Exclusive: Net zero central in Railpen's 2022 voting policy

Policy strengthens and clarifies positions on employee representation and voting rights

Jonathan Stapleton
clock • 3 min read
Escott: Covid-19 shone a bright light on the importance of fair workforce treatment
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Escott: Covid-19 shone a bright light on the importance of fair workforce treatment

Railpen has published its 2022 voting policy providing further clarity on how it intends to engage with its portfolio companies over the next 12 months and how it will vote if expectations on priority issues are not met.

The investment manager of £35bn of railway scheme assets said the policy - published today (13 December) - builds on its commitment to take proactive action to protect and enhance the value of members' savings through effective stewardship and work towards its net zero commitment.

The global policy outlines the voting positions Railpen will take on behalf of the members of the railways pension schemes at domestic and international annual general meetings in the 2022 season.

This updated policy further strengthens Railpen's position on its core engagement themes of climate transition, employee representation and the role of equal voting rights for effective stewardship - all of which it said have "a material impact across its portfolio".

A new net zero voting framework

Railpen said putting its net zero plan into action through engagement and voting is a key component of its commitment to delivering a net zero portfolio by 2050 or sooner - noting it would continue working to advocate for clear climate policies and positive action for a smooth net zero transition.

Railpen head of sustainable ownership Michael Marshall said: "Fundamental to achieving our net zero commitments is our constructive engagement with portfolio companies to ensure business strategies and activities effectively support the transition to a Paris-aligned world.

"Exercising our voting rights on a company's climate change approach is a vital part of effective stewardship which achieves real world change. Our voting policy this year therefore outlines in detail our approach both to routine voting on climate issues and ‘say on climate' resolutions. We will assess a portfolio company's climate risk and net zero alignment status and will not be afraid to use our vote to express support or sanction for a company's approach and activities."

Employee voice and representation

Railpen said it also believes that firms that listen to the voice of their workforce are likely to deliver better longer-term performance. Accordingly, its expects portfolio companies to disclose their approach to employee engagement and what action has been taken in response.

It said that vital to firms' effective engagement with and fair treatment of their workers is freedom of association and meaningful consideration of the best way to hear the worker voice - noting this could include using workforce directors and adding it will be working with investors and portfolio companies to set out the circumstances under which this approach would work best.

Railpen senior investment manager Caroline Escott explained: "Covid-19 shone a bright light on the importance of fair workforce treatment and effective management-workforce dialogue to a company's continued financial performance In 2020 and 2021, Railpen has been engaging extensively with companies across our portfolio on how, and how effectively, they are working to understand the experience of their workforces and reflect this in their decisions.

"We have used the feedback from our engagements, as well as our forthcoming research with the CIPD, Pensions and Lifetime Savings Association, and High Pay Centre, to further emphasise the importance of the worker voice in this year's voting policy - and we look forward to working with others in the coming months to outline investor expectations around what a meaningful approach to workforce relations could look like in the US and UK markets."

One-share, one-vote

Railpen added its 2022 voting policy also strongly supported the "vital role" minority shareholders play in maintaining the UK's global reputation as a well-protected market, and the importance of equal voting rights in ensuring they can act as effective stewards and meaningfully influence corporate behaviour.

It said the voice of long-term institutional investors can help businesses succeed and must have a fair basis on which to be heard - noting that, in 2022, Railpen will collaborate with others to intensify its voting and engagement activity with public and private companies, as well as with other participants in the pre-initial public offering market, to encourage the shift to a one-share, one-vote arrangement.

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