Stewardship Report 2023

The full report details how Railpen, on behalf of the Trustee, works to protect and enhance member outcomes through proactive and thoughtful stewardship. It includes information on Railpen’s stewardship philosophy and approach and provides case studies which discuss outcomes and learnings from our integration, stewardship and climate workstreams.

2023 report highlights include:

1. Escalation to improve member outcomes: Railpen prioritises confidential and constructive engagement with companies. However, it reserves the right to take its concerns public, or to divest its holding entirely, if the company fails to adequately address the issues that have been raised.
   
   In 2023, Railpen divested from companies that weren’t making sufficient progress on material issues, despite extensive work to engage constructively in previous years. This included divestment from two companies with significant governance issues, as well as from one company where the team had extensive and unmitigated concerns on workforce treatment. Other escalation activities in 2023 included a pre-declaration against a firm on governance grounds, which led to improved dialogue, and co-filing a climate lobbying resolution at a major US utilities firm.
   
   
2. Leading industry action on listings and corporate governance standards: Railpen recognises both the privilege and the responsibility which derive from its scale and resource. In 2023, Railpen therefore continued to advocate for robust investor protections in the UK and elsewhere, both in its own right and by collaborating with others in the industry to enhance impact. This included drafting and co-ordinating a public letter signed by £300 billion of UK scheme AUM (on behalf of 22 million members) expressing concerns about the FCA’s CP23/10 consultation to change the UK listings rules, running discussion sessions for other schemes on the topic, meeting with key UK officials, and sending a private letter signed by nearly £500 billion of UK pension scheme AUM to index providers to ask them to protect their asset owner clients (and therefore the end beneficiary) from any changes resulting from the FCA’s proposals.
   
   The Investor Coalition for Equal Votes (ICEV), chaired by Railpen alongside the Council of Institutional Investors (CII), also continued to challenge unequal voting rights in the US, UK and elsewhere in 2023. It grew its AUM, raised policymakers awareness of the issues with its November 2023 report Undermining the shareholder voice, and commenced its second phase of engagements with pre-IPO companies in advance of an expected 2024 pick-up in IPO activity.
   
   
3. A deepening approach to ESG integration beyond listed equity: In 2023, Railpen further refined its approach to ESG integration across most asset classes including infrastructure, at both the post- and pre-investment stages. This included establishing KPIs for directly held infrastructure assets, as part of developing a more consistent monitoring framework, and carefully assessing a private equity manager’s investment approach and governance of ESG issues both generally and in relation to a specific fund.