RPMI Railpen (Railpen), which manages £31 billion of assets on behalf of the railway pension schemes, has today published its Voting Policy for the 2021-22 AGM season.

The policy update reflects Railpen’s key corporate governance and sustainability themes. Railpen outlines additional expectations of its portfolio companies on climate reporting and workforce treatment, health and safety – with a particular focus on corporate behaviour throughout the Covid-19 pandemic. Key updates include:

Meeting the challenges of Covid-19
Railpen will support boards who successfully and safely steer companies through Covid-19 in a way which demonstrates an awareness of the wider workforce’s experiences at this time. It will scrutinise corporate behaviour towards employees, customers, suppliers and other stakeholders. Where Railpen does not believe that there has been fair treatment or a genuine commitment to delivering such treatment in the future, voting sanctions will be actioned accordingly.

Workforce treatment
Railpen believes that how well a company supports and treats its workforce offers an important insight into its corporate culture and is a vital ingredient for sustainable financial performance. It expects boards to communicate the importance of the workforce, including details of activities undertaken and any material outcomes. This should include disclosures around work undertaken to secure employees’ health and security in the course of the Covid-19 pandemic.

Climate and financial accounting
Investors need financial reporting to reflect a company’s financial risks accurately. Railpen expects portfolio companies to appropriately incorporate material information about climate-related issues into their financial statements – and not just in their narrative reporting. Where they have not done so, or where inconsistencies exist between narrative reporting and financial disclosures, Railpen may vote against the Report and Accounts, the Audit Committee Chair, or the auditor’s reappointment.

The new global policy takes effect for the 2021 AGM Season and is available on the Railpen website.

Michael Marshall, Head of Sustainable Ownership at Railpen, said:

“We recognise that companies have faced numerous new challenges in the past year, but this has made scrutiny of their operating practices even more important. We will take these extraordinary circumstances into account in our engagement and voting practices but will hold companies and directors to account for their behaviour through this period.

“A thoughtful voting approach alongside constructive engagement with portfolio companies supports our objective of enhancing long-term investment returns for beneficiaries. The updates we have made to our 2021 global voting policy will allow us to continue to exercise our voting rights systematically, consistently, and in a way which is in beneficiaries’ best interests.”

Caroline Escott, Senior Investment Manager at Railpen, said:

“Railpen has long considered climate change as being financially material to our portfolio and the outcomes for beneficiaries. We need companies to discuss climate-related issues in their narrative reporting and their financial accounts and make the climate assumptions they use clear.

Incorporating this into our voting policy for 2021 – in the year in which the UK is hosting COP26 – allows us to be clear about our expectations for corporate and auditor behaviour, and how we will vote if these expectations are not met.”