Scottish Widows is committed to being a responsible investor on behalf of its customers, with particular focus on stewardship, ethical investment and environmental, social and governance (ESG) issues. We manage these responsibilities through a formal Responsible Investment Governance Framework.
The objective of this Framework is to provide our investment committee with the appropriate oversight of the ESG issues that might affect our customer funds.
This Framework will be updated to reflect our desire for a programme of continuous improvement in this area.
Responsible Investment Beliefs
Scottish Widows oversees the investment management of its fund range on behalf of its customers with the goal of delivering improved investment outcomes on all funds (customer and shareholder), balancing returns and risks through driving appropriate strategic investment decisions, setting investment mandates for fund managers and effective execution and governance, in all cases taking into account customer commitments.
We are committed to achieving this in accordance with high standards of corporate governance and responsible investment practices. Our fiduciary duty is to act in the best long-term interest of our customers and to do so requires us to recognise that broad ethical, social and governance (ESG) issues can impact financial performance.
Ethical, social and governance issues comprises many factors, including, but not limited to, environmental concerns, climate change, resource scarcity, board composition, diversity and talent management. We believe that the approach to managing these issues may influence the short, medium and long-term financial performance of the assets we invest in. Consideration of these issues should therefore inform our investment analysis and decisions. We believe that this approach mitigates risk, supports long-term returns, and is in line with our customers’ interests. As such, it reflects our pursuit of long-term stability and return, which is a key component in achieving financial sustainability.
As an active and responsible owner, we actively consider our obligations during the selection, appointment, monitoring and retention of our fund managers. We consider our obligations in line with the bullets below:
- We expect our external fund managers to have an effective approach to Responsible Investment in place and for this to be embedded in the relevant policies, investment processes and standards of the manager.
Our external fund managers should be able to demonstrate an effective approach to responsible investment that can be communicated directly to customers.
We expect our external fund managers to be signed up to the Stewardship Code and UN Principles of Responsible Investment and, where they are not, actively encourage them to do so.
We take into account the Responsible Investment activity of any external fund managers as part of the selection process.
- We expect our external fund managers to consider material ESG issues as part of their investment decision making process.
We expect our fund managers to understand how relevant ESG risks and opportunities may affect the value of the investments held on behalf of our customers. We require our fund managers to take into consideration material investment risks and opportunities, and seek to take account of this information in our investment decisions.
- We expect our external fund managers to use appropriate influence to encourage companies to manage ESG risks effectively.
The process of active engagement is one of the key principles of the fund management process and we expect our fund managers to actively monitor, engage and intervene
on matters that may affect the long-term value of their investments. This may include corporate strategy, business performance, corporate governance and environmental and social issues that may materially affect the future sustainability of companies.
Where contentious issues arise, we recognise that constructive dialogue with companies is usually the best way to resolve them. Doing so safeguards long-term investment performance and serves the wider interests of our customers and society.
With UK investments, we require our fund managers to have due regard to the UK Corporate Governance Code. With overseas investments we require our fund managers to have due regard to relevant comparable international standards, where available.
We expect that voting rights are exercised on behalf of customers in a consistent and considered way, and for our listed equity investments we expect our fund managers to exercise their voting rights in all markets.
- We expect to avoid investment in companies engaged in activities prohibited by international conventions that have been ratified by the UK (including the Oslo Convention on Cluster Munitions and the Ottawa Treaty on Anti-Personnel Landmines).
- We expect the managers of our mandated funds to report on their Responsible Investment activities on a regular basis.
We expect our managers to report on their responsible investment activities, including evidence of reported information regarding the above points, on a regular basis or as requested on specific issues, on the funds that they are mandated by us to manage. This will provide the Unit Linked Investment Management committee with the opportunity to seek clarification and to evidence all reported information if requested by us.
We expect our managers to report their stewardship activities and outcomes to the public on at least an annual basis for the funds that they are mandated to manage.
We actively monitor our fund managers on the requirements set out in the Policy framework.
We provide ethical and sustainable investment options for our customers.
An ethical and/or environmental fund is available across all products. We will provide appropriate disclosure on ESG issues as they relate to our customer funds and will report on our activities and progress towards implementing the Responsible Investment Governance Framework.