Preserve Plan investor update Q3 2020

Nick Pidgeon

by , Senior Investment Manager at State Street Global Advisors

18 Nov 2020 /  

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Hi, I’m Nick Pidgeon from State Street Global Advisors, and we’re here to give you an update about the Preserve Plan, which you are invested in.

How did the plan perform compared to the market, over the last three months? Did we have a good quarter or a bad quarter?

The Preserve Plan invests into short-term debt of high rated creditworthy companies with the principle aim to reduce risk and preserve your savings. COVID-19 led market stresses - which had prevailed over the second quarter of 2020 - eased throughout the third quarter. Improved market conditions resulted in lower returns for the short-term debt purchased for the plan. The plan performance, however, remains positive to short-term market conditions.

What can savers expect for the next quarter?

Challenging conditions are set to continue unfortunately, with the economic outlook remaining clouded as COVID-19 cases increase and tighter lockdown measures are implemented. These will likely have negative ramifications on the economy.

On a more positive note, the potential for a Negative Interest Rate Policy (NIRP) remains a threat, but expectations of this happening eased after Bank of England Governor Andrew Bailey said that the Bank were not about to use negative interest rates imminently and that the bank has a lot of work to do before considering cutting interest rates below zero.

Brexit trade negotiations are ongoing however at this stage, so it is impossible to say with any degree of certainty that a trade deal will be agreed within permitted time scales.

How has State Street Global Advisors driven positive social change in the past quarter?

Our aim is to promote positive changes to the environmental, social and corporate governance practices in the companies that the Plan invests in by engaging with them and voting on resolutions at company annual general meetings.

Climate change has been, and will continue to be, a key area of focus for our stewardship endeavours. As a result of the impact from COVID-19 the attention of many companies has shifted from longer-term sustainability matters to more immediate ESG and economic factors. It is important that companies focus on the short-term issues that have arisen but this should not be to the detriment of systematic risks, such as climate change, hence we have continued to engage with companies on the topic. So far this year we have had 72 specific climate-related engagements and they have focused on having companies:

  • Address the risk of climate change on their business
  • Commit to reducing carbon emissions
  • Educate boards ensuring directors are aware of climate risks
  • Provide climate reporting which conforms with relevant standards

Coupled to our engagement efforts to drive positive change, is the use of our vote at shareholder meetings. In recent years most climate-related shareholder resolutions were targeted at energy companies. This year however, we have seen a growing number aimed at financial institutions. One such example is a shareholder resolution raised with Barclays by the responsible investment charity, ShareAction. The resolution sought to direct the company to stop financing energy and utility companies that are not aligned with the Paris Agreement.

Following engagements with shareholders and ShareAction, Barclays announced a plan to reach net zero carbon emissions by 2050 and a commitment to align all of its financing activities with the goals and timelines of the Paris Agreement. Barclays also submitted its own management resolution on climate for investors to consider at the annual meeting vote. The spirit of both resolutions was broadly similar but we opted to support Barclays’ resolution and abstain from the resolution submitted by ShareAction for the following reasons:

  • We believe Barclays’ proposal was the more ambitious of the two. Further, Barclays’ ambition to achieve net zero emissions by 2050 covers all of its portfolio, not just lending (as proposed by ShareAction’s resolution).
  • The resolution submitted by Barclays sought to transition its provision of financial services across all sectors to align with the Paris Agreement, whereas ShareAction’s resolution was too narrowly focused on the “phaseout” of specific financial services in the energy and power sectors.
  • The passing of both resolutions could have created legal uncertainties, as they are both binding.

We will continue to engage and vote on climate change matters and our recently published Annual Climate Stewardship Review which providers further insights into our activities can be found here.

Your updated fact sheet will soon be available to download in the BeeHive. If you’d like to ask a question in the next update or share your thoughts, you can get in touch with PensionBee via email or Twitter.

As with all investments, past performance is not indicative of future performance and you may get back less than you start with.

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