Tracker Plan investor update Q3 2020

Konrad Święcicki

by , Investment Manager at State Street Global Advisors

18 Nov 2020 /  

18
Nov 2020

bar graph going up in white against a yellow background

Hi, I’m Konrad Święcicki from State Street Global Advisors, and I’m here to give you an update about the Tracker 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?

Economic growth rebounded across the globe in the third quarter amid relaxation in COVID-19-related lockdowns, government and central bank support and pent up demand being released. However, growth momentum decelerated toward the end of the third quarter as governments cut back support and services growth remained restricted given persistent and rising COVID-19 cases. In short, the uncertainty evident for much of this year remained, meaning the value of your plan will have varied over the past three months.

In light of this, the plan was down 0.25% for the quarter ending in September, bringing the year-to-date return to -6%. Whilst down modestly during the third quarter, the plan has recovered from its March lows.

As a reminder, the aim of the Tracker Plan is to help grow the value of your savings over the long-term, having returned 7.72% annualised over the past five years. So even though we are seeing some bumps in the road now, it is important not to overreact to short-term shocks.

What can savers expect for the next quarter?

The global economy and stock markets have made reasonable strides to recover from low points earlier in the year, with the current trajectory suggesting a positive outlook over the coming months. However, challenges lie ahead as greater uncertainty is expected around rising COVID-19 cases, Brexit, and the US election.

The second wave of the coronavirus pandemic has now materialised, prompting many European states, including the UK, to increase social and business restrictions. This is likely to hinder economic recovery over the next quarter and present companies with a more difficult operating environment.

Formal Brexit talks have resumed meaning the possibility of reaching a deal in the near-term remains. However, savers should expect uncertainty during this period as the exact details of the solution become known. Faced with the dual threat of a global pandemic and Brexit, UK companies have lagged global peers and will likely continue to face challenges. Savers should expect variations in their plan value as a result of this.

Whilst we expect a difficult market environment over the next quarter, with many unpredictable factors, I’d like to remind you of the diversified nature of the Tracker Plan. It holds a combination of different types of investments, aiming to limit the extent to which your savings suffer from this market uncertainty, whilst growing the value of your savings over the long-term.

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.

Have a question? Call our UK team 020 3457 8444

Have a question?

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