Grainger : BPT Pension Scheme Statement of Investment Principles

BPT Retirement Benefits Scheme

Statement of Investment Principles - Implementation Statement

The purpose of this Statement is to provide information, which is required to be disclosed in accordance with the Occupational Pension Schemes (Investment and Disclosure) (Amendment) 2019 Regulations. In particular, it confirms how the investment principles, objectives and policies of the Trustees' Statement of Investment Principles (SIP) dated 1 October 2019 have been implemented. The SIP provides further background details on investment arrangements.

This Statement covers the period 1 July 2019 to 30 June 2020.

Investment managers and funds in use

The Trustees have appointed Rathbone Investment Management Limited ('Rathbones') as the Scheme's investment manager, who manages the Scheme's assets on a segregated basis.

	Asset Class			Target Allocation		Allocation Range
	Equities			50%		35%	- 65%
Bonds	50%	35%	- 65%
	Cash			0%		0%	- 5%
Total	100%

Strategy Review

There have been no changes to the investment managers or target asset allocation over the year.

Scheme Governance

The Trustee board is responsible for making investment decisions, and seeks advice as appropriate from Broadstone Corporate Benefits Limited ('Broadstone'), who are authorised and regulated by the Financial Conduct Authority.

The Trustees do not actively obtain views of the membership of the Scheme to help form their policies set out in the SIP.

There were no changes to the objectives put in place for Rathbones and Broadstone which were last reviewed in December 2019. The Trustees are due to formally review these objectives by December 2022, or earlier.

There were no changes to the investment management agreements with Rathbones during the year.

Statement of Investment Principles

The Trustees last reviewed the Statement of Investment Principles (SIP) in October 2019, which was updated to take account of updated investment regulations.

The Trustees have a policy on financially material considerations relating to Environmental, Social and Governance (ESG) issues, including the risk associated with the impact of climate change. In addition,

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the Trustees have a policy on the exercise of rights and engagement activities, and a policy on non- financial considerations. These policies are set out below and are detailed in the SIP.

There were no departures from the policies set out in the SIP, including the Trustees' policies on financially and non-financially material considerations, during the year.

Since the year-end, the Trustees have reviewed the Statement of Investment Principles (SIP) again in September 2020 to take account of updated investment regulations.

Policy on financially and non-financially material considerations

Trustees' Policy: The Trustees believe that the consideration of financially material Environmental (including climate change), Social and Governance (ESG) factors in investment decision making can lead to better risk adjusted investment returns. The Trustees expect the investment manager, when exercising discretion in investment decision making, to take financially material ESG factors into account. On an ongoing basis the Trustees (delegating to the Investment Consultant where appropriate) assess the ESG integration capability of their investment manager.

Where ESG factors are non-financial (i.e. they do not pose a risk to the prospect of the financial success of the investment) the Trustees believe these should not drive investment decisions. The Trustees expect their investment manager, when exercising discretion in investment decision making, to consider non-financial factors only when all other financial factors have been considered and in such a circumstance the consideration of non-financial factors should not lead to a reduction in the efficiency of the investment.

There have been no changes to the Trustees' policy, nor any departures from their policy, during the year.

The Trustees note that the manner by which financially material ESG factors will be taken into account by the investment manager will depend on the underlying asset classes within segregated mandates and the management style used (e.g. active or passive).

The Trustees are satisfied that the portfolio currently invested in by the Scheme is managed in accordance with their views on financially material considerations, as set out below, and in particular with regards to the selection, retention, and realisation of the underlying investments held.

The Trustees have access to updates on governance and engagement activities by the investment manager, and input from their investment advisors on ESG matters. These views are also taken into account when appointing and reviewing investment managers.

The Trustees acknowledge that they are delegating the consideration of financially material factors in relation to determining the underlying holdings to their investment manager.

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A summary of the Trustees' views for each asset class in which the Scheme invests is outlined below.

	Actively or
Asset Class	Passively		Comments
	Managed?
Equities	Active		The Trustees expect the investment manager to take financially material ESG
			factors into account, given the active management style of the portfolio and
			the ability of the manager to use its discretion to generate higher risk
			adjusted returns. The Trustees also expect the investment manager to
			engage with the underlying investee companies.
Bonds	Active	With regards to corporate bonds, the Trustees expect the investment
			manager to take financially material ESG factors into account, given the
			active management style of the portfolio and the ability of the manager to
			use its discretion to generate higher risk adjusted returns. The Trustees also
			expect their investment manager to engage with investee companies, where
			possible, although they appreciate that fixed income assets do not typically
			attract voting rights.
			With regards to government bonds, the Trustees believe there is less scope
			for the consideration of ESG issues to improve risk-adjusted returns in this
			asset class because of the nature of the securities.
Cash	Active		The Trustees believe there is less scope for the consideration of ESG issues to
			improve risk-adjusted returns in this asset class because of the nature of the
			securities.

Policy on the exercise of voting rights and engagement activities

Trustees' Policy: The Trustees believe that in order to protect and enhance the value of the investments, over the time horizon over which the benefits are paid, they must act as a responsible asset owner. The Trustees expect the investment manager to exercise its ownership rights, including voting and engagement rights, in order to safeguard sustainable returns over this time frame. On an ongoing basis the Trustees (delegating to the investment consultant where appropriate) assess the stewardship and engagement activity of their investment manager.

There have been no changes to the Trustees' policy, nor any departures from their policy, during the year. In particular, all voting activities have been delegated to the investment manager, as the Trustees do not have any legal right to vote on the underlying holdings.

However, the Trustees periodically meet with their investment managers, to engage with them on how they have taken ESG issues and voting rights into account for the investment approaches they manage on behalf of the Trustees. As part of this, the Trustees will seek to challenge their investment managers on these matters where they think this is in the best interests of members.

To complement this monitoring, the Trustees have access to stewardship and governance reports from Rathbones which are produced on an annual basis.

Within the current investment arrangements, the underlying equity holdings have voting rights attached to them.

The investment manager uses the voting policy of a third party proxy voter when exercising voting rights and will often engage with investee companies directly. The third party proxy voter used is confirmed in the table below.

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The Trustees have delegated engagement activities to their investment managers, and Rathbones reports annually on how they have voted on behalf of the Trustees for the underlying holdings.

A summary of the votes made by Rathbones from 1 January 2019 to 31 December 2019 on behalf of the Trustees is provided in the table below. The analysis is based on the latest information available from the investment manager.

Manager

Pooled or

Third Party Proxy Policy

Resolutions

Resolutions Voted:

Segregated?

Used

Voted On

For

Against

Abstained

Rathbones

Segregated

ISS

4,897

98%

1%

1%

The voting activity set out above is presented at the company level, rather than being scheme or fund specific. The Trustees will work with their investment manager to obtain more detailed fund-specific voting information in future years.

The Trustees have requested details of the significant votes made on behalf of the Trustees (where voting rights are attached). Details of these significant votes are provided below, together with engagement activities where voting rights are not held by the investment manager. The notable engagement activities of the investment manager (as determined by the holding that has effected the most change in the manager's opinion) is provided below:

• Rathbones voted for a proposal calling on BP to explain how its strategy is consistent with the Paris Agreement on climate change. BP has announced new targets including net zero emissions from its operations, net zero carbon emissions from the oil and gas it digs out of the ground, and a 50% reduction in the carbon intensity of all the products it sells.

The Trustees are comfortable with the investment manager's approach for exercising rights and conducting engagement activities, and specifically that they attempt to maximise shareholder value as a long-term investor.

The Trustees also consider the investment manager's policies on stewardship and engagement when selecting and reviewing investment managers.

Monitoring of Investment Arrangements

In addition to any reviews of investment managers or approaches, and direct engagement with investment managers (as detailed above), the Trustees receive performance reports on a regular basis from Rathbones to ensure the investment objectives set out in their SIP are being met.

Signed: ___________________________________________

27 January 2021

Date: ___________________________

On behalf of the Trustees of the BPT Retirement Benefits Scheme

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