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

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 2023 we have - and seek to maintain - gender parity across our business, our Executive Team and our Board. We are also very proud that 40% of our colleagues self identify as coming from a minority ethnic group, something remarkable 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 Disability Confident Employer, an accredited Living Wage employer and a signatory of the Race at Work Charter and the Social Mobility Pledge. We also offer gender-inclusive paid parental leave to all colleagues.

We are proud to have achieved a workplace in which 91% 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, charities and community organisations.

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, or 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 investment objectives allow. First, screens can be applied to equities and fixed income, but cannot yet as easily be applied to gilts, government bonds, cash or alternative investments such as commodities or REITs. Second, other objectives, such as ‘values-based’ or ‘religionbased’ investing, or a target return will take precedence over screening.

The equity and fixed income portions of our core plan range are fully screened for violators of the United Nations Global Compact and manufacturers of controversial weapons. Screened plans are: the Tailored Plan, Tracker Plan, Fossil Fuel Free Plan, Pre-Annuity Plan, Preserve Plan and the Impact Plan, which together represent 93% of our asset base.

Our remaining two plans have a specific objective which prevents ESG baseline screening. These objectives are: investing in line with Islamic values (the Shariah Plan) or a target return of c.4% over a five-year period (the 4Plus Plan). The 4Plus Plan also has an actively managed component that further prevents screens from being applied.

In addition to applying baseline screens, we have reduced our overall exposure to tobacco and thermal coal over time. Over 99% of the Tailored Plan, our largest plan by customers and assets, passes BlackRock baseline screens for tobacco, thermal coal, civilian firearms and nuclear weapons. Our asset managers used FTSE and MSCI definitions in applying their exclusions.

Breakdown of exclusions by plan in 2023

Continuation of exclusions by plan:

Our intention is to increase baseline screens in all our screenable plans over time, in line with the views of our customer base. We seek their views through annual surveys, which have a good response rate.

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.

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.

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.

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 and engage with management teams that do not propose timelines for appropriate change.

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 engage regularly with the investment stewardship teams of our managers to articulate the views and expectations of our customer base, which we get from regular surveys and interviews. 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 also seek to drive good corporate behaviour.

We also engage with our managers publicly, on issues of key importance to our customers, such as Living Wages.

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.

PensionBee has a number of key areas of focus when it comes to active ownership of customer assets. We use surveys to get a deeper understanding of the areas of most importance to our customers. 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 regularly join other institutional investors in supporting the most important shareholder resolutions on the issues that matter most to our customers.

4. Voting Choice

BlackRock and State Street Global Advisors have granted us “Voting Choice” from the 2023 proxy voting season onwards. Voting Choice enables institutional clients, such as PensionBee, the ability to participate in voting decisions at the AGMs 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 86% 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 for voting in these plans from 2023 onwards. We selected this voting policy as it best aligns with our customers interests and expectations, which we collect annually via a survey.

We publish the outcomes of each voting season on our ESG Document Hub as soon as the data is available from ISS.

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 this voting across all plans over time.

5. Climate commitments

Net zero

In 2022 PensionBee announced that it had achieved carbon neutrality of Scope 1 and Scope 2 (market-based) emissions in accordance with PAS 2060.

We have also committed to achieving net zero emissions across the entire business by 2050. This commitment is applicable to all direct (Scope 1) and indirect (Scope 2) operational emissions, as well as emissions from our wider value chain (Scope 3).

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.

In 2022, we continued disclosing under the Streamlined Energy & Carbon Reporting (‘SECR’) framework. We have reported on all of the emission sources required under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

In 2022 we also began disclosing under the recommendations of the Taskforce for Climaterelated Financial Disclosures (‘TCFD’) for the first time.

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 continue to 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. 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 active participants of ShareAction’s Good Work Coalition, where we regularly co-sign letters with other large institutional investors to demand listed companies pay their staff the Living Wage. We supported the Good Work Coalition’s 2022 campaign on ‘Engaging the Supermarket Sector on the Living Wage’, attending investor engagement workshops with representatives from the supermarkets, adding our public support to the Living Wage shareholder resolution at Sainsbury’s AGM in June 2022.

From 2021 we’ve been an investor signatory and disclosing participant under the Workforce Disclosure Initiative (WDI) and were short-listed for an award in the ‘Best First Time Responder’ category. 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 2022, our WDI disclosure score was 89%, as compared to a financial sector average of 67%. From 2022, we also began to ask the companies in our supply chain to disclose under the WDI.

Frameworks and disclosures

We report under SASB, GRI, Bloomberg GEI, WDI, SECR and TCFD. 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: 26-09-2023