How we invest: a guide to active ownership
What is active ownership? And how does it benefit you?
01 Dec 2020
We operate on your behalf, as owners of the businesses where we invest your savings.
This means that we pro-actively engage with our key investments in public companies via our asset managers; we vote on all shareholder recommendations from management; and we seek to support the management of these businesses to take robust long-term decisions that align with the generation of sustainable returns to our customers.
This is called ‘active ownership’ – but how does it benefit you?
What does active ownership mean?
Active ownership means we’re stewards of the businesses we invest in. Our view of risk considers activities that impact profit in the short-term but also things that could impact profits in the future. This includes reputational risks that develop from poor environmental, social or governance (ESG) practices, because these practices eventually impact the value of the company.
How does active ownership work in practice?
In our public investments, we vote on all shareholder resolutions and our investment managers engage with the companies to encourage them to manage ESG risks. These risks can appear in a business at any time and dramatically reduce revenue and/or increase costs.
In our large, private investments, we seek to have influence over their governance so we can support long-term decision-making and strong management of human, natural, and organisational capital. For example, we encourage accountability and responsibility between the activities of the business, its consumers, employees, the society in which it operates, the environment and regulators.
Watch this short video for examples of our investments.
We're proud to invest where we can influence how the business is managed. Find out how we use Active Ownership to invest in opportunities that we think will generate sustainable income for members.
What are the benefits of active ownership?By operating as owners, we believe we can add value to those businesses and support them to grow sustainably. Here are some of the outcomes that we expect from being active owners:
- robust and dependable retirement incomes and savings growth for you, our customers
- reputationally-robust goods and services for the customers of the companies we invest in
- motivating, fair and safe outcomes for the employees of these companies.
We believe by taking decisions as “owners” we align interests to create enduring value; have positive impacts on the system where the company operates; and create healthy outcomes for your retirement. We want our businesses to continuously improve the resilience of their supply chains; consider the impact of their activities on the world around them and ensure they treat all stakeholders (including customers and employees) fairly. This then improves the long-term health and profitability of the business. It also enables the company to provide sustainable income for our customers once they retire, and contributes towards a better quality growth in economic activity.
For further reading, see our CIO’s article published on the London School of Economics and Political Science library - why organisational success depends on valuing higher quality, rather than simply lowest-cost routes to economic growth.
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