PensionBee Environmental, Social & Governance (ESG) Policy

PensionBee’s approach to integrating material ESG factors into its investments for the long-term benefit of customers, society and the planet.

Contents

1. Our approach
2. Exclusionary screens
3. Engagement and active ownership
4. Voting Choice
5. Climate commitments
6. Working with others
7. ESG disclosures and benchmarking

1. Our approach

PensionBee’s mission is to make pensions simple, so that everyone can look forward to a happy retirement. We work to make this vision a reality for our customers, in the form of financial freedom, good health and social inclusion.

We believe that pursuing all of these pillars of a happy retirement - financial freedom, good health and a socially inclusive society where there are strong corporate role models - will lead to bigger pensions for our customers.

As part of our mission we seek to maintain a socially inclusive workplace that not only reflects the rich diversity of the UK population, but that is also a welcoming place for historically underrepresented groups in the pensions and financial services sector.

In achieving our vision, we also aspire to be a role model within corporate society and to lead by example. This means in 2024 we seek to maintain gender parity across our business, our Executive Team and our Board. We are also very proud that 36% of our colleagues self identify as coming from a minority ethnic group, something rare in financial services.

Every PensionBee employee is eligible to receive company equity as part of their annual compensation, so we all enjoy and benefit from the future success of our business. We are a Level 2 Disability Confident Employer, and an accredited Living Wage employer, paying London Living Wage as a minimum, regardless of where employees are located across the UK.

We have made a voluntary commitment to a number of pledges and social impact initiatives; we are a signatory of the Race at Work Charter, the Social Mobility Pledge, Tech Talent Charter and the Diversity Project. We also offer gender-inclusive paid parental leave to all colleagues.

We are proud to have achieved a workplace in which 90% of colleagues tell us they feel aligned with PensionBee’s mission, vision and values.

In our local community, our colleagues strive to be good role models in the society in which we all live, through our work with local state secondary schools and community organisations.

Through our Diversity and Inclusion programme led by Executive Management, we fundraise for and highlight the work of a range of charities. In 2023 these included; Breast Cancer Now, Micro Rainbow, The AHOY Centre, Brentford FC Penguins and YoungMinds.

As part of our vision for helping our customers achieve a happy retirement we take our responsibilities as an asset owner to heart. We recognise we have an important role to play in driving positive change through our customers’ ownership in some of the world’s largest companies.

We believe that effectively managing our ESG priorities will help preserve our resilience and drive long-term value for all our stakeholders. We pursue our ESG work transparently, disclosing our targets and relevant metrics, an approach which supports accountability and enables us to keep our stakeholders apprised of our progress.

In 2022 we conducted our first ESG materiality assessment, to identify and prioritise the ESG issues most critical to our business and inform our ESG roadmap.

Investment philosophy

PensionBee’s investment philosophy is carried across all its investment plans, to the extent compatible with the desired financial outcomes. PensionBee’s investment philosophy is that investments should be: diversified, low-cost, simple to understand, screened and offer 100% FSCS protection.

In order to deliver these objectives, PensionBee plans are predominantly index-based investments via existing pooled funds. This means that our plans generally don’t carry the risks associated with active management and returns will keep in line with the benchmark or index they track.

As a result of our investing approach, our customers are the owners of thousands of companies around the world. At PensionBee we believe in the engagement with consequences approach. This means we want to work with all companies to help them become better corporate citizens and create an investment system that rewards positive impact to the planet and society.

However, there will always be some companies that it is not possible to engage with. These companies engage in harmful business activities, such as the manufacture of weapons expressly intended for use against civilians, tobacco producers or those who continually break international norms in line with the United Nations Global Compact (UNGC).

To unify our investment philosophy with our responsibility as an asset owner and position as a corporate role model, our approach to ESG integration is asset-based screening complemented by investment stewardship.

2. Exclusionary screens

Baseline screens

We seek to apply baseline ESG exclusionary screens where both the asset class and the plan’s investment objectives allow. First, screens can be applied to equities and corporate bonds, but cannot yet as easily be applied to gilts, government bonds, cash or alternative investments such as infrastructure, real estate or commodities. Second, other objectives, such as ‘religion-based’ investing or a target return will take precedence over screening.

Six of our plans have ESG baseline screens for equities and corporate bonds. Please see the table below for a full breakdown of screens by plan. Our asset managers use FTSE, MSCI and Dow Jones definitions in applying their exclusions.

Breakdown of exclusions by plan in 2024:

Continuation of exclusions by plan:

Two of our plans have a specific objective which prevents ESG baseline screening. The objective of the Shariah Plan is to invest in line with Islamic values, so the plan is screened for sectors inconsistent with Sharia law, some of which are reflected in the table.

The objective of the 4Plus Plan is an annualised target return of c.4% above the cash rate over a minimum five-year period. Whilst the majority of the 4Plus Plan’s underlying SSGA funds do contain baseline ESG screens, the fund has an actively managed component and managers have discretion to use unscreened third party funds to meet the target return objective.

Further exclusions

We continue to work with asset managers to further expand the scope of ESG integration into our plan range, where there is the availability of building blocks and transaction costs can be kept to a minimum. We do this in line with the views of our customer base, which we seek through surveys.

In 2022, BlackRock announced it was adopting a formal ESG policy for their LifePath strategy, which the Tailored Plan is based on, and committed to achieving a 50% reduction in carbon emission intensity by 2029.

In early 2023 we launched our latest sustainable investing option, the PensionBee Impact Plan, in response to customer demand for a mainstream impact investing option. The plan exclusively invests in companies solving the world’s greatest social and environmental challenges. It also has the most stringent exclusion criteria of all our PensionBee plans.

Our Impact Plan is the latest in a series of PensionBee customer-led plan innovations for the UK pensions market, following our launch of the UK’s first mainstream Fossil Fuel Free Plan in 2020. These customer-led plan innovations seek to elevate the ambition of all UK savers, that their pension can be invested in line with their values, to build a better world whilst they save for retirement.

In 2023, SSGA announced a number of ESG changes to their UK funds. Exclusionary screens for tobacco and thermal coal were introduced to the Tracker and Pre-Annuity Plans. And as a result of environmental and social characteristics to the investment process for the Preserve Plan, the plan was reclassified from Article 6 to Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

Gambling is considered a controversial sector due to the impact it can have on families, communities and mental health. Therefore, gambling has been actively excluded from some of our investments, including our Impact and Shariah Plans.

3. Engagement and active ownership

Pensions have the collective power and potential to change the world for the better. Trillions of pounds are invested in companies that can improve or harm the planet and society through their business activities. At PensionBee we believe that companies that focus on their contribution to society and the planet have a better long term chance of being financially sustainable and will bring stronger returns for our members.

Through indexing our customers are universal owners in the investment system. This means they own shares in most major global companies and our asset managers, BlackRock, State Street Global Advisors and Legal & General Investment Management, as index portfolio managers, do not have discretion to edit securities outside of the relevant index. Through ownership in all these companies, we have the collective power to encourage good corporate behaviour, and drive positive change for the benefit of our customers.

Whilst exclusions work for some types of companies, we believe in the engagement and active ownership approach. We think our role at PensionBee is to be a responsible and vigilant asset owner, to help challenge bad corporate behaviour where it has a material impact on our customers’ pensions and to engage with management teams that do not propose timelines for appropriate change.

We use surveys in order to understand the areas of most importance to our customers when it comes to active ownership. Data from our 2020, 2021, 2022, 2023 surveys of customers in the Tailored Plan gives us insight into the areas of most importance to our customers as investors, but also participants in UK society, the labour force and on this planet.

• Climate change, ensuring we hold the world’s biggest polluters to account
• Halting deforestation, habitat loss and ocean pollution
• Respecting human rights, ensuring the fair treatment of direct and supply chain workers
• Diversity and inclusion, closing gender and ethnicity pay gaps, ensuring companies truly reflect the societies they operate in at every level
• Paying wages that represent true cost of living, the Living Wage and the London Living Wage

We’ve also extended surveying to customers in the Tracker Plan, the 4Plus Plan, and the Fossil Fuel Free Plans. Survey results can be found in our ESG Hub.

Our managers use direct engagement before AGMs to advance material sustainability insights to enhance long-term risk adjusted return and then block vote across all the assets, where they do not make sufficient progress with the engagement. For some companies voting is the only way to signal dissatisfaction with the direction of travel.

As active owners we meet with the global investment stewardship teams of our managers on a regular basis to understand the rationale behind their engagement policies and to provide robust challenge to their voting record on areas of key focus for our customers. We do this with the purpose of driving up levels of transparency and accountability around their direct engagement activities, applying scrutiny to their voting record and demonstrating our commitment to active ownership.

We will also engage with our managers publicly on issues of key importance to our customers, such as Living Wages. We do this with the purpose of raising public awareness of the issue in the run up to a vote. In 2022 we publicly called upon our asset managers to support the Living Wage shareholder resolution at Sainsbury’s AGM, as part of the Good Work Coalition.

We also have a history of working with other institutional investors to publicly endorse climate-related environmental resolutions, including those associated with risks of new fossil fuel financing. We work in coalition with investors who share an ambition to mitigate climate risk in investee companies and as part of a broader movement to increase transparency for and accountability to shareholders in the system. We also do this as part of our vision to live in a world where everyone can look forward to a happy retirement.

4. Voting Choice

BlackRock and State Street Global Advisors granted us “Voting Choice” from the 2023 proxy voting season. Voting Choice gives institutional clients, such as PensionBee, the ability to participate in voting decisions at the in-scope Annual General Meetings (AGM) of the major global companies where they are asset owners.

From 2023 Voting Choice was offered in three PensionBee plans; the Tailored Plan, the Tracker Plan and the 4Plus Plan, which together represent 85% of the asset base. Under Voting Choice we are offered the ability to vote using a standardised voting policy from Institutional Shareholder Services, a global proxy voting provider.

PensionBee has used ISS’s Socially Responsible Investment (SRI) voting policy in these plans from May 2023 onwards. We selected this voting policy as it best aligns with our customers’ vote preferences, which we collect annually via a survey which uses historic shareholder votes as a way to measure the changing views and expectations of our customer base.

The ISS SRI voting policy supports well framed environmental and social resolutions that seek to promote good corporate citizenship while enhancing long-term shareholder and stakeholder value. The SRI policy can also vote against the management of heavy carbon emitting companies where ISS determines they are not taking the minimum steps needed to be aligned with a net zero by 2050 trajectory.

We publish the outcomes of our voting surveys, vote records and voting reports for each proxy voting season on our ESG Hub.

Our Impact Plan and our Fossil Fuel Free Plan also use bespoke directed voting, to advance long term interests of the planet and society, and support environmental and social shareholder resolutions, in line with the objectives of the plans.

For our remaining plans, our managers will continue to use direct engagement before votes to advance material sustainability insights to enhance long-term risk-adjusted returns and then block vote across all the assets.

We will continue to work with managers to expand the scope of voting across all plans over time.

5. Climate commitments

Net zero

In 2023 PensionBee made its net zero commitment to achieving a long-term reduction in greenhouse gas (GHG) emissions across all operations and investments by 2050. These targets are aligned with the Paris Agreement and are consistent with emissions reductions required to keep warming within 1.5°C.

To achieve this, PensionBee will reduce Scope 1 and 2 GHG emissions by 90% by 2050 from a 2022 baseline. Our long-term target for Scope 1 and 2 absolute emissions by 2050 is 1.2 tCO2e.

The Company will also reduce Scope 3 (Category 15 GHG Protocol) emissions associated with the investment portfolio by 90% by 2050 from a baseline of 2019. The long term WACI emissions target is 17.8 tCO2e per $m Revenue by 2050.

We also committed to reviewing our target ambition and metrics regularly and publishing progress annually. This is to ensure that we remain aligned with the best understanding of the science required to achieve 1.5°C limited warming by 2100.

Our full net zero commitment, our Streamlined Energy & Carbon Reporting (‘SECR’) framework and full disclosure under the Task Force for Climate-related Financial Disclosures (‘TCFD’) can be found in the climate-related disclosures section of our Annual Reports.

Climate collaboration

PensionBee is part of the Mayor’s Business Climate Challenge (‘BCC’), an ambitious energy efficiency programme which supports businesses to reduce their energy consumption, to accelerate building-decarbonisation efforts and contribute to London’s target of becoming a net zero city by 2030. In 2023, we received a special recognition from the Mayor of London for being a leading London business taking action to reduce energy consumption and carbon emissions by over 10%.

All of our asset managers, BlackRock, State Street and Legal & General Investment Management are aligned with the TCFD recommendations, and they are all members of the Net Zero Asset Managers Initiative. They regularly disclose their own net zero commitments and also support the companies in which they invest in developing credible transition plans of their own, including setting corporate emission reduction goals.

Minimising our impact on the environment

In order to minimise our environmental impact, we only use cloud-hosted web services which remove the need for servers. Our website is powered by 100% renewable energy with Cloudflare Pages, now in partnership with The Green Web Foundation, for which we have received a green certification.

Companies that commit to powering their operations with 100% renewable energy with Cloudflare are required to match their total energy usage with electricity produced from renewable sources. Our office premises on Blackfriars Road use 100% renewable REGO sustainable green electricity and we are committed to reducing carbon emissions each year. The office is centrally located next to Southwark and Waterloo stations and is easily accessible by public transport. We also offer bike storage and showers for those who wish to run, walk or cycle.

We offer fully remote working to all employees, which greatly reduces commuting emissions for those who wish to work permanently from home, as well as allowing us to recruit from further afield, in a more inclusive way. We also have low business travel emissions as most of our meetings were held virtually or in central London, where we are based.

PensionBee is a paperless pension provider. Our communications are digital, with annual statements available to download in the BeeHive. We estimate the pensions industry still sends out approximately 40m paper packs each year by post and we have long campaigned for other providers to reduce their use of paper.

Each year we donate old working laptops to our partner school, which are used by their careers service to increase employability prospects through online training and skills development. Other unneeded office equipment is recycled or given away to employees.

6. Working with others

We recognise that collectively as asset owners we have the power to change the investment system to address most social and environmental issues facing the planet for the benefit of our customers. To do that not only must we work together but we must also try to open up debate and raise awareness with new audiences.

This was our intention behind becoming the Make My Money Matter campaign’s first pension pledge partner. It is also why we engage with a number of initiatives as an asset owner that will allow us to act collectively with other investors where appropriate.

Since 2020, we have been an active member of ShareAction’s Good Work Coalition. We join other accredited Living Wage investors to collectively engage companies on good work standards, such as paying the Living Wage, providing secure work through Living Hours and taking action on diversity and inclusion through the Ethnicity Pay Gap Campaign. In 2023 we have continued to add our name to calls for publicly listed companies to prioritise support for their lowest-paid employees and meet the new real Living Wage rates during the cost of living crisis.

From 2021 we’ve been an investor signatory and disclosing participant under the Workforce Disclosure Initiative (WDI). The WDI aims to improve corporate transparency and accountability on workforce issues, provide companies and investors with comprehensive and comparable data and help increase the provision of good jobs worldwide. In 2023, our WDI disclosure score was 99%, as compared to a financial sector average of 64%. In 2023 we won two WDI Awards for our submission and efforts in collecting data; the WDI Award for the company with the most complete response and the Contingent Workforce Data Award.

7. ESG disclosures and benchmarking

PensionBee has received recognition across numerous ESG frameworks, rating agencies and indices. We voluntarily submit our ESG data to organisations such as the Sustainability Accounting Standards Board (SASB), the Workforce Disclosure Initiative (WDI), Global Reporting Initiative (GRI), S&P’s Corporate Sustainability Assessment (CSA) and Bloomberg’s Gender Equality Index (GEI). We have also been independently assessed by ESG raters such as ISS, Refinitiv, and EthiFinance.

In 2023 we joined both the FTSE All Share and the FTSE4Good Index (which is owned by LSE’s FTSE Russell). Additionally, in 2023 we became an active participant in the UN Global Compact and made a commitment to conduct our business in alignment with universal sustainability principles.

You can find all our disclosures in our ESG Document Hub.

As part of our commitment to increasing our transparency in all the strands of ESG, we will disclose under additional frameworks as data becomes available and in response to future incoming regulation as it relates to climate-related disclosures.

Your views

Everything we do at PensionBee is shaped by the views of our stakeholders. We welcome your thoughts and suggestions on this policy and on our evolving approach to ESG by email: [email protected].

Last edited: 01-03-2024