Engage, oversee, influence: Our three-pillar stewardship approach

As a proud signatory of the UK Stewardship Code, we recently published our 2024 Responsible Investment and Stewardship Report. It demonstrates how we have evolved our investment proposition with responsible investment practices at its core, and how we have put our stewardship approach into action – all driven by the desire to deliver better outcomes for our customers, today and tomorrow.

Below, we look at each of these three pillars in more detail.

As a large UK asset owner, we aim to responsibly manage our own assets while also helping drive an industry-wide transition toward a sustainable, inclusive society – delivering better long-term outcomes for our customers and the wider economy.

We target our stewardship initiatives across three core pillars:

We engage directly and collaboratively with investee companies across our priority themes:

• Environment: Climate and nature
• Social: Human rights and human capital management
• Governance: Diversity on boards and AI & ethics

We also use our shareholder right to vote in order to escalate our engagement activity, express support for an ongoing strategy and to ensure suitable governance is in place to manage risks and opportunities related to ESG factors

PRI Spring is a collaborative investor initiative engaging companies on nature-related topics. Through our participation in PRI Spring we are leading on engaging with a UK-based nutritional consumer goods company, which is a large producer of health, hygiene and nutrition products. Due to the range of products they sell, they have exposure to several high-risk commodities, with their largest being their exposure to palm oil. In our first meeting with the company, we focused on how they assess and minimise the risks of their high-risk commodity exposure, with the company explaining the certification processes they use in their palm oil supply chain. We also had a further discussion on their work with trialling satellite monitoring of the areas they source their palm oil from, so that they do not rely solely on third-party certifications. Our next phase of engagement will focus on their lobbying practices and disclosures.

We have been engaging Shell for several years, initially directly and then as part of CA100+ along with other investors. In 2024 the company weakened its targets for reducing the carbon intensity of the energy it sells. At its 2024 AGM, alongside other investors and Follow This, we co-filed a resolution asking in an advisory vote for the company to align its medium-term targets with the goal of the Paris Agreement. In addition to supporting the shareholder resolution, we also directed votes against the Chairman of the Board and against their Energy Transition Strategy.

As asset owners, our ability to deliver responsible investment outcomes is closely tied to the effectiveness of the investment managers managing our funds. During 2024, we continued to systematically review, engage with, and constructively challenge our core appointed investment managers on their responsible investment and stewardship practices. This included thematic engagement topics such as climate transition and water risk, as well as engagement on their overall stewardship integrity – such as how they’re handling the politicisation of ESG, as set out in the example below.

We aim to responsibly manage our own assets while also helping drive an industry-wide transition toward a sustainable, inclusive society.

In 2024, we engaged with our appointed investment managers to discuss the responsible use, governance, and strategic implications of generative AI (Gen AI) by portfolio companies. This shed light on the integration of this technology across various sectors, highlighting both the risks and opportunities. We discussed whether companies perceive Gen AI as financially significant and how they are leveraging it to enhance productivity, improve customer service, and develop new products and services. We emphasised the importance of board oversight, risk management, privacy considerations, and responsible AI reporting. We explored evolving work on Gen AI, including issues such as algorithmic bias, disinformation, transparency, and data governance. Our engagements aimed to understand how companies are addressing these challenges and navigating the regulatory landscape, particularly the EU AI Act. We stressed the need for training on bias, involving external experts, and equipping board members to oversee Gen AI-related risks. Environmental impacts, such as data centre power consumption, and the need for responsible AI KPIs and external assurance, were also discussed. These dialogues were supported by insights from both active and passive managers (Schroders, BlackRock, and SSGA), each bringing unique perspectives on implementation, oversight, and disclosure expectations. In early 2025 we we published a paper on Responsible AI, outlining our stewardship priorities and key governance gaps needing urgent attention.

Throughout 2024, we continued encouraging our appointed investment managers to strengthen their capabilities across both asset classes and geographies – which has been particularly important amid the growing politicisation of ESG and pushback in certain markets. We’ve been pleased to see recent hires that not only reinforce teams in developed markets but also expand stewardship expertise in emerging markets – where local knowledge and cultural context are essential to meaningful engagement. In some cases, we’ve gone beyond oversight to actively support capability-building. We dedicated extensive time to one of our passive managers, guiding and contributing to the development of their newly launched specialist stewardship service, providing input on frameworks, expectations, and thematic focus areas. This reflects our long-term approach to manager relationships and our commitment to improving standards across the investment value chain.

As a large asset owner, we are committed to tackling systemic risks and shaping resilient markets. To support this, we collaborate with investor coalitions, non-profit organisations and industry associations to drive forward standards and frameworks.

We also engage with policymakers, regulators, and industry stakeholders to drive change that benefits savers. We are involved in relevant industry initiatives and trade associations and hold roles on policy focused committees and working groups. We also work closely with the Government and regulators directly and respond to many consultations and calls for evidence as they develop future policy.

Since joining UKSIF in 2021, we’ve actively contributed to its forums, consultations and policy work. In 2024, as Head of Responsible Investment at Scottish Widows, I joined the Board. We continued to contribute to UKSIF’s policy recommendations for the General Election, fiduciary duty, UK Green Taxonomy and the UK Pensions Review. We also contributed to its responses to consultations, including the UK Stewardship Code, as well as the Transition Finance Market Review and ESG Ratings. More recently, we have supported UKSIF in their engagement with the Department of Energy and Net Zero’s Parliamentary Select Committee towards shaping the role of the National Wealth Fund and Great British Energy in supporting the UK’s energy transition and underpinning mechanisms required to crowd in private capital in meeting the UK’s decarbonisation goals. Earlier this year, we also co-published a report with UKSIF on systemic risks.

Initiated in 2023 by Church Commissioners, Aviva Investors and Scottish Widows, initially under the WBA’s Social Collective Impact Coalition (CIC), this initiative moved to its Phase 2 in 2024 under its three targeted workstreams with their detailed concept notes:

2024 saw clear investor leads assigned to each workstream, new investor signatories joining the initiative, increased engagement and progress by some ESG data providers, and the beginning of the third workstream on controversies and norms breaches.