Railpen, the £34bn railways pension scheme, has published its 2024 Stewardship Report as part of its ongoing commitment to the 2020 UK Stewardship Code.
The report details how Railpen, on behalf of the trustees, works to protect and enhance member outcomes through what it considers to be proactive and thoughtful stewardship.
In addition to Railpen’s stewardship philosophy and approach, the report sets out the key developments, engagements and outcomes from across Railpen’s priorities: active ownership, environmental, social and governance integration, and climate.
Michael Marshall, director of investment risk and sustainable ownership at Railpen, said: “We follow the evidence that companies with good corporate governance practices and engaged shareholders are more likely to achieve the superior long-term financial performance that members of the railways pension schemes need.”
The 2024 report includes industry-wide stewardship initiatives where Railpen combined its voice, influence and expertise with other investors and stakeholders whose interests align with its own to make its engagement efforts more effective.
Railpen also continued to build on its previous work, advocating against changes to the UK listing rules, specifically the introduction of dual-class share structures (DCSS).
Railpen said it believes that owners of capital should have a voice in proportion to their economic ownership, and the evidence shows that any benefits to firm value from DCSS decline only a few years after a company lists.
In response to the FCA’s 2024 proposals, which removed even the minimal shareholder safeguards that had been previously proposed in its 2023 consultation, Railpen leveraged its position as co-founder and chair of the $4.5trn (£3.3trn) Investor Coalition for Equal Votes to work with other domestic and international pension schemes to develop a coherent and clear position.
This included support for asset owners and industry bodies with their responses and calculating the additional cost to investors and beneficiaries from the proposed changes, which was also included by the PLSA in its consultation response.
There was also an action to improve audit quality – where Railpen believes a high-quality audit is vital to ensuring shareholders can obtain a fair and true assessment of a company’s financial health and stability.
In 2024, Railpen worked with Governance Perspectives to produce the Acting on Audit report, which identified the main factors that affect audit quality and auditor accountability, and includes recommendations to policymakers, investors and companies to improve transparency, engagement and audit quality.
Railpen also updated its global voting policy to protect shareholder rights. An emerging challenge, noted Railpen, is ensuring that shareholders’ voices continue to be heard as the regulatory landscape evolves.
The revised policy included new lines on how Railpen would consider voting against company plans to re-register or move to locations with “weaker” investor protections.
Railpen distributed its updated policy to its priority holdings and, for the first time, to all FTSE 350 companies, given that Railpen felt the need to urge UK companies not to follow UK policymakers in what it calledm the “race to the governance bottom”.
The report also includes several case studies on Railpen’s direct engagements with portfolio companies on material sustainability and governance issues last year.
Caroline Escott, head of investment stewardship at Railpen (pictured), commented: “Our purpose is to secure our members’ future. Generating the required returns to achieve this mission is challenging. To succeed, we need to use all the levers available to us – including stewardship – to drive long-term value creation at the company and market level.”
And Escott added: “We are not afraid to act where we think the latest industry or market development may damage member outcomes. This includes advocating against the ‘race to the bottom’ we are seeing from companies and policymakers on what evidence shows are financially material issues, including diversity, equity and inclusion, climate change and shareholder rights.”
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