West Yorkshire Pension Fund member website

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Statement of compliance with the UK stewardship code for institutional investors

Principle 1

Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

The West Yorkshire Pension Fund (WYPF) is committed to being a responsible investor. As an internally managed fund, the WYPF Investment Strategy Statement (ISS) sets out the policies to be followed to by the internal investment management team for incorporating Environmental, Social and Governance (ESG) issues into investment decisions. The Investment Strategy Statement is reviewed regularly, and updated in accordance with best practice. The ISS and WYPF Voting Policies are published in full on the WYPF website.

WYPF has a fiduciary duty to act in the best financial interests of its members. City of Bradford Metropolitan District Council, as administering authority for the WYPF, delegates all its functions as administering authority to the Governance and Audit Committee. The Governance and Audit Committee utilises the Investment Advisory Panel (IAP) as the vehicle for overseeing the Funds investment function. The IAP is responsible for the Fund investment strategy. The Director, WYPF, has day to day control of all aspects of Fund activities, including the investment management function. The IAP meets on a quarterly basis to set the investment strategy, and at other times for special items including alternative investments such as private equity and property.

Responsible investment, when managed correctly, should effectively manage investment risks and opportunities in order to achieve sustainable long term investment returns. The consideration of ESG factors is employed at every stage of the investment cycle by the internal fund management team, through investment strategy, selection and stewardship of the assets under ownership.

WYPF exercises its right as a shareholder to vote at the annual and extraordinary general meetings of companies in which it holds shares. The Fund also engages with those companies either directly, collaboratively, or through specialist service providers. WYPF works with or is a member of various shareholder groups such as Local Authority Pension Funds Forum, PIRC, IIGCC, Climate Action 100+ Project, Shareaction, Carbon Disclosure Project, and Ceres.

The Fund has an appointed custodian who is responsible for the safekeeping of its assets.

Principle 2

Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed.

City of Bradford Metropolitan District Council is the administering authority of the WYPF. The Council constitution sets out the conflicts of interest policy within the code of conduct for members. These policies are available on the City of Bradford MDC website. www.bradford.gov.uk members code of conduct

Declarations of Interest are a standard agenda item at all Investment Advisory Panel (IAP) meetings. Members of the IAP complete a Declarations of Interest form annually. These declarations are held in a register which is available for viewing at any time.

The Actuary to the Fund is AON Hewitt. The fund publishes the AON Hewitt Conflicts of Interest policy on the WYPF website.

A Compliance Manual governs conflicts of interest for the Internal Investment Managers. Managers must report all personal share dealings to the Director, WYPF on an ad hoc basis when dealing is carried out. Further disclosures are made in writing to the Director, WYPF on a six monthly basis, which confirm total personal share dealing carried out over the period. The Director, WYPF retains these disclosures.

When the Internal Investment Manager is provided with company information which is restricted under Insider Information legislation, the manager has to agree with the corporate broker to be made an insider. This may be done verbally or by email. The manager must also notify the Director, WYPF that they have been made an insider, and must not trade in that company’s shares on behalf of the Fund or through personal share dealing, until the information is no longer considered to be inside information. The Director, WYPF keeps a record of Insider Information notifications.

Principle 3

Institutional Investors should monitor their investee companies.

WYPF is an internally managed fund. Responsibility for equity shareholdings is delegated to the in-house investment management team. The team monitors companies held in the portfolio as part of the normal investment process, and matters relating to ESG are included as part of this.

Additionally, WYPF employs PIRC to monitor and provide guidance on corporate governance issues relating to the companies in which WYPF has a shareholding. The Local Authority Pension Fund Forum (LAPFF) may also issue alerts to members on specific areas of concern regarding corporate governance.

The Fund is committed to using its shareholder rights in order to encourage companies to behave responsibly. The investment managers regularly meet with company management at conferences and company meetings, and hold conference calls with company management on a frequent basis. If the internal managers have concerns regarding corporate governance, company performance or reporting standards, then those issues would be raised at such meetings. Members of the team will also attend Annual General Meetings of companies where appropriate. If the internal manager is not satisfied with the company response to concerns raised, then further dialogue may be required, with collaborative dialogue another option (please see Principles 4 and 5 for further detail on collaborative dialogue).

Principle 4

Institutional investors should establish clear guidelines on when and how they will escalate their stewardship activities

WYPF has a policy of engagement with companies rather than divestment. The Fund believes that it is more effective to engage with company management on a regular basis regarding issues of concern, rather than simply selling shares, which the Fund would consider only when other forms of engagement have been exhausted.

In order to escalate engagement, the Fund will often work collaboratively with other shareholders and groups.

The Fund is a member of the Local Authority Pension Fund Forum (LAPFF), which carries out the majority of engagement work on the Fund’s behalf. The LAPFF engages with companies on a wide variety of subjects, including environmental and carbon risk, board composition and board member remuneration, employment standards, human rights, social and reputational risk, and financial reporting standards. The LAPFF will send letters, meet with company boards, issue alerts to members, attend AGMs, and arrange the filing of shareholder resolutions or legal action if appropriate. The LAPFF will also monitor how effective their engagement has been and report this to members on a quarterly basis.

Principle 5

Institutional investors should be willing to act collectively with other investors where appropriate.

West Yorkshire Pension Fund has been working collaboratively with other investors for over two decades. The Fund joined the LAPFF in 1992, and members from WYPF IAP have served as chair and deputy chair at LAPFF since 2008. The Director, WYPF, has been a member of the LAPFF Executive committee since 2011. The former Director of WYPF, now retired, served as Honorary Secretary to LAPFF for a number of years prior to retirement.

LAPFF membership comprises 79 local government pension funds with over £230billion of assets under management. WYPF considers that working collectively alongside other members of LAPFF, with the combined shareholder power this brings, is highly effective as a means of shareholder engagement. Through membership of the LAPFF the WYPF has been a co-filer of shareholder resolutions at company general meetings on numerous occasions. The majority of these resolutions have been accepted and recommended by company management and duly approved at the AGM.

The WYPF became a member of the Institutional Investor Group for Climate Change (IIGCC) in 2003, one of the earliest members of a group now comprising 169 members across 11 countries with €23trillion of assets under management. The IIGCC exerts pressure on companies, policy makers, regulators and governments to consider, prepare for and disclose upon climate change in all aspects of business. IIGCC also offers guidance on various aspects of climate change, including climate scenario analysis and successful investor engagement planning.

WYPF became signatory to the Climate Action 100+ project at launch in December 2017. This is a global group of 310 large investors, with $32trillion assets under management. The aim of the project is engagement with the 100 largest greenhouse gas emitting companies across the globe. The project is due to last five years, and more companies will be added to the initial 100 over time. The engagement is already proving very effective, with Royal Dutch Shell and BP publicly announcing many new commitments to combat climate change as a direct result of work carried out with the Climate Action 100+ project.

The fund became signatory to the Carbon Disclosure Project (CDP) in 2007, another shareholder group which is focussed on climate change and carbon emissions.

The Fund has signed the Global Investor Statement on Climate Change. This statement is supported by 415 investors with over $32trillion assets under management, and calls on world governments to:

· Achieve the Paris Agreements Goals

· Accelerate private sector investment into the low carbon transition

· Commit to improve climate related financial reporting

The statement is available in full at 2018 GLOBAL INVESTOR STATEMENT TO GOVERNMENTS ON CLIMATE CHANGE (pdf)

Principle 6

Institutional Investors should have a clear policy on voting and disclosure of voting activity

WYPF exercises its shareholder voting rights at Company Annual and Extraordinary General Meetings in the UK, Europe, USA, Canada, Asia, Japan, Australia, New Zealand and South America, and any other countries where it is possible to do so. The voting policy is published in full on this website.

Voting is carried out on behalf of the Fund by Pension and Investment Research Consultants (PIRC) in accordance with WYPF voting policies. The Fund does not automatically support the board at general meetings.

As WYPF carries out securities lending, procedures are in place to recall any shares out on loan before a company meeting, in order that WYPF can vote on the entire shareholding.

Principle 7

Institutional Investors should report periodically on their stewardship and voting activities

PIRC produce a Proxy Voting Review report and a Voting Summary Report on a quarterly basis, which the Fund publishes on this website.

The Investment Advisory Panel receive reports of PIRC voting activity on a quarterly basis.

Where shareholder resolutions have been filed, the IAP will also receive a report of these at the quarterly investment panel meeting.

IAP receives engagement report publications, including an analysis of the effectiveness of that engagement, from the LAPFF on a quarterly basis. The LAPFF website regularly provides updates on engagement activity.

Where engagement success has been achieved and reported by the Climate Action 100+ project, or other groups of which WYPF is a member, the Fund will update the WYPF website newsfeed, Facebook and Twitter accounts with that information.