sustainability team oversees its voting analysis and execution in conjunction with its investment managers. Unlike many of its peers, Baillie Gifford does not outsource any part of the responsibility for voting to third-party suppliers. It utilises research from proxy advisers for information only. Baillie Gifford analyses all meetings in-house in line with its Governance & Sustainability Principles and Guidelines and endeavours to vote every one of its clients’ holdings in all markets.

Whilst it is cognisant of proxy advisers’ voting recommendations (ISS and Glass Lewis), Baillie Gifford does not delegate or outsource any of its stewardship activities or follow or rely upon their recommendations when deciding how to vote on its clients’ shares. All client voting decisions are made in-house. Baillie Gifford votes in line with its in-house policy and not with the proxy voting providers’ policies.


Schroders evaluates voting resolutions arising at investee companies and, where they have the authority to do so, vote on them in line with their fiduciary responsibilities and in what Schroders deems to be the interests of their clients. The Corporate Governance specialists assess each proposal, applying Schroders voting policy and guidelines (as outlined in the ESG Policy) to each agenda item. In applying the policy, they consider a range of factors, including the circumstances of each company, long-term performance, governance, strategy and the local corporate governance code. Specialists will draw on external research, such as the Investment Association’s Institutional Voting Information Services and ISS, and public reporting. Schroders own research is also integral to the process; this is conducted by both financial and Sustainable Investment analysts.

Schroders are not afraid to oppose management if they believe that doing so is in the best interests of shareholders and their clients. Such votes against will typically follow an engagement and they will inform the company of their intention to vote against before the meeting, along with their rationale. Where there have been ongoing and significant areas of concerns with a company’s performance they may choose to vote against individuals on the board. However, as active fund managers Schroders usually look to support the management of the companies that they invest in. Where they do not do this, they classify the vote as significant and will disclose the reason behind this to the company and the public.


Where Newton plans to vote against management on an issue, it often engages with the company in order to provide an opportunity for its concerns to be allayed. It does alert a company regarding an action it has taken at their annual general meeting to explain its thought process and often communicates further with the company’s board/investor relations teams to gain a better understanding of the situation.

Overall, Newton prefers to retain discretion in relation to exercising its clients’ voting rights and has established policies and procedures to ensure the exercise of global voting rights.

Newton’s head of responsible investment (RI) is responsible for the decision-making process of the RI team when reviewing meeting resolutions for contentious issues. Contentious issues may be referred to the appropriate industry analyst for comment and, where relevant, Newton may confer with the company or other interested parties for further clarification or to reach a compromise or to achieve a commitment from the company.

All voting decisions are made by Newton. Newton uses ISS to administer proxy voting as well as its research reports on individual company meetings. ISS’s recommendations will only take precedence in the event of a material potential conflict of interest, which could include registering an abstention, despite Newton’s general stance of either voting in favour or against proposed resolutions. Newton’s voting decisions take into account local market best practice, rules and regulations while also aiming to support their investment rationale.

12.2. Summary of voting behaviour over the year

A summary of voting behaviour over the period is provided in the table below.

Fund 1 Fund 2 Fund 3 Fund 4 Fund 5 Fund 6 Fund 7
Manager name BlackRock BlackRock BlackRock BlackRock Baillie Gifford Schroder Life Newton
Fund name World Equity Index Fund Funda-mental Equity Index Fund Minimum Volatility Index Fund Emerging Markets Equity Index Fund Multi Asset Growth Fund Dynamic Multi Asset Fund Real Return Fund
Total size of fund at end of reporting period £6,532m £829m £804 £13,634m £2,464m £877m £5,837m
Value of Plan assets at end of reporting period1 £139.7m £139.7m £139.7m £31.5m £26.0m £26.0m £26.0m
Number of equity holdings at end of reporting period 1,546 2,986 339 1,369 78 691 97
Number of meetings eligible to vote 973 3,333 354 3,294 112 810 112
Number of resolutions eligible to vote 13,094 39,480 4,698 28,844 1,357 10,466 1,614
% of resolutions voted 99.8 99.8 99.6 100.0 87.6 91.6 99.3
Of the resolutions on which voted, % voted with management5 91.12 92.72 94.02 90.52 96.52 89.7 84.5
Of the resolutions on which voted, % voted against management5 8.72 7.12 6.02 9.52 3.4 9.6 15.5
Of the resolutions on which voted, % abstained from voting5 0.82 1.72 0.32 4.12 0.2 0.8 0.0
Of the meetings in which the manager voted, % with at least one vote against management 38.2 34.9 33.3 38.0 18.8 51.0 44.0
Of the resolutions on which the manager voted, % voted contrary to recommendation of proxy advisor 0.33 0.23 0.23 1.93 N/A4 4.8 11.5
A summary of voting behaviour over the period (2021)

1 Asset values include the Plan’s DC and AVC assets.

2 Figures may not total 100% due to a variety of reasons, such as lack of management recommendation, scenarios where an agenda has been split voted, multiple ballots for the same meeting were voted differing ways, or a vote of ‘Abstain’ is also considered a vote against management.

3 BlackRock does not follow any single proxy research firm’s voting recommendations, though it subscribes to two research firms. BlackRock’s voting and engagement analysis is determined by several key inputs including a company’s own disclosures, and BlackRock’s record of past engagements.

4 Whilst Baillie Gifford is cognisant of proxy advisers’ voting recommendations (ISS and Glass Lewis), it does not delegate or outsource any of its stewardship activities or follow or rely upon their recommendations when deciding how to vote on Baillie Gifford’s clients’ shares. All client voting decisions are made in-house. Baillie Gifford votes in line with its in-house policy and not with the proxy voting providers’ policies.

5 These figures may not sum to 100% due to rounding.

12.3. Most significant votes over the year

Commentary on the most significant votes over the period, from the Plan’s asset managers who hold listed equities, is set out below. We have interpreted “most significant votes” to mean those that:

  • might have a material impact on future company performance;
  • the investment manager believes to represent a significant escalation in engagement;
  • impact a material fund holding, although this would not be considered the only determinant of significance, rather it is an additional factor;
  • have a high media profile or are seen as being controversial; or
  • the Plan or the sponsoring company has a particular interest in.

BlackRock World Equity Index Fund

Origin Energy Limited, October 2021
Summary of resolutions: Before undertaking any further shale oil and gas exploration and/or production (also known as “fracking”), commit to surveying the Company’s entire licence areas to establish a baseline of water quality; consulting with Traditional Owners and their family groups on all cultural water flows to establish connectedness; and make the methodology, findings, and recommendations of this research public.
Vote: Against
Outcome of the vote: Fail
Size of mandate’s holding at voting date: 0.01%

Origin Energy Limited is an integrated energy company that provides energy retail, renewable energy, gas exploration and production, and power generation services to 4.3 million customers in Australia and the Pacific. BlackRock voted against the shareholder resolutions because the company’s related policies and practices in relation to water management and protection already largely comply with the goals of the resolution. The company’s disclosures also provide transparency regarding how it engages and considers stakeholders’, particular Native Title holders’, interests through proactive consultation. In order to manage potential adverse impacts on sacred sites, the company followed the Northern Territory Aboriginal Sacred Sites Act to obtain approval from the relevant Native Title holders and certification by the Aboriginal Area Protection Authority, which confirmed the relevant Native Title holders and custodians were consulted. Moreover, the company continues to disclose how it engages with the Northern Land Council to maintain the support of Native Title holders.

BlackRock Fundamental Equity Index Fund

Vedanta, August 2021
Summary of resolution: Re-appoint the Chairman of the board as a Director and re-appoint the Non-Executive Independent Director
Vote: Against
Outcome of the vote: Pass
Size of mandate’s holding at voting date: 0.02%

Vedanta is India’s largest natural resources company. BlackRock voted against both re-appointments given the Directors’ ultimate accountability regarding BlackRock’s governance concerns relating to board oversight. In particular, BlackRock is concerned about a loan of approximately U.S. $1 billion from Vedanta’s fully owned subsidiary to the unlisted holding company, VRL. In BlackRock’s view, the fact that the board did not require, or appear to have suggested, a vote by independent shareholders to approve a loan of this size (made to the controlling shareholders) is a breach of the board’s fiduciary duty to act in the best economic interests of the company and all shareholders. BlackRock notes that this loan went through at least two rounds of re-pricing that raise concerns about the accuracy of the loan being described as simply part of cash management activities, with interest rates for a period at 14%-17.5% indicative of a distressed borrower. BlackRock is also concerned about a series of related party transactions enabled by the company’s controlling ownership structure, that in its view, are not aligned with minority shareholders’ long-term economic interests.

BlackRock Minimum Volatility Index Fund

Kroger, June 2021
Summary of resolution: Assess environmental impact of non-recyclable packaging
Vote: For
Outcome of the vote: Fail
Size of mandate’s holding at voting date: 0.96%

Kroger operates retail establishments across the U.S. and is currently one of the largest grocery retailers in North America. BlackRock voted for this shareholder proposal because the manager agrees with the proposal’s intent to address the business risk of plastic packaging and waste management. BlackRock determined that support for the proposal could accelerate Kroger’s progress on this issue. BlackRock acknowledges the efforts Kroger has made to address its exposure to natural capital-related risks, including setting 2030 Sustainable Packaging Goals for its own brand products and partnering with an innovative circular packaging platform to reduce single-use plastics. However, BlackRock believes Kroger has yet to finalise its 2030 strategy details and lags some of its peers that have made more robust commitments to reduce the overall use of plastic in both their operations and supply chain. Supporting the shareholder proposal is with the intention to accelerate Kroger’s progress on improving its packaging and waste management.

BlackRock World Emerging Markets Equity Index Fund

China Shenhua Energy Company, June 2021
Summary of resolution: Approve the report of the board of directors for the year ended 31 December 2020; Elect Mr Yang Rongming as non-executive director.
Vote: For
Outcome of the vote: Pass
Size of mandate’s holding at voting date: 0.14%

Shenhua is one of the world’s largest energy companies. BlackRock voted For both proposals as it believes Shenhua has been responsive to shareholder concerns regarding climate-related risks and recognises the need for clear plans to transition to a low-carbon economy and that the board will benefit from an opportunity to deliver on those commitments. Shenhua initially obtained an exploration license for a project in Australia in 2008, allowing it to explore large agricultural land with recoverable reserves and raw coal production. The project raised concerns from various stakeholder groups about natural capital sensitivities and came under further scrutiny in 2020 when another company’s project resulted in the destruction of a First Nation heritage site. BlackRock held multiple engagements with Shenhua to discuss the potential risks of its involvement in the project. Engagements intensified after Shenhua applied for a mining lease in August 2020. After continued engagement with BlackRock and other stakeholders, in April 2021 the company reached an agreement with local authorities to withdraw its mining lease application and surrender its development consent for the project. BlackRock views the announcement as a reflection of the company’s growing awareness of sustainability risk – in particular natural capital and company impacts on people – as well as the larger matter of Shenhua’s plans to transition to a low-carbon economy, which include targets to peak carbon emissions by 2025 and to become carbon neutral by 2060.

Baillie Gifford Multi Asset Growth Fund

Greggs plc, May 2021
Summary of resolution: Remuneration Report
Vote: Against
Outcome of the vote: Pass
Size of mandate’s holding at voting date: 0.26%

Baillie Gifford opposed the resolution to approve the Remuneration Report because of the Remuneration Committee’s decision not to align executive directors’ pensions with the workforce until four years after the Investment Association’s guidance. In line with the Investment Association’s guidance, Baillie Gifford expects companies to align the pension contributions of their executive team with that of the wider workforce by the stated deadline – end of 2022. Greggs stated in their annual report that the pensions of their current executives would not be aligned until the end of 2026 which Baillie Gifford did not believe to be acceptable. Following the submission of its votes, Baillie Gifford communicated its concerns to the company who acknowledged these and stated that they would review pension alignment at their next remuneration policy review, ahead of the 2023 Annual General Meeting (“AGM”). Baillie Gifford looks to continue to engage on this issue.

Schroder Life Dynamic Multi Asset Fund

Alphabet Inc., June 2021
Summary of resolution: Require Independent Director Nominee with Human and/or Civil Rights Experience
Vote: For shareholder proposal
Outcome of the vote: Not provided by the manager
Size of mandate’s holding at voting date: 1.77%

Schroders voted for this proposal as they believe ongoing controversies associated with the company suggest that Alphabet’s efforts to address human and civil rights concerns need to be strengthened. Schroders believed considering an Independent Director Nominee with experience in this field would contribute towards tackling this issue and were supportive of this proposal as a result. This vote was deemed significant by Schroders as they voted against the management recommendation and this holding represents a significant proportion of the fund’s equity allocation.

Newton Real Return Fund

Citigroup, April 2021
Resolution: Amend proxy access right
Vote: For shareholder proposal
Outcome of the vote: Fail (32% voted For)
Size of mandate’s holding at voting date: 1.20%

Newton voted in favour of one shareholder resolution that management recommended voting against. This was in relation to improving minority shareholder rights by way of providing shareholders with access to propose directors for election to the company’s board. 32% of shareholders voted for this resolution. The vote outcome, while not a majority, will be understood by the board as a matter of significant interest to the company’s shareholders. It is a matter that should be addressed to avoid a further or increased public demonstration of concern.

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