Standard Life International dac has a duty of care to our customers, shareholders and stakeholders. Our approach to stewardship and engagement is based on the European Union's Shareholder Rights Directive II (EU SRD II), which came into force in June 2019. It's also in line with our philosophy on responsible investment. We review and refresh our approach regularly.
Aims of EU SRD II
One of the aims of EU SRD II is to promote effective stewardship and long-term investment decision-making in regulated financial services companies. Supported by the promotion of greater shareholder involvement in corporate governance of public companies, it helps to ensure decisions are made for a company's long-term stability, and that they take environmental and social issues into account.
Implementing our policy
Many of the funds we offer our customers are managed by external asset managers. We don't have any input into their investment strategies or guidelines. It’s important to us, however, that these managers take their stewardship responsibilities seriously, and that they influence the companies they invest in where appropriate.
We delegate responsibility for decision making and shareholder engagement in the investment management process to the asset managers we work with. Their ability to vote on our behalf is taken into account as part of our selection process. This ability is formally delegated to them in our contract.
While we outsource investment management to a number of asset managers, our largest strategic partner is abrdn (formerly Aberdeen Standard Investments). They're committed to good stewardship and responsible investing, and to effective management of conflicts of interest.
You can find out more about the engagement and voting activity of our other external managers on their websites.
The commitment from Phoenix Group
As a long term asset owner, Phoenix Group acts on behalf of policy holders and shareholders to invest responsibly and is committed to factoring Environmental, Social and Governance (ESG) matters into investment decision-making. We will play a vital role in decarbonising the capital markets and financing the transition to a sustainable low carbon economy. As part of Phoenix Group, Standard Life International will comply with the investment philosophy and processes we are developing.
Our areas of focus
Strategy and governance
We work with our asset management partners to deliver on customer and stakeholder expectations. We will increase investment in assets that support a sustainable world, aligned with the United Nations - Sustainable Development Goals (UN SDGs), within the shareholder and policyholder business.
In 2020 Phoenix Group, as a demonstration of our commitment to ESG investment decision-making and ownership, became a signatory to the United Nations - Supported Principles of Responsible Investment (UN PRI), the world's leading proponent of responsible investment. It works to understand the investment implications of ESG factors and to support its international network of investor signatories when incorporating these factors into their investment and ownership decisions.
Our responsible investment philosophy
The governance for the development, implementation and monitoring of our responsible investment philosophy is managed by our Investment Committee. The philosophy is refreshed annually, or more frequently if required. To allow sufficient attention to responsible investment, we have put in place a management committee to review ESG-related risks and opportunities across all portfolios. This committee reports to the Investment Committee and the Group Board Sustainability Committee.
We give our customers further information about how we incorporate ESG factors into investment processes on our websites.
Integrated ESG management
We continue to review and enhance ESG integration within our investment processes, and to embed best-in-class data analytics and capability to support this process. Our network of asset management partners are all signatories to the UN PRI and UK Stewardship Code.
Initial due diligence and ongoing monitoring ensures assets continue to be managed in line with Phoenix Group's philosophy and expectations. All our asset management partners are required to implement our approach to responsible investment and to integrate ESG considerations into their investment processes.
Asset manager assessment
Asset manager assessments are undertaken by a dedicated and experienced team. External consultants support us with the selection and monitoring of our asset management partners’ responsible investment processes, and we are committed to continuing and broadening this work on our own behalf.
As part of the assessment process we issue formal requests that help us gather the information we need, reviewing the policies and frameworks of asset management partners and the factors affecting implementation. These findings are presented to our governance committees. Partners who fail to meet our minimum requirements are put on notice to improve within agreed timelines, or we may end our relationship with them.
Active stewardship is critical to the delivery of our ambitions and our commitment to achieving net zero. As a large asset owner, we recognise our stewardship responsibilities and adopt an "engagement first" approach. Our objective is to use our position of influence to bring about change and to continue to act towards that goal.
For funds and portfolios where we set the investment strategy and guidelines, responsibility for decision making and shareholder engagement in the investment management process is delegated to the asset managers we work with. Their ability to vote on our behalf is taken into account as part of our selection process. This ability is formally delegated to them in our contract.
Their delegated stewardship responsibilities include:
- Monitoring resolutions and making sure voting rights are carried out in line with investment objectives
- Engaging with companies they invest in and monitoring investee companies on relevant matters
- Capital structure
- Social and environmental impact and corporate governance
- Escalating activities to the management of companies they invest in as necessary
- Acting collectively with other investors and shareholders, including communicating with those where relevant or necessary
Stewardship in action
Our asset management partners, working on on our behalf, strive to use our influence as significant investors to achieve progress. In instances where our standards have not been met, divestment is both appropriate as responsible stewards of our clients' capital, and aligned to our goal of investing for better outcomes. Examples of where our asset managers have put stewardship into action include Boohoo Group plc, a UK-based online fashion retailer.
Our asset management partner abrdn divested Boohoo from our responsible investment funds in response to allegations of slavery and poor conditions within the company's supply chain. Having spoken to Boohoo's management team a number of times, our asset manager felt their response was inadequate in scope, timeliness and gravity.
Decarbonising our investment portfolio
We are committed to decarbonising our investment portfolio and achieving net zero GHG emissions by 2050. To do this we will actively engage with decarbonisation alliances, initiatives and policy makers. We will also enhance our internal capability by acquiring and developing the tools we need to perform portfolio analysis using best-in-class metrics, taking into account both physical and transitional risks.
This is consistent with the objective of limiting the temperature rise to no more than 1.5°C above pre-industrial temperatures, and is in line with the Paris Agreement and the commitment of the UK Government. We recognise that there are many considerations in delivering this target and our immediate focus is on our equity and liquid credit portfolios.
For more information on how we foster responsible investing please view our Phoenix Group Sustainability Report.
Phoenix group remuneration policy
Sustainability is at the heart of our business and a key strategic priority. We align our performance goals to our Phoenix one team goals, and to our determination to be a customer-obsessed, purpose-led organisation led by a diverse and talented workforce connected by common values.
Our reward framework, remuneration policy and best practice is established and regularly reviewed by the Remuneration Committee against board-approved terms of reference. Remuneration must be competitive enough to motivate, retain and attract quality staff.
Our Annual Incentive Plan performance measures are based on the achievement of strategic (including sustainability), personal and business performance goals. Long term Incentive Plans are also offered to business and executive leadership over a three to five year outlook. This helps us be the "best place our colleagues have ever worked", which we see as being core to the achievement of our sustainability aspirations.
Standard Life International dac
The Phoenix Group continue to develop its ESG reporting capabilities in line with its sustainability targets and will seek to expand coverage on an ongoing basis which will include more granular data at a Standard Life International dac level. We will update our PAI statement when this data becomes available.