Corporate Governance and Socially Responsible Investment
This area of the website provides information on the Management Trustees' approach to two key aspects of investment, Corporate Governance and Socially Responsible Investment (SRI). On this page we explain the Management Trustees' overall approach and the instructions that they give to British Airways Pension Investment Management Ltd (BAPIML), the Schemes' Fund managers. Links are also provided to a report from the BAPIML CEO on how the Management Trustees' policies are implemented, together with annual reports on activity in UK and international Corporate Governance and SRI, details of voting records for the year ended 31 March 2009 and a list of the Schemes' 100 largest equity investments.
Royal Dutch Shell Oil Sands Shareholder Resolution
At Royal Dutch Shell's forthcoming AGM we have been asked to vote on a Shareholder Resolution:
Resolution 23: Direct the Audit Committee or a Risk Committee of the Board to Commission and Review a Report on Investment Risks Associated with Future Canadian Oil Sands Projects
Both Management and Research Recommendations and Electronic Voting (RREV) have recommended voting against this resolution. After engaging with Royal Dutch Shell and conducting our own research, we believe the company's response to issues raised in the shareholder proposal, to have been satisfactorily addressed.
Royal Dutch Shell have outlined their assumptions on world energy demand and oil price volatility (citing the International Energy Agency's (IEA) World Energy Outlook 2009 report), they have also provided details on pricing estimates for future carbon emissions. In its economic assessment Royal Dutch Shell assumes a higher CO2 price than that currently being charged in Alberta. Independent studies have been conducted on the impact of emissions from oil sands based fuels, and a recent report produced by IHS Cambridge Energy Research Associates suggests that on a life-cycle basis oil sands are, around 5-15% more CO2 intensive compared to conventional crude. Royal Dutch Shell is however, continuing to research into alternative methods of extraction which will further reduce emission levels.
The company has stated that as part of the company's established investment approval process for all its projects they look at health, safety and environmental impacts. The company has also advocated its support for the Blueprint scenario, in relation to the future challenges of entering a low carbon world (please view link below for further details*).
BAPIML has voted against the shareholder resolution.
If you require further information please click on the links provided below.
BP Oil Sands Shareholder Resolution
At BP's forthcoming AGM we have been asked to vote on a Shareholder Resolution:
Resolution 25: Approve that the Audit Committee or a Risk Committee of the Board Commissions and Reviews a Report Setting Out the Assumptions Made by the Company in Deciding to Proceed with the Sunrise Project.
Both Management and Research Recommendations and Electronic Voting (RREV) have recommended voting against this resolution.
After conducting our own research and meeting senior executives at BP, we believe the company's response to issues raised in the shareholder proposal to have been satisfactorily addressed.
BP have outlined their assumptions on world energy demand (citing the IEA's 2009 World Economic Outlook) and oil price volatility, they have also provided details on pricing estimates for carbon emissions for its projects and have conducted independent studies on the impact of Steam Assisted Gravity Drainage (SAGD), which suggests CO2 emissions are 5-15% higher compared to conventional methods. The company will make its final investment decision later this year and assuming it is sanctioned will start production in 2014. In the meantime BP will continue to look at techniques through technological innovation to further reduce emission levels. As part of the company's established investment approval process the board has stated that for all its projects they look at several factors which include non-financial risk elements - environmental, social and reputational risk. BP have also committed to producing an annual Canadian sustainability report which will commence in 2011.
BAPIML will be voting against the shareholder resolution.
For further information please click on the links provided below.
http://www.bp.com/sectiongenericarticle.do?categoryId=9032829&contentId=7060779
Corporate Governance
BAPIML has been instructed by the Management Trustees to exercise voting and other rights attaching to the Schemes' investments at meetings of UK and overseas listed companies wherever practicable. Where relevant rights are exercised, this will be based on the framework formulated by the National Association of Pension Funds.
The Management Trustees have also agreed to the incorporation of the principles set out in the Institutional Shareholders' Committee Statement of Principles on the responsibilities of Institutional Shareholders and Agents into their Corporate Governance arrangements.
The primary objective of these Corporate Governance arrangements is to protect the economic interests of the Schemes. Details of the exercise of voting rights are reported to the Management Trustees at least quarterly and a summary of this information along with data summarising the Schemes' larger investments will be made available on the member website each year, along with a list of the Scheme's 100 largest equity holdings.
Socially Responsible Investment
The Management Trustees' overriding objective is not to cause BAPIML to take any action (whether by purchasing, holding or selling any investment) which could be reasonably expected to diminish the financial returns on the Schemes' investments as a whole.
Subject to this objective, the Management Trustees require BAPIML to incorporate as part of its investment process a systematic approach to the maintenance of ongoing dialogue with the management of those companies in which it retains, or proposes to make, significant equity investments and, where appropriate, other forms of investment. The specific purpose of such dialogue - called 'responsibility discussion overlay' , or RDO - is to establish a framework within which BAPIML may, on behalf of the Management Trustees, raise issues concerning the social, environmental or ethical aspects of the operations of the investee company. BAPIML has been requested to report to the Management Trustees once in each calendar year on its activities under RDO and the Management Trustees use this report as a focus for issuing further guidance to BAPIML (in consultation with British Airways plc where appropriate) if required.
Documents
Report from the BAPIML CEO on implementation of Corporate Governance and SRI policy for the year ended 31 March 2009
BAPIML report on Corporate Governance for UK investments for the year ended 31 March 2009
BAPIML report on Corporate Governance for international investments for the year ended 31 March 2009
BAPIML report on Socially Responsible Investment for the year ended 31 March 2009
Voting Record for UK investments for the year ended 31 March 2009
Voting Record for international investments for the year ended 31 March 2009
List of 100 largest APS investments at 31 March 2009
List of 100 largest NAPS investments at 31 March 2009