On behalf of the Trustees of the TfL Pension Fund (the “Fund”), I am 
pleased to present our third Annual Report on Sustainable Investing. The 
report builds on our experience from the last two years in significant ways 
but at the same time preserves important learning threads and the Fund’s 
core investment beliefs. Sustainability is an evolutionary process for the 
Trustees, embracing key changes based on well thought through framework 
and evidence, but at the same time being bold and leapfrogging where 
benefits are clear-cut. The adoption of TCFD (Task Force on Climate-
related Financial Disclosures) reporting, well ahead of the regulatory 
requirements, is a good example of that.
The Trustees continue to use all three building blocks of Sustainable 
Investing, namely targeting better Environmental, Social and Governance 
outcomes for the Fund’s portfolio of public and private companies. This is 
seen as key part of a robust risk management process, consistent with the 
long-term investment horizon of the Fund. ESG now makes up a significant 
part of the Trustees’ ongoing dialogue with the Fund’s managers and the 
adviser as part of a fully integrated investment process. Another important 
development this year was the appointment of Sustainalytics as the Fund’s 
voting and engagement partner. This would help to materially step up our 
activities in this area and complement the ESG integration process.  
It is fair to say that whilst the Trustees have achieved a lot, there is an 
honest acknowledgement that more should and will be done. Some 
of it will be driven by better understanding and evaluation of the risk-
return trade-offs involved, and that would require continuous learning 
and following (or in some cases setting) the “industry best practices”. 
Regulation – both local and global – will be the other catalyst for the 
change. The Trustees expect to be pro-active on both fronts. 
Ultimately, sustainability is not just about managing risks, but also making 
profitable investments in areas that will be part of the solution – more 
important than ever in the Covid-19 “new normal”. The Trustees will 
continue to build on the strong momentum in this area, expecting to 
increase allocation to “ESG tilted” investments.
I trust you find the report interesting, engaging and above 
all helpful to better understand the Trustees’ approach in 
this area.
Maria Antoniou
Chair, TfL Pension Fund
TfL Pension Fund
2020 Report on Sustainable Investing
Executive Summary:
	
In recent years ESG investing has gained a real foothold in the investment 
industry and in the wider society at large. Once considered niche by 
some in the financial markets, ESG and sustainable investing is now regularly 
in the mainstream media and is expected to continue to grow rapidly over the 
coming years.
	
This is the third year the Fund has published its Sustainable Investing 
Annual Report and we are pleased to be able to share this now with 
you. This Report captures the on-going efforts and evolving activities the Fund 
has undertaken during 2019/20 as it continues along its important journey to 
integrate ESG considerations across all of its investments. As we go to publish, 
ESG issues have never been as important than they are right now, especially 
following the devastating social and economic havoc wreaked by the COVID-19 
pandemic.
	
As a provider of responsible long-term capital, the Trustees strongly 
believe that the Fund should be an agent of positive change, 
collaborating with like-minded investors and engaging with companies to invest 
its members’ pension money sustainably and responsibly.
	
The Trustees recognise that transparency and disclosure of its ESG 
Policy and related activities in this area is a key component of being a 
responsible investor.
	
The Fund continues to employ the “RISEN” framework to reinforce its 
long-term thinking in this area (see page 3 of this Report).
	
2020 was another busy year with the Fund continuing to adapt to stay 
ahead of an evolving ESG regulatory landscape. The Fund updated its 
Statement of Investment Principles (“SIP”) in March this year following further 
regulatory changes to the requirements for the SIP. More changes are expected 
next year. 
	
In the twelve months to 31 March 2020, carbon emissions across the 
Fund’s active equity and bond portfolio declined a further 3.4% and since 
2017 have fallen significantly by around 26% (see page 5 of this report).
	
Across its corporate bond portfolio, the Fund delivered a 50% reduction 
in carbon emission intensity versus the benchmark (see page 5).
	
68 companies excluded across the Fund’s active segregated mandates, 
based on the criterion that the companies derived 30% or more of their 
revenues from either thermal coal extraction or thermal coal electric generation.
	
The Fund was an early voluntary adopter of the Task Force on Climate 
Related Financial Disclosures (“TCFD”) in its annual Report & Accounts 
for 2020 (see page 6).
	
The Fund scored A or A+ on all modules in its 2020 PRI Assessment, 
with some areas again performing consistently higher than the median 
scores of all respondents (see page 18).
	
In its 2020 PRI Assessment, the Fund also included additional 
asset classes for assessment such as private equities, property and 
infrastructure, scoring A in these modules (see page 18).
	
Since it first started tracking its ESG scores in 2017, the Fund continues 
to outperform its benchmark for its active equity and bond portfolios 
(see page 15).
	
The Fund’s portfolio continues to outperform its benchmark on the 
wider SDG framework, namely MSCI World, MSCI Emerging Markets and 
MSCI Small Caps (see page 16).
	
Appointment of Glass Lewis, internationally recognised as one of the 
leading providers of corporate governance information, to oversee the 
Fund’s proxy voting would bring consistency and sharper focus to the Fund’s 
proxy voting record (see page 10).
	
Sustainalytics, a leading provider of ESG research, ratings and analysis, 
also on-boarded to provide an engagement-based voting overlay to 
supplement Glass Lewis as well as direct engagements with investee companies 
(see page 11).
	
Voted at over 545 meetings with over 350 active engagement dialogues 
with public companies across various platforms– Sustainalytics, Climate 
Action 100+ and manager-led engagements on issues relating to ESG and 
responsible investing.
	
The Fund continues to work in partnership with its managers to source 
investment opportunities that not only offer attractive rates of return, 
but equally are aligned to the United Nations Sustainable Development Goals 
(“SDGs”). Here we showcase some of these exciting investment opportunities 
that the Trustees are proud to be part of (see page 19).

TfL Pension Fund | 2020 Report on Sustainable Investing
2
Investment Beliefs
1. Risk and return are related, but not all risks are rewarded
2. Clear objectives are essential and should be liability related and funding 
driven
3. An active corporate governance programme can add value
4. Skilled investment managers do exist and it is possible to outperform the 
market
5. Timing is important: asset valuation cannot be ignored when planning 
strategic change
6. Long-term focus is important in thinking about investment strategy 
and implementation
7. Return and sustainability are not conflicting objectives and the main 
objective of the Fund is to deliver superior investment returns and 
sustainability is a part of this, not some standalone objective
8. Climate change is a significant long-term financial risk which has 
potential to impact all holdings in the portfolio over time if not 
properly managed
9. There is frequently a first mover advantage, but to exploit it requires a 
willingness to take unconventional risk
10. Diversification helps to control risks and improve efficiency
11. Illiquidity is frequently rewarded in the long-term
12. The equity market is generally rewarded in the long-term
13. Unrewarded risks should be mitigated where possible
14. The implementation of any investment or strategy should be cost effective 
and at an appropriate price relative to the opportunity
Before we begin to look in more detail at each section of the Report, now is a good point to remind ourselves of the Trustees’ Investment Beliefs. The following 
Principles reflect those beliefs and are intended to set the background against which all investment related decisions are taken to the benefit of the Fund. All 
discussions and decisions from investment strategy and implementation through to tactical views and funding should be taken with these beliefs in mind. Although all 
beliefs are equally as important as each other, for the purposes of this Report, specific attention is drawn to Belief numbers 3, 6, 7, 8 and 10.
BACKGROUND
Regulation and Investment 
Framework update
SUSTAINABILITY PROGRESS: 
QUICK CHECKLIST
Noteworthy progress made 
since our last publication
CLIMATE CHANGE RISK:
MEASUREMENT & MONITORING
Continue assessing the resilience of 
our investments to climate risks 
VOTING & 
ENGAGEMENT
Collaboration with like-minded 
investors enhance our progress
ESG REPORTING
Assessing ESG outcomes 
through different angles
UNPRI
Achieved A+ or 
A scores across 
all categories 
WAY AHEAD
CASE STUDIES 
Investments with material 
ESG outcomes
TfL Pension Fund’s ESG Journey Continues
but IS A LOT more advanced than just a few years ago

Background
Regulation and Investment 
Framework update
Pensions Regulation
Fiduciary duties and 
the prudent person principle
Investment Framework
•	 In the world of ESG and responsible investing nothing stands still for very 
long and 2020 was no exception as the Fund had to once again adapt to stay 
ahead of an evolving regulatory landscape. For the second year running, the 
Fund updated its Statement of Investment Principles (“SIP”) in March this 
year following further regulatory changes to the requirements for the SIP. 
•	 Before we look at some of these changes, however, it is worthwhile having a 
recap of changes made to the SIP in 2019. It was updated so that it covered 
the Trustees’ polices in relation to material financial and non-financial 
considerations (including ESG considerations) in the selection, retention and 
realisation of investments and voting and engagement activities in respect of 
their investments (e.g. stewardship).
•	 Further changes came into effect in June 2019, namely ‘The Occupational 
Pension Schemes (Investment) Regulation 2005’ to implement aspects of 
the EU’s second Shareholders’ Rights Directive (“SRD II”) covering workplace 
pension scheme stewardship and governance. The new Regulations 
significantly expanded the SIP requirements in addressing stewardship in 
more detail and revised trustees’ investment disclosure obligations.
•	 By 1st October 2020, under this new legislation trustees of defined 
benefit schemes are required to update their SIPs so that it includes 
their policies on the following: 
	
-	 Explain their arrangements with asset managers, including how 
they incentivise their appointed managers to align investment 
strategy with the trustees’ policies and to make investment 
decisions based on long-term performance.
	
-	 Set out the methods by which they monitor and engage with 
investee companies and other stakeholders in relation to their 
capital structure and the management of conflicts of interest.
•	 In addition to the above, trustees will also be required to:
	
-	 Produce a form of implementation statement on their 
engagement and voting practices setting how they acted on the 
principles set out in the SIP during the preceding scheme year.
	
-	 Publish their SIPs, and later, their implementation statements free 
of charge on a publicly available website.
•	 Following a thorough review of the above changes and having consulted with 
TfL as Principal Employer, the Trustee Board approved and incorporated 
them in the SIP in March 2020, well ahead of the 1st October deadline. 
•	 Looking at the implementation statement, all schemes must prepare one for 
inclusion in their first annual report and accounts produced after 1st October 
2020 and within seven months of the end of each scheme year. As the Fund 
issued its Report and Accounts for 2020 prior to 1st October, it will look to 
produce its first implementation statement before 1st October 2021. 
•	 It should be noted that a certain level of disclosure already takes place in 
the Fund’s Annual Report and Accounts. For DB schemes like the Fund, the 
content in the statement is generally limited to report on the engagement 
activities and votes exercised during the year. The Fund will need to set out 
how and the extent to which, in the opinion of the Trustees, the policies in 
the SIP relating to the exercising of voting rights and engagement activities 
have been followed during the year. Equally, it will need to describe voting 
behaviour by, or on behalf of Trustees (including most significant votes cast 
by the Trustees or on their behalf) during the year and state any use of the 
services of a proxy voter during that year. 
•	 The appointment of Sustainalytics together with the consolidation of voting 
through Glass Lewis will assist the Fund in the preparation of the information 
for reporting in the 2021 Annual Report and Accounts.
•	 As well as operating by reference to these specific investment regulations, 
there are also broader legal concepts which need to be taken into account in 
investment decision making, as explained next.
•	 For Trustees of DB schemes like the Fund, there are three core duties that 
they must consider when making investment decisions:
	
-	 Exercise investment power for its proper use – the purpose of a trustee’s 
investment power is to invest in such a way as to provide the promised 
benefits in full.
	
-	 Take account of relevant financial factors – trustees should consider ESG 
issues as financially material factors. There is a growing body of evidence 
to suggest that ESG issues, like climate risk, can have a material impact on 
long-term risks and return outcomes. Incorporating ESG considerations 
into investment decision making is therefore critical for the health and 
well-being of the Fund in the long-run.
	
-	 Act in accordance with the “prudent person principle” – recent advances 
in artificial intelligence and machine learning have improved ESG data, 
particularly data on climate risks and related financial opportunities. 
Trustees should now consider how future scenarios, such as a transition 
to a low carbon economy, could impact their schemes assets (and 
liabilities) and what a prudent course of action should be to mitigate 
against and contain any risks while also seeking any related financial 
opportunities.
•	 As in earlier reports it is useful to remind ourselves of the framework which 
the Trustees employ to guide them when looking at ESG and sustainable 
investing, what we have come to term the “RISEN” framework:
	
-	 Recognising that companies which fail to recognise and handle their social 
and environmental impacts with care, or ones that do not adopt ethical 
and responsible governance practices are poor long-term investments 
because they will be prone to financial losses and loss of reputation. 
	
-	 Improving its ESG approach and practices from ongoing learning and 
doing, recognising that this is a growing area for the Trustees and clearly 
more can and will be done as the collective knowledge improves over 
time.
	
-	 Seeing ESG factors not in isolation but as part and parcel of the 
investment process with a view to making ESG integration less of a 
labelling exercise and more of a push towards real and positive long-term 
changes in the underlying companies the Fund has invested in.
	
-	 Engaging with investment managers both during the selection process and 
their ongoing monitoring to understand how ESG is taken into account 
from a long-term risk management and valuation perspective. 
	
-	 Nudging investment managers to consider in more detail the impact of 
the activities of companies in which they invest have on the environment, 
particularly when they operate in countries with less sophisticated and 
demanding regulatory requirements. This is to ensure companies are treating all 
stakeholders fairly (shareholders, customers and employees) and conforming to 
standard business principles of transparency, integrity and fair and reasonable 
dealing.
TfL Pension Fund | 2020 Report on Sustainable Investing
3

5. Ongoing 
manager 
monitoring
Reports on quarterly past 
performance figures only. No 
forward-looking consideration 
of manager ESG attributes 
or exposure of mandates to 
climate change risk in the 
longer term.
Active managers are expected 
to demonstrate how ESG criteria 
are being used in stock selection and 
de-selection.
Develops a robust monitoring process – 
reporting qualitatively and quantitatively 
against each manager.
Managers expected to demonstrate 
integration of ESG in investment 
processes rather than the existence of 
separate “advisory” ESG analysts.
Measures alignment of listed equity and 
corporate bond portfolios across 2° 
transition sectors and technologies.
6. Appointing 
new managers
Mentions ESG only as an 
afterthought in tender 
invitations and gives it no 
weight in selection criteria.
ESG is identified in tenders as 
an important issue on which 
potential new managers will be expected to 
demonstrate competency.
ESG credentials key in tender 
process. Investment management 
agreements negotiated to include 
specific ESG requirements.
Responsible investment requirements 
included across all asset classes including 
e.g. side letter terms in private equity 
funds.
7. Stewardship 
& engagement
Not considered relevant. 
Justified based on an incorrect 
assumption that the scheme’s 
investments are all pooled 
and therefore “stewardship is 
impossible”.
Trustee expects managers to report on 
how they have exercised voting rights 
attached to shares (including across 
passive equity mandates).
Managers are expected to be signatories 
to the FRC Stewardship Code.
Managers are expected to report in 
detail on their engagement policies and 
how these have been implemented. 
This should include examples of voting 
against the board on ESG related issues. 
Managers with a poor engagement 
record will be downgraded.
Consider adoption of an off-the-shelf 
voting e.g. AMNT redlines. 
Large schemes: takes an active 
and direct role engaging with investee 
companies across all asset classes.
Considers joining other investors in filing 
climate-related shareholder resolutions 
where companies are underperforming 
on adaptation or disclosure.
Small schemes: appoints proxy voting 
and engagement service reflecting 
trustee’s ESG beliefs and position on 
climate risk.
8. Scenario 
testing
None
Obtains broad estimates from 
consultants as to the potential 
significance of climate change on the 
scheme’s portfolio.
Considers carbon foot-printing 
tests on portfolio. This may focus 
initially on listed equities and corporate 
bonds.
All-portfolio risk assessment (including all 
real asset holdings) to identify exposure 
to transaction risks and potential physical 
damage risk under different climate 
scenarios.
9. Reporting
Sends stock wording to any 
members causing a nuisance.
Some commentary provided to 
scheme members in annual report.
Considers TCFD reporting framework as 
a structure for internal governance.
Reports publicly against TCFD.
10. Industry 
Involvement
None
Relies on advisers to provide updates on 
significant developments requiring action 
and training as required.
Trustee board keeps abreast of industry 
discussions and attends events to 
improve knowledge and observe best-
practice.
Considers becoming a UN PRI Signatory.
Joining investor groups 
such as IIGCC.
Engage with policy makers to improve 
practice across the industry.
Sustainability Progress: Quick Checklist
Noteworthy progress made since 
the publication of 2019 Report 
Sustainability Progress – Quick Checklist | Commitment to continuous improvement
ACTION PLAN
Behind the curve
Unlikely to stand up 
to any serious scrutiny
On the back foot
Getting compliant
On the front foot
Embedding ESG into 
Trustee governance
Getting ahead
Making ESG and climate change a 
key strategic issue
1. Set 
investment 
beliefs
Trustee board relies on its 
investment consultants to tell 
them what to believe. Sets 
nothing out in writing.
Trustee board receives a brief training 
session before minuting that ESG and 
climate change are considered material 
financial factors.
Trustee board spends time on 
training before discussing and
 agreeing a responsible investment 
beliefs statement including a position 
on climate change risk.
Trustee board discusses ESG beliefs at 
least annually. Where applicable, trustee 
seeks to align beliefs with sponsor views. 
Considers alignment of strategy with UN 
SDGs.
2. Review 
existing 
managers
No engagement with existing 
managers.
Takes stock of existing managers 
and uses investment consultant 
scoring framework to rate current 
managers on their ESG credentials. 
However, scores are only used as a 
differentiator where there are other 
reasons to review a manager.
Full consideration of each 
manager’s ESG capabilities (including 
qualifications) with specialist input from 
investment consultants – includes being 
alive to “green-washing”.
Managers which require most attention 
identified and engaged with. Where no 
improvement is forthcoming or possible 
within current mandates, these will be 
reviewed.
All managers expected to demonstrate 
deep ESG integration.
Integrates corporate environmental data 
in manager investment processes.
3. Set a DB 
investment 
strategy
Existing strategy not reviewed.
Trustee keeps existing
strategy under review as ESG 
experience develops.
For active mandates: considers 
diversification across sources of climate 
risk as well as traditional asset classes.
Sustainability and low carbon indices 
considered for passive allocations.
Positive allocation to sustainable 
investment or investment in assets 
aligned with a below 2°C pathway.
Consider tilting portfolio away from 
lower scoring ESG assets or sectors such 
as high carbon emitters.
4. Document 
a Policy
Adds generic wording to SIP at 
suggestion of the investment 
consultant. No further thought 
by trustee.
Trustee does not consider 
wording or how it will be 
implemented in practice. 
Trustee considers wording in the SIP 
reflecting the circumstances of the 
scheme and existing manager mandates.
Trustee agrees how wording is 
implemented in practice with their 
investment consultants.
Trustee develops a stand-alone 
responsible investment policy which 
supplements the SIP. This may start 
with existing manager mandates but will 
progress to deeper integration of ESG 
factors over time.
The policy is periodically reviewed.
Extensive responsible investment policy 
with detailed consideration of ESG in each 
asset class, detailed climate change policy 
and stewardship policies.
Climate change risk embedded across 
other trustee governance and internal 
control frameworks and considered as 
part of an integrated risk management 
framework (including any climate change 
risks pertinent to the scheme sponsor 
covenant).
FURTHER CONSIDERATIONS
YOUR ACTION PLAN
2020
2019
TfL Pension Fund | 2020 Report on Sustainable Investing
4

2020
120,000
100,000
80,000
60,000
40,000
20,000
0
2016
2017
2018
2019
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Climate Change Risk: 
Measuring & Monitoring
Assessing the resilience of our investments to climate risks
MSCI Scope 1 & 2 GHG Emissions
•	 The Fund has been analysing its carbon footprint of companies in its active 
equity and bond portfolio based on MSCI’s scope 1 and 2 GHG emissions 
data 2016. The Trustees continue to remain fully committed to the 
monitoring and annual reporting of the Fund’s “carbon footprint” and more 
importantly in pursuing an engagement policy with respect to addressing 
climate change risk. The following provides an insight into the level of carbon 
emissions from the companies within which we are currently invested as at 
March 2020.
•	 In the twelve months to 31 March 2020, the Fund’s carbon emissions across 
its active equity and bonds portfolio declined by a further 3.4%, falling from 
79,900 tonnes of CO2 equivalents for every million of US dollars sales to 
77,223 tonnes of CO2 equivalents in Q1 2020. From its peak in Q4 2016 
of 104,915 tonnes of CO2 equivalents the Fund has reduced its carbon 
emissions by around 26% as at March 2020. 
•	 As in 2020, the three sectors that stand out as the worst emitters are 
utilities, energy and materials which together account for around 90% of 
the relative carbon footprint of the Fund. More significantly, however, is 
the value of these three sectors added together only account for 9% of the 
Fund’s total market value, which itself has fallen from a peak of around 15% 
in late 2016.
•	 Like most pension schemes, it is important that the Fund holds these sectors 
as part of a balanced portfolio. In an inflationary environment materials and 
energy are typically the sectors that provide protection, while utilities sector 
is often viewed as a classic defensive sector that tends to be more stable 
during the various phases of the economic cycle.
 Industrials
 Information Technology
 Consumer Staples
 Utilities
 Energy
 Real Estate
 Consumer Discretionary
 Materials
 Health Care
 Communication Services
CARBON EMISSION (TONNAGE BY SECTOR)
•	 In general, the overall emission tonnage of the sectors the Fund is invested 
in continue to fall, with the greatest improvements seen in Utilities Sector 
where it is down on an average by around 56% since 2016.
EMISSION TONNAGE REDUCTION – TOP 3 SECTORS
 Health Care
 Utilities
 Consumer Staples
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2020
2016
2017
2018
2019
140
120
100
80
60
40
20
0
Corporate Bond Portfolio Carbon Intensity
•	 50% reduction in carbon emission intensity versus representative benchmark 
across the corporate bond portfolio was achieved (as shown in the chart). 
•	 This reduction is mainly attributed to the fundamental analysis performed 
by the manager, with each entity carefully evaluated and scored on its 
environmental profile relative to its peers. 
Source: Fund Manager
MSCI ESG Carbon Intensity Score
31 Mar 2020
       30 Jun 2020
Portfolio
Benchmark
250
200
150
100
50
0
109.0
103.5
233.4
235.7
LGT Cockpit tool measurement
•	 As with its ESG scoring, the Trustees feel it is important to not rely on a 
single provider for examining its carbon footprint either. For this reason, the 
Fund again made use of leading sustainability manager, LGT Capital Partners 
(“LGT”)’s Cockpit tool as another measure of its carbon footprint. When 
examining the environment footprint of the Fund’s active equity portfolio the 
cockpit uses four different metrics: greenhouse gas emissions (GHG), energy 
consumption, water withdrawal and waste generation. 
•	 Again here, the active equity portfolio displayed superior performance when 
compared to the benchmark on all metrics with the exception being energy 
consumption. As can be seen, GHG, water withdrawal and waste generation 
are significantly lower than the reference index.
Resource Intensity Measurement
per USD 1 million sales
Greenhouse gas emissions
45% lower CO2 emissions p.a.1
corresponds to CO2 emissions of 41 cars
Energy consumption
55% higher energy usage p.a.
corresponds to energy usage of 159 people
Water withdrawal
36% lower water usage p.a.
corresponds to water usage of 82 people
Waste generation
50% less waste generation p.a.
corresponds to waste of 568 people
118.6
metric tons CO2 p.a.1
711.1
megawatt hrs p.a.
6,622.3
cubic metres p.a.
275.4
metric tons p.a.
216.9
metric tons CO2 p.a.1
459.6
megawatt hrs p.a.
10,414.4
cubic metres p.a.
553.1
metric tons p.a.
Positive Impact
per USD 1 million sales
Transport for London 
equity portfolio
Custom
benchmark
TfL Pension Fund | 2020 Report on Sustainable Investing
5

Task Force on Climate Related Financial 
Disclosures (“TCFD”)
•	 In March 2020, the Fund was an early adopter of TCFD, including a 
statement in its Annual Report and Accounts for 2020. Published in 
2017, the TCFD recommendations which have received widespread 
support all around the world, is split into four sections: Governance, 
Strategy, Risk Management and Metrics and Targets to help 
companies identify the risks and opportunities presented by climate 
change. Although voluntary and still in a relatively early stage of 
implementation, the UK government has signalled its willingness to 
make the reporting guidelines mandatory, and the expectation is that 
all companies, including large asset owners like pension schemes, will 
need to disclose in line with TCFD recommendations by 2022. 
•	 The Trustees were keen, however, to be proactive and at the 
forefront by making a voluntary disclosure in the Fund’s Report and 
Accounts for 2020. The objective of TCFD reporting is to lead to 
better-informed decision-making on climate risks, and to improve 
transparency around how companies are assessing, managing and 
reporting climate-related risks. It is essential that the Trustees clearly 
communicate to its members and stakeholders how climate-related 
risks and opportunities are being managed to improve trust and help 
build public confidence. 
•	 One specific aspect of the TCFD reporting is scenario analysis, a 
technique for assessing the Fund’s resilience to different future 
outcomes. This helps Trustees assess how assets may be affected 
by different scenario outcomes. Under this section of this Report we 
take a closer look at some of this scenario analysis where the Fund 
used the Paris Agreement Capital Transaction Assessment (“PACTA”) 
and the Bank of England (‘BoE’) tools to conduct some stress testing 
on the active equity and corporate bond holdings of the portfolio.
Assessing the resilience of our investments to 
climate risks
•	 The Trustees have long recognised that climate change does not only have 
consequences for society at large, but it will also have a material impact 
on investment performance which can affect members’ future retirement 
incomes. For this reason, they are committed to taking actions today to 
safeguard members’ future pensions and livelihoods from the financial risk 
of climate change while also attempting to identify opportunities associated 
with the transition to a low carbon economy.
•	 In order to assess the resilience of its investments to climate risk, the 
Trustees have undertaken an exercise known as scenario analysis. Carrying 
out scenario analysis is a crucial step in trustees meeting their legal duty to 
manage climate-related risks. 
•	 In this next section, we focus on several climate scenario tools currently 
available to investors including BoE stress test, PACTA and TPI as it is 
important to avoid relying on a single tool. These tools are aiding the 
Trustees to plan their portfolio for future potential scenarios. It must be 
noted that this is a rapidly evolving space and the tools highlighted below is 
not an exhaustive list.
•	 The TCFD recommendations require asset owners to conduct scenario 
planning regarding climate change. In response, the Fund has carried out 
scenario analysis on its active equity and corporate bond holdings using 
the tools highlighted above. These are three of the widely acknowledged 
scenario analysis tools for climate change risks. We will begin by reviewing 
the results of the Bank of England stress test.
Key takeaway: 
The equity and corporate bond portfolio’s exposure to climate change 
risks appears to be mitigated and contained, as evident in the Bank 
of England stress test (also supported by the PACTA and TPI analysis 
results), though improvements are still needed and indeed ongoing 
(through investing in sustainability-tilted assets and excluding coal 
intensive assets, engagements with fund managers and investee 
companies, monitoring portfolio ESG performance and promoting 
climate related disclosures such as TCFD adoptions). 
It’s worth noting that the Fund’s portfolio has significant allocations to private 
market assets with a strong climate sustainability theme (such as renewable 
energy infrastructure assets), which is not included in this analysis, as the tools 
currently available do not allow for private market assets. 
Bank of England climate stress test
•	 In a speech to the European Commission on 21 March 2019, Mark Carney, 
the then Governor of the Bank of England, highlighted the need for financial 
supervisors to conduct climate stress-tests to assess the resilience of their 
regulated entities to such risks. 
•	 On 18 June 2019, the Bank of England launched its climate stress-test. 
While initially mandatory for insurance companies, the test also allows other 
financial institutions (including pension funds) to assess the vulnerabilities of 
their portfolios to adverse climate change and energy transition scenarios. 
•	 The test shows the impacts on the Fund’s investments under three climate 
scenarios from climate related physical and transition risks. As can be seen 
in the charts, the impact on the equity portfolio appears to be contained to 
a small percentage, especially up to the year 2050, while the impact on the 
corporate bond portfolio is more muted (less than 1% loss of value). 
•	 In Scenario A, ‘Sudden, disorderly transition (temperature rise estimate of 
below 2°C by 2100)’, the impact is assessed for the year 2022; the Fund’s 
equity portfolio value change is estimated to be -3.2% (-0.03% for corporate 
bond portfolio). 
•	 In Scenario B, ‘Long-term orderly transition broadly in line with Paris 
Agreement (temperature rise estimate of well below 2°C by 2100)’, the 
impact is assessed for year 2050; the Fund’s equities are estimated to lose 
circa 4.5% value (corporate bonds value change by -0.3%).
•	 In Scenario C, ‘No transition and continuation of current policies 
(temperature rise estimate of above 4°C by 2100)’, the impact is assessed for 
year 2100; the equity portfolio value change is estimated at -6.3% (-0.8% for 
corporate bonds).
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
SCENARIO A – CHANGES TO THE PORTFOLIO’S
 VALUE BY SUBSECTOR IN 2022
SCENARIO B – CHANGES TO THE PORTFOLIO’S 
VALUE BY SUBSECTOR IN 2050
Equity
Equity
Equity
Bonds
Bonds
Bonds
	 Coal Extraction
	 Gas Power
	 Aviation
	 Real Estate
	 Oil Extraction
	 Low Carbon Power
	 FF-based materials
	 Water
	 Gas Extraction
	 Non-Electric 
Vehicles
	 Other materials
	 All other sectors
	 Coal Power
	 Electric Vehicles
	 Agriculture
	 Oil Power
	 Shipping
	 Food Logistics
	 Coal Extraction
	 Gas Power
	 Aviation
	 Real Estate
	 Oil Extraction
	 Low Carbon Power
	 FF-based materials
	 Water
	 Gas Extraction
	 Non-Electric 
Vehicles
	 Other materials
	 All other sectors
	 Coal Power
	 Electric Vehicles
	 Agriculture
	 Oil Power
	 Shipping
	 Food Logistics
-3.5%
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
	 Coal Extraction
	 Oil Power
	 Electric Vehicles
	 Other materials
	 Water
	 Oil Extraction
	 Gas Power
	 Shipping
	 Agriculture
	 All other sectors
	 Gas Extraction
	 Low Carbon Power
	 Aviation
	 Food Logistics
	 Coal Power
	 Non-Electric 
Vehicles
	 FF-based materials
	 Real Estate
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
SCENARIO C – CHANGES TO THE PORTFOLIO’S 
VALUE BY SUBSECTOR IN 2100
TfL Pension Fund | 2020 Report on Sustainable Investing
6

•	 In addition to the BoE stress testing tool, the Fund also undertook some 
scenario analysis using PACTA. The section below shows results for the 
equity portfolio1.
Paris Agreement Capital Transition Assessment 
(“PACTA”)
•	 The tool analyses exposure to climate transition risk. It was designed in part 
for TCFD, and provides an analysis of the portfolio relative to an economic 
transition consistent with limiting global warming to 2°C above pre-industrial 
levels (the “Sustainable Development Scenario” transition). It covers three 
climate relevant sectors – fossil fuel (split into Oil& Gas and Coal), power, 
and automotive. 
•	 The analysis looks at 5-year trends from 2020 to 2025, and the results below 
illustrate the equity portfolio’s current and future exposure to climate change 
transition risk2. 
1. What is the current exposure to economic activities affected by the 
transition to a low carbon economy i.e. current exposure to ‘climate 
change transition risk’? 
•	 Overall, the Fund’s equity portfolio is less exposed to transition risk than the 
benchmark across the climate-relevant sectors, as it has less weight to high 
carbon activities such as Oil & Gas Production and Coal/ Gas Power Capacity, 
but more weight to Renewables Power Capacity. 
•	 In the Automotive sector, the portfolio has slightly less weight to Electric 
and Hybrid Vehicles than the benchmark and more weight to Internal 
Combustion Engine Vehicles. This is a slight disadvantage but offset by the 
lower exposure to Oil & Gas and Coal mentioned above. 
2. What is the expected future exposure to 
high and low carbon economic activities?
•	 The results quantify the expected evolution of the portfolio’s exposure to 
high-carbon and low-carbon activities in 5 years (2025) based on the current 
revealed production and investment plans of companies in portfolio with 
business activities in the fossil fuel, power, and automotive sectors.
•	 The figures below show the estimated exposure in 2025 to high-carbon and 
low-carbon technologies in each sector3. The equity portfolio is estimated 
to outperform the market in the Power sector, because it has a higher share 
of Renewable technologies. The portfolio is estimated to lag the market by a 
margin in the Automotive sector, because it has a lower share of Electric and 
Hybrid technologies. In the Power sector, the portfolio is estimated to be in 
line with the market.
•	 Having looked at the findings from both the BoE and PACTA tools, we now 
turn our attention to the results the Fund undertook using the TPI tool. 
This is the second year running that the Fund has employed this tool as the 
Trustees look to gain a better understanding of what a transition to a low-
carbon economy could mean for some of its major holdings in high-impact 
sectors such as oil and gas, mining and electricity
•	 Having looked at the findings from both the BoE and PACTA tools, we now 
turn our attention to the results the Fund undertook using the TPI tool. 
This is the second year running that the Fund has employed this tool as the 
Trustees look to gain a better understanding of what a transition to a low-
carbon economy could mean for some of its major holdings in high-impact 
sectors such as oil and gas, mining and electricity
Weight (by market value) of 
issuers exposed to the technology
Current exposure of the equity portfolio to high-carbon and low-carbon 
activities as a % of the portfolio, compared to the equity market.
 Gas Production
 Oil Production
 Coal Production
 Renewable 
Capacity
 Hydro Capacity
 Nuclear Capacity
 Gas Capacity
 Coal Capacity
 Electric Vehicles
 Hybrid Vehicles
 ICE Vehicles
4.0%
3.0%
2.0%
1.0%
0.0%
Portfolio
Portfolio
Portfolio
Portfolio
MSCI ACWI
Oil & Gas Production
Coal Production
Power Capacity
Automotive
MSCI ACWI
MSCI ACWI
MSCI ACWI
TECHNOLOGY
Share of Sector Production
Portfolio
Portfolio
Portfolio
Aligned 
Port.
Aligned 
Port.
Aligned 
Port.
Aligned 
Market
Aligned 
Market
Aligned 
Market
Fossil Fuel 
Production
100%
75%
50%
25%
0%
Automotive
Production
100%
75%
50%
25%
0%
Power Capacity
100%
75%
50%
25%
0%
Gas
Oil
Coal
Electric
Hybrid
ICE
Renewables
Hydro
Nuclear
Gas
Coal
1 Equity has a much more significant allocation in the Fund than corporate bonds so this section focuses 
on equity (due to limited space); but results for the corporate bond portfolio can be made available on 
request. 2 This section focuses on the Fund’s equity portfolio results (as equity has much bigger weighting 
in the Fund than corporate bonds). Results for corporate bonds can be made available on request. 3 
‘Aligned Port.’ represents portfolio technology mix in 2025; ‘Aligned Market’ shows technology mix of the 
market under an Sustainable Development Scenario transition in 2025.
PACTA CLIMATE ALIGNMENT REPORT
Transition Pathway Initiative (“TPI”)
•	 TPI is a global initiative led by asset owners and supported by asset 
managers. Seen by many as a major breakthrough for responsible investment 
at its launch in January 2017, the initiative saw the coming together of asset 
owners and asset managers to take collective responsibility for managing 
climate change risk. It uses publicly disclosed information, collected by FTSE 
Russell and validated by the Grantham Research institute at the London 
School of Economics. 
•	 Since its launch, the tool has expanded its range of assessments to cover 
more than 300 of the world’s highest emitting companies, across 16 sectors. 
This now represents approximately 40% of carbon emissions in the FTSE 
Global Index. 
•	 Using this tool should enable the Trustees to not only make better informed 
decisions about how companies with the biggest impact on climate change 
are adapting their business models to prepare for the transition to a low-
carbon economy, but also as a basis for engagement with companies on their 
progress towards specific targets.
•	 The TPI tool ranks companies by two measures: how well their management 
is dealing with climate change risks and how effective are they at achieving 
carbon reduction. Management quality assessments rely on data from FTSE 
Russell to assign companies to one of five levels, ranging from level 0 (no 
recognition of climate change as a significant issue) to level 4 (climate change 
deeply integrated into a company’s business practices). 
•	 Performance assessments compare individual companies with internationally 
agreed benchmarks made as part of the Paris Agreement and assess their 
progress towards meetings the Paris goals. We begin by looking at the first 
measure in more detail, the quality of management of companies in dealing 
with climate change risks.
Quality of the Management
•	 The Fund has been tracking its actively managed holdings against the 
TPI database since 2017. As can be seen in the table below, the most 
striking observation is that in the three years to March 2020 the number of 
companies actively held by the Fund that are assessed by the TPI fell by as 
much as 33% during this period with the corresponding market values of 
these holdings falling significantly from 3.4% to 1.9% as a proportion of the 
total Fund market value. 
•	 It is worth highlighting that following the Trustees’ decision to exclude coal 
holdings within the Fund’s active mandates that derive 30% or more of 
their revenues from either thermal coal extraction or thermal coal electric 
generation, investments in the coal mining sector have fallen to zero having 
had a market value of £28m in 2017.
•	 Even more helpful is the significant improvement in the quality of 
management score of the companies the Fund is invested in which increased 
markedly from 1.6 to 3.5 over the period under assessment. As noted earlier, 
level 4 is the highest score representing companies which have set long-term 
quantitative targets for reducing greenhouse gas emissions, incorporated ESG 
issues into executive renumeration and incorporated climate change risks and 
opportunities in their strategy. Next we look at how well these companies are 
achieving carbon reduction.
TfL Pension Fund | 2020 Report on Sustainable Investing
7

# of Companies
Market Value (£mn)
Company Name
Mar-20
Mar-17
Mar-20
Mar-17
STEEL
1
4
11.2
27.1
COAL MINING
–
7
–
28.3
CEMENT
2
2
3.3
19.3
ELECTRICITY UTILITIES
6
4
46.2
22.0
AIRLINES
1
1
1.8
3.7
OTHER INDUSTRIALS
5
7
44.4
65.7
OTHER BASIC MATERIALS
–
3
–
14.2
OIL & GAS
3
9
7.1
60.5
SERVICES
2
3
3.0
20.9
AUTOS
3
8
20.4
48.9
CONSUMER GOODS
2
2
13.1
4.4
OIL & GAS DISTRIBUTION
1
–
1.3
–
CHEMICALS
5
–
25.6
–
ALUMINUM
1
3
3.0
19.9
PAPER
2
1
2.2
1.2
SHIPPING
2
–
14.1
–
TOTAL
36
54
197
336
TOTAL FUND
535
632
10,473
9,752
% OF FUND VALUE
6.7%
8.5%
1.9%
3.4%
WEIGHTED AVERAGE SCORE
3.5
1.6
Carbon Alignment
•	 TPI evaluates companies’ carbon performance against the globally agreed 2 degrees temperature increase target, and against national pledges for emissions 
reductions made at, or subsequent to, the Paris Agreement, but also against a more rigorous benchmark – Below 2 Degrees. 
•	 Given that the TPI focuses on the most carbon intensive sectors and more specifically the worst performing companies within those sectors, the carbon 
performance assessment does not capture all of the Fund’s holdings. Out of 36 companies that potentially map onto the TPI framework as of March 2020, only 19 
key companies within high risk sectors were formally assessed by the TPI for carbon performance as set out in the table below.
•	 The emission activity targets to comply with the Paris Pledges, 2 Degrees and Below 2 Degrees benchmark are sector specific as each sector has a different starting carbon 
intensity (a function of the sector’s business model) and accordingly a different target. Out of 19 companies held by the Fund that were assessed by the TPI, 11 of them 
were identified as “Not Aligned” with the emission target equating to around 43% of the combined market value of the 19 companies. Therefore, viewed from a market 
value perspective, a larger portion of the assessed companies (57%) are within or below the 2 Degree target.
Companies
Carbon Performance Alignment
Market Value (£mn)
Sector
MV%
A P MOLLER MAERSK B
Below 2 Degrees
13.5
Shipping
13%
EDISON INTERNATIONAL
Below 2 Degrees
10.3
Electricity Utilities
10%
ENEL
2 Degrees
8.4
Electricity Utilities
8%
EXXON MOBIL CORP
Not Aligned
2.8
Oil & Gas
3%
HONDA MOTOR LTD
Not Aligned
17.9
Autos
17%
JAPAN AIRLINES LTD
Not Aligned
1.8
Airlines
2%
JXTG HOLDINGS INC
Not Aligned
2.1
Oil & Gas
2%
KIA MOTORS CORP
Not Aligned
1.3
Autos
1%
MITSUI OSK LINES LTD
Below 2 Degrees
0.6
Shipping
1%
NATIONAL GRID PLC
Not Aligned
1.1
Electricity Utilities
1%
NEXTERA ENERGY INC
Below 2 Degrees
12.4
Electricity Utilities
12%
ORSTED
Below 2 Degrees
13.0
Electricity Utilities
12%
POSCO
Not Aligned
11.2
Steel
11%
RIO TINTO LTD
Not Aligned
3.0
Aluminum
3%
RWE AG
Not Aligned
1.0
Electricity Utilities
1%
SEMEN INDONESIA (PERSERO)
Not Aligned
1.9
Cement
2%
STORA ENSO CLASS R
Below 2 Degrees
1.1
Paper
1%
TOTAL SA
Not Aligned
2.2
Oil & Gas
2%
UPM-KYMMENE
Below 2 Degrees
1.1
Paper
1%
106.7
100%
Number of Companies
Market Value %
Not Aligned	
11
43%
2 Degrees	
1
8%
Below 2 Degrees	
7
49%
	
19
100%
TfL Pension Fund | 2020 Report on Sustainable Investing
8

Autos
Of the two companies assessed by the TPI, Honda is broadly on the right trajectory 
to meet the targets; whereas Kia has made some really pleasing progress and is 
now on a downward trajectory to hit the target. 
Shipping
Both companies are well within the emission targets.
Oil & Gas
Of the two companies assessed by the TPI within this sector, not surprisingly 
all of them are some way of the required trajectory to hit the targets. That said, 
however, some encouragement is that Total is projected to hit the target in 2040. 
The Trustees have had extensive conversations with the managers and continue to 
challenge them to justify the holding taking “material risks” into account.  
Utilities
Of the 5 companies mapped, 4 companies are currently outperforming the TPI 
benchmarks. RWE, however, although clearly reducing its carbon footprint, its 
trajectory is not meeting the required benchmark. 
Steel
Posco, the only holding in this sector, is clearly not on the desired trajectory to 
meet the Carbon Intensity targets. 
2015
2020
2025
2030
2035
2040
2045
2050
2055
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1
Carbon intensity (metric tonnes of CO2 per MWh electricity generation)
Paris Pledges
2 Degrees
Below
2 Degrees
 NextEra Energy
 Enel
 National Grid
 Edison Int
 Orsted
 RWE
 Reported
 Targeted
 Posco
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2.25
2
1.75
1.5
1.25
1
0.75
0.5
0.25
0
Carbon intensity (tonnes of CO2 per tonne of steel)
Paris Pledges
2 Degrees
Below
2 Degrees
 Reported
 Targeted
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Average new vehicle emissions (grams of CO2 per kilometre [NEDC])
 Kia
 Honda
 Reported
 Targeted
175
150
125
100
75
50
25
0
Paris Pledges
2 Degrees
Below
2 Degrees
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
Carbon intensity (gCO2 / t-km)
 MOL
 AP Moller - Maersk
 Reported
 Targeted
12
10
8
6
4
2
0
International 
Pledges
2 Degrees
Below
2 Degrees
Emissions intensity (gCO2e / MJ)
 Exxon Mobil
 Total
 Reported
 Targeted
2015
2020
2025
2030
2035
2040
2045
2050
2055
80
70
60
50
40
30
20
10
0
Paris Pledges
2 Degrees
Below
2 Degrees
•	 The Trustees have reviewed the carbon performance results of the 19 
companies across the five sectors (utility, autos, shipping, oil & gas and 
steel) and are using these findings as a basis to challenge and initiate detailed 
conversations with the investment managers who have acquired these stocks on 
their behalf. Below are the findings of the individual sectors.
CARBON PERFORMANCE: ELECTRICITY UTILITIES
CARBON PERFORMANCE: OIL & GAS
CARBON PERFORMANCE: STEEL
CARBON PERFORMANCE: AUTOS
CARBON PERFORMANCE: SHIPPING
TfL Pension Fund | 2020 Report on Sustainable Investing
9

Voting & Engagement
Collaboration with like-minded investors 
is more effective and cost efficient
•	 In the year to 31 March 2020, the Trustees voted at 545 shareholder 
meetings across our actively managed equity portfolios. During the same 
period, BlackRock, the Fund’s passive equity manager voted at 15,887 
shareholder meetings. Voting is one of the most powerful tools the Trustees 
have as a long-term investor in safeguarding the Fund’s assets.
•	 The Trustees take their fiduciary obligation to be an active shareholder very 
seriously. They strongly believe that exercising voting rights is an essential 
part of the value creation process. It is necessary for promoting strong 
corporate governance and for holding boards to account for their actions 
during the year. Equally, it acts as an important tool for exerting pressure on 
environmental, social and governance matters. 
•	 In December 2019, the Trustees appointed Sustainalytics as the Fund’s 
engagement advisor.
•	 As part of its mandate, Sustainalytics has partnered with Glass Lewis to carry 
out proxy voting on behalf of the Fund. Globally recognised as one of the 
leading providers of corporate governance information, the Fund worked with 
Glass Lewis to ensure a smooth transition across to their industry-leading 
proxy vote management platform, Viewpoint. 
•	 Since 1st April 2020, Glass Lewis has been undertaking proxy voting on 
behalf of the Fund based on their own guidelines and developed a custom 
voting policy which aligns with Sustainalytics engagement outcomes (voting 
overlay programme). Prior to the switch to Glass Lewis, all voting was 
undertaken by the respective active equity managers which potentially 
could have led to conflicting voting outcomes if the same stock was held 
across different portfolios. The consolidation process will ensure that voting 
complies with consistent policy guidelines, while Viewpoint’s transparency 
allows the Fund to thoroughly and independently audit the entire voting 
process at any time.
•	 Between the 1st April and 30th June 2020, 278 company meetings were held 
across five regions with Glass Lewis voting 3,693 resolutions on behalf of the 
Fund. A summary of proxy voting by region and proposal categorisation is 
shown on the adjacent charts.
•	 As part of the Sustainalytics – Glass Lewis partnership, ‘voting overlay’ 
is introduced as a means of engagement escalation with focus on non-
responsive companies. When engagement progress has stalled due to 
poor response from companies, Sustainalytics would use ‘votes against’ 
companies at shareholder annual general meetings (‘AGM’s) as a means of 
escalating the engagement agenda. This can be seen as ‘value-add’ on voting.
•	 During Q2 2020, Sustainalytics provided policy advice on 18 meetings and 
354 resolutions. The rationale on the voting advice is presented through a 
few examples listed in the adjacent table.
•	 The Covid-19 pandemic has shone the spotlight on ESG factors, especially 
social and governance issues, and has taught us that now more than at any 
other time in our recent history the importance of active ownership has 
never been greater.
•	 As an institutional investor the Fund owns a small share of around 700 
companies globally. Our goal is to vote at all the shareholder meetings 
of companies in our equity portfolio. We have a responsibility to use our 
ownership rights to improve corporate governance practices across our 
investee companies. 
 Voted
 Unvoted 
0
10
20
30
40
50
60
70
80
Asia ex-Japan
Canada & 
United States
Europe
Japan
Latin America 
& Caribbean
MENA
MEETINGS BY REGION & VOTE STATE
0
 100
 200
 300
 400
500
600
Audit/Financials
Capital 
Management
Compensation
Meeting 
Administration
SHP: Governance
VOTES ‘FOR’ MANAGEMENT CATEGORISATION
0
20
40
60
80
100
120
140
160
Audit/Financials
Capital 
Management
Compensation
Meeting 
Administration
SHP: 
Environment
SHP: Social
VOTES ‘AGAINST’ MANAGEMENT CATEGORISATION
Company
Country
Voter Rationale
Sustainalytics Advice
Metropolitan Bank & 
Trust Company
Philippines
Amendment is not in best interests 
of shareholders
Metropolitan Bank & Trust Company is part of the Material Risk Engagement. 
However, based on the company’s willingness to engage, we see no reason to 
modify the existing voting for recommendation.
Credit Suisse Group AG
Switzerland
Size and disclosure of termination 
payments
Vote authorised via special instructions to vote with policy on behalf of the Fund.
Facebook Inc
United States
Affiliate/Insider on audit committee
Facebook Inc is part of the Material Risk Engagement programme. However, based 
on the company’s willingness to engage, Sustainalytics sees no reason to modify 
the existing voting recommendations. Vote authorised in line with policy.
Amazon.com Inc.
United States
An assessment of the company’s 
customer due diligence could 
benefit shareholders
Amazon.com Inc. is part of the Plastics and the Circular Economy engagement 
theme. However, based on the early stages of the engagement dialogue, 
Sustainalytics sees no reason to modify the existing voting recommendations. 
Vote authorised in line with policy.
TfL Pension Fund | 2020 Report on Sustainable Investing
10

Engagement
•	 The Trustees strongly believe that the best way to alter public companies’ 
behaviour is through constructive dialogue with the boards of the companies 
that they hold. 
•	 Working in partnership with the Fund, Sustainalytics engages on its behalf 
with companies that form part of its public equity and corporate fixed 
income holdings to seek positive change for the companies and the societies 
in which they operate, ultimately benefiting the Fund and its members.
•	 Sustainalytics approach to engagement is centred around the notion 
of building long-term partnerships with the aim of creating long-term 
sustainable investment value in the companies that they engage with. To 
achieve this requires the following:
	
-	 setting clear engagement objectives that both resolve relevant issues and 
enhance companies’ overall ESG performance. 
	
-	 constructing relationships built on two-way dialogue
	
-	 using a partnership approach to engagement rather than an activist style
	
-	 versatility in how they interact with companies using all available 
communication tools at their disposal (i.e. emails, calls, in-person 
meetings with management, conference calls, site visits and proxy voting)
	
-	 using a collaborative basis to leverage the power of ownership influence
•	 Following consultation with Sustainalytics, the Trustees decided to focus 
on the following three programmes; global standards, material risk (which 
replaces and enhances the previous emerging markets theme) and thematic 
engagement (which includes plastics and the circular economy) as seen below:
Material Risk Engagement
•	 Protect and develop value in holdings and investment universe through 
engagement on unmanaged material ESG issues
•	 Improve risk mitigation and attain deeper insight to the companies’ ESG risk 
management
Thematic Engagement
•	 Influence companies to proactively address ESG risks and opportunities
•	 Demonstrate responsible investment commitments by creating positive 
impact on company, sector, system and issue level
LABOUR • HUMAN RIGHTS • ENVIRONMENT • BUSINESS ETHICS
Global Standards Engagement
•	 Improve company behaviour on ESG issues in relation to international 
guidelines and conventions
•	 Manage corporate reputational risks and demonstrate investor action on 
issues with severe environmental or social consequences
•	 The Fund has attended regular calls held by Sustainalytics for participating 
investors, to follow up on existing discussions and progress with engaged 
companies. The Fund may also attend engagement meetings with investee 
companies, including occasional site visits, facilitated by Sustainalytics. 
•	 In addition, the Fund also lends weight to the engagements directly, by 
exercising voting rights on shareholder resolutions in support of specific 
engagement initiatives. Equally, on certain cases where progress has stalled, 
as advised by Sustainalytics the Fund would reach out to engaged companies 
via letters urging companies to respond to specific issues of concern.  
•	 These past months have been greatly influenced by the Coronavirus (COVID-
19). The Fund and Sustainalytics have made the impact of this issue and 
companies’ response a prevalent agenda topic across engagements. 
•	 In this next section we will take a closer look at each of these engagement 
programmes and highlight some of the activities undertaken by Sustainalytics 
on behalf of the Fund since their appointment. We begin by looking at the 
global standards engagement arena, using two of the world’s biggest brand 
names as examples, reinforcing the collaborative basis approach to harness 
shareholder influence to hold these global giants to account for their actions.
Global Standards Engagement – Summary of Cases
•	 Global Standards covers engagement on companies regarding their 
compliance with international conventions and guidelines on environment, 
human rights and corruption.
•	 It is an overriding key performance indicator since it carries the highest 
level of influence on corporate value compared to any of the individual ESG 
factors.
•	 The charts below give a summary of current Global Standards engagements 
with the Fund’s investee companies; two example cases follow in the next 
page.
•	 The small number of cases above compared to the Fund’s total holdings 
shows that most companies in the Fund’s equity portfolio are in compliance 
with international ESG standards.
43%
 Engage
 Business Ethics
 High
 Evaluate
 Human 
Rights
 Medium
 Environment
 Low
 Resolved (c/y 2020)
 Labour 
Rights
 Not evaluated
77%
13.%
10%
9%
9%
39%
39%
17%
35%
9%
TOTAL NUMBER OF CASES
ENGAGE CASES – BY NORM
ENGAGE STATUS – BY PERFORMANCE
TfL Pension Fund | 2020 Report on Sustainable Investing
11

Case Background: Case opened in February 2020. Over 
the past year the company has repeatedly been involved in controversies 
related to workers health and safety. The United States Department of Labor 
Occupational Safety and Health Administration (OSHA) has investigated 
and fined the company for repeatedly failing to maintain and enforce OSHA 
safety requirements in its operations. In the UK, 440 serious health and safety 
incidents, including fractures, head injuries, contusions and collisions with 
heavy equipment have been reported between 2015-2018.
Engagement Objective: Amazon should take steps to understand the 
health and safety risks faced by its workers. It should introduce appropriate 
improvements involving H&S policies and practices aligned with international 
standards, including proactively mitigating hazards and improving working 
conditions. The company should report on its H&S performance and consider 
independent third-party verification of its management system.
Progress: Initially Amazon expressed some openness to a dialogue but cited 
the pandemic as obstacle for holding a call in the near term. In May 2020, 
Amazon hired a “Head of ESG Engagement” who is now the primary contact 
on this case. Sustainalytics has scheduled a conference call with Amazon in 
December 2020. The coming calls will focus more on the company’s lack of 
disclosure and management of health and safety beyond only the pandemic 
situation and its statements that it is doing a lot to protect workers.
Example – New Case – Amazon.
com Inc: Labour Rights – Workplace 
Accident(s) (United States)
Example – Company Outreach – 
McDonald’s Corp: Labour Rights 
– Labour rights violations at 
contractors (United States) 
To tackle a small number of unresponsive companies and advised by 
Sustainalytics, the Fund may write to the company board and cast votes against 
company resolutions at AGMs, as an engagement escalation technique. 
A recent case involved McDonald’s. As there had been several labour rights 
rulings against McDonald’s franchises in various countries of operations, 
along with recurring criticism from unions, Sustainalytics considered this as 
an opportunity for the company to better promote labour rights among its 
franchisees.
The Fund, together with several other investors, issued a letter to McDonald’s 
in June urging the company to participate in a dialogue. This prompted a 
positive response from the company, emphasising their willingness to engage 
with the Fund as well as with Sustainalytics acting on the Fund’s behalf. This 
represents notable progress on the engagement case, which had stalled since 
2017 prior to the escalation. 
Engagement Objective: McDonald’s should actively promote the company’s 
Standard of Business Conduct among its franchisees, and ensure franchisees 
live up to this especially with regards to labour rights. Efforts taken by the 
company to ensure compliance in this area should be transparently reported to 
relevant stakeholders.
Progress: A conference call was held in August 2020, and contact was re-
established. McDonald’s discussed its policies on labour rights on the call and 
Sustainalytics raised several questions. Sustainalytics aim to schedule a follow 
up call in late 2020.
Example – Metropolitan Bank & 
Trust Co. (Philippines): Focus on ESG 
Integration in Financials
Example – Magnit PJSC (Russia Food 
Retailer): Focus on Risk Assessment 
and ESG Disclosure
Case Background: Metrobank has minimum integration of 
ESG factors in credit assessment as well as investing. It is 
key to ensure the commitment for better ESG disclosure as a 
driver for improved ESG risk management. 
Change Objective: Metrobank should implement a 
consistent approach – policies, due diligence and disclosure – 
to integrating ESG risks and opportunities in credit (e.g. issuing 
loans) as well as investments. 
Progress: The company has been responsive but progress 
is slow. This may change, as the main shareholder is also 
pushing for and working with ESG disclosure.
Case Background: Magnit previously had a very limited focus 
on ESG risk management and disclosure and the ESG Risk 
Rating of the company was therefore in the high risk category. 
Sustainalytics initiated engagement with Magnit to support the 
company building a relevant ESG risk management. 
Change Objective: Magnit should integrate corporate 
governance issues further in the sustainability strategy and 
detail out goals for Green House Gas emission reductions in 
logistics. 
Progress: This case was part of the former Emerging Market 
themed engagement and has been ongoing. Magnit has 
developed a sustainability strategy with a wide range of commitments and goals 
towards 2025. The company has simultaneously released the first Sustainability 
Report for 2019. In October, Magnit joined the UN Global Compact. The 
improvement has proved to be consistent, so this engagement is being closed 
as resolved.
Material Risk Engagement – enhanced solution from Emerging Market Engagement theme 
•	 Sustainalytics introduced the new Material Risk Engagement in March to replace and enhance on the Emerging Markets (EM) Engagement. Material Risk 
Engagement will cover developed markets as well as EM. 
•	 The Fund attended the introductory call at the launch. Currently 6 of the Fund’s holdings are being actively engaged under Material Risk Engagement, but 
more cases will be initiated. 
•	 Similar to EM Engagement, the Material Risk Engagement aims to promote and protect long-term value by engaging with high-risk companies on financially-
material ESG issues. 
•	 The engagement is focused on the Material ESG issues with the largest management gap (gap between risk exposure and risk management). It adopts a 
collaborative and constructive approach to help high-risk portfolio companies to better identify, understand and manage their ESG risks.
TfL Pension Fund | 2020 Report on Sustainable Investing
12

Example – Sony Corp. (Japan)
Case Summary: Sony already has committed to several 
initiatives, as shown below. Sustainalytics will focus on the 
operational roll-out of these commitments and encourage 
disclosure of more detailed data and measurements. Also 
how it collaborates with NGOs and other stakeholders to 
tackle plastic waste in particular. 
The company has in place: 
•	 Green Management 2020 strategy which includes a priority 
to reduce and substitute its dependency on oil-based 
resources.
•	 A target to reduce the amount of virgin oil-based plastics 
per product unit by 10%.
•	 Sony also targets resource efficiency and utilises Life Cycle 
Assessments of its products
Plastics & Circular Economy
•	 Proactive thematic engagement addresses one of the fastest growing 
environmental topics on the political agenda. Currently, two Fund holdings 
are being engaged (Sony and Schneider Electric). 
•	 The ultimate goal is to encourage the company to improve the quality and 
economics of recycling practices, to shift strategic focus towards redesign 
and innovation and to increase the reusability of products. It follows a three-
year project timeline from January 2019. 
•	 The Fund attended the semi-annual update call held by Sustainalytics. The 
engagements are gaining momentum and yielding improvement; companies 
are putting the building blocks of a fully circular approach in place. 
•	 The focus is gradually shifting from ascertaining companies’ commitment 
to a circular economy to exploring the practical questions of establishing 
circularity systems and the sharing of best practice between companies.  
Although the Trustees stands behind Sustainalytics in achieving progress in each of the three programmes, they also continue to proactively monitor manager 
engagements on investee companies that the managers hold on their behalf. Indeed the majority of engagements with investee companies are carried out by 
the fund managers who ultimately decide whether to hold a company’s stocks. Two examples of manager engagement with high carbon emission or low ESG 
rating companies are covered in the following pages.
Manager Engagement Activities with 
Investee Companies
Volkswagen (VW) 
•	 As far as ESG ratings are concerned, VW remains somewhat of a poster child 
for ‘bad ESG’ with a CCC (lowest possible) rating from MSCI. It is held by 
one of the Fund’s equity managers that invests in companies that are out 
of favour with the market but perceived by the manager as having strong 
potential to recover from the trough (called ‘value investing’). 
•	 While the manager acknowledges the significant past failings of VW and 
ongoing fallout from the ‘Dieselgate’ emissions scandal – indeed the 
significant fines and reputational damage are what created the value buying 
opportunity – they think the low ESG rating fundamentally misrepresented 
where VW is today. The manager has engaged with VW on the following 
areas and has seen improvements that supports its investment thesis in the 
stock.
Electric vehicle technology
•	 Leading up to Dieselgate, VW presented itself (and was viewed by the 
market) as a leader in environmentally efficient engine technology. Ironically, 
Dieselgate (which began in 2015) was the catalyst for VW to actually become 
a leader in the energy transition, embarking on an early and aggressive 
electrification strategy (in part to repair its damaged reputation) and thereby 
putting itself ahead of peers in terms of scale and technological innovation. 
Corporate governance
•	 VW recently made long-term equity grants a significant portion of 
compensation for the top 7,000 managers, which should help ensure 
decisions are better aligned with shareholder interests. 
•	 All eyes are certainly on them and there is a strong incentive for management 
to ensure that something like Dieselgate is never allowed to happen again. 
This can be evidenced by the company’s recent decision to only use 
sustainably sourced cobalt for its electrified vehicles.
Labour issues 
•	 The manager has been able to gain more confidence in the recent union 
engagements. The VW union has had significant influence over decision-
making at the company, previously preventing necessary restructuring plans 
from going ahead. It seems that some progress has been made, with the 
union agreeing to early retirement packages that will not be backfilled. 
•	 Furthermore, the union has granted concessions whereby each employee is 
more flexible on the functions he or she is allowed to perform. The hope is 
that VW can continue to become more efficient while also not entering into 
massive layoffs that could impact employee morale and turnover.
RWE 
•	 RWE AG was one of the highest emitting holdings in the Fund’s equity 
portfolio; it’s reported scope 1&2 greenhouse gas emissions intensity was 
8193.7 metric tonnes per million USD sales (31 March). The Trustees asked 
the manager to explain its rationale for holding this stock. The manager 
believes that company management behaviour is improving regarding climate 
change. It should be highlighted that this manager runs a very diversified 
portfolio with 200 stocks, and the holding in RWE is small. 
•	 The manager considers that RWE is benefiting from a structural shift 
into renewable energy, which accounts for more than 75% of its sales. 
Management are also charting an exit from their coal and nuclear operations 
– this is a complex and lengthy decommissioning process and the manager 
believe RWE is showing a genuine commitment to become a leading 
renewables business, with explicit short and long-term targets.
•	 RWE have set themselves several clear targets. For example:
	
-	 they have a target to reduce CO2 emissions to net zero by 2040 (figure 1)
	
-	 eliminate coal use by 2038 (figure 2) and 
	
-	 they have interim targets to increase renewable energy use (figure 3)
•	 The manager will monitor the company to ensure management is meeting its 
plans and potentially encourage it to do more to align itself with a 1.5 degree 
warming scenario.
Figure3
Figure1
 
2012
million tonnes
180
-51%
-75%
net 
zero
2019
2030
2040
CO2
Neutral
Note: Wind and solar installed capacity excluding storage.
Installed 
capacity
COD 
2020
COD 
2021
Projects under construction
COD 
2022
Target 2022
Residual 
target
GW pro rata
8.7
2.0
1.6
0.2
0.5
>13.0
1.6 Onshore
0.4 Solar
0.2 Onshore
0.5 Offshore
TfL Pension Fund | 2020 Report on Sustainable Investing
13

Figure2
Source: RWE ESG presentation
23.2 GW
12.7 GW
<10.0 GW
4.3 GW
0.0 GW
Coal as % of 
total capacity
44.6%
30.4%
<25.0%
<10.0%
0%
Coal as % of 
total production
62.4%
38.4%1
<35.0%
<20.0%
0%
2012
2019
2023
2030
2038
Coal – installed 
capacity
1 Includes pro forma combined renewables portfolio. | Note: Based on full load hours under normal weather conditions and achievement of government renewables targets. Excluding plants in security reserve.
Production in 2038 refers to first year post closure.
•	 In addition to approaching ESG through voting and engagement, the Fund 
is also an active member of several global and industry initiatives as the 
Trustees accept that there is a limit to what they can achieve as a single 
investor. Here we look at some of the collaborations that the Fund has been 
involved in since our last Report.
Climate Action 100+
•	 Since 2018 the Fund has been a supporting investor in Climate Action 100+, 
which is a 5-year initiative of PRI and other prominent investor groups who 
are seeking to focus more efforts on the largest corporate greenhouse gas 
emitters. It is engaged with 161 global companies which account for up to 
80% of global industrial emissions. 
•	 For those companies for which the Fund was a supporting investor (Rolls 
Royce, Anglo-American and Rio Tinto) this included face-to-face (or virtual) 
engagement with company management, usually at Board level, making a 
statement at AGM (Annual General Meeting) and supporting shareholder 
resolutions that align with Climate Action 100+ goals. Areas of focus over 
the last year are:
	
-	 Clear goals or targets for emissions reductions towards net zero by mid-
century, including investment plans for the transition
	
-	 Reform of corporate approach to industry lobbying 
	
-	 Providing enhanced corporate disclosure in line with recommendations 
from the Task force on Climate related Financial Disclosures (“TCFD”).
Progress Update in 2020
•	 The discussions with the companies are confidential, however one 
consequence of Covid-19 has been that the attendance of shareholders at 
AGMs has not been possible and instead their proceedings have been made 
publicly available. Therefore, through the reported Q&A sessions for the 
three companies, it is possible for the public to gain greater insight into the 
ongoing private discussions taking place in support of the Climate Action 
100+ initiative. (see link for more details www.climateaction100.org)
•	 One point to highlight upfront is that despite the onset of Covid 19 and the 
prominence given to it at the annual meetings, there was no indication given 
that it was going to impact their planned activities to address the climate 
change issue.
This year’s progress on the three focus companies: 
Rolls Royce
•	 The Fund recognised that this year has been very challenging for the 
aviation sector. The firm noted that staff wellbeing, including managing the 
redundancy programme, is prioritised. 
•	 In June, Rolls Royce published its 1.5°C Business Pledge, committing the 
business to net zero carbon and representing a significant step forward. As 
part of this commitment, Rolls-Royce will: 
	
-	
Align its business to the Paris Agreement goals, to limit global 
temperature rise to 1.5°C; 
	
-	
Use its technological capabilities to play a leading role in enabling 
vital parts of the economy to get to net zero carbon by 2050, 
including aviation, shipping, rail, and power generation; 
	
-	
Continue to, and seek to accelerate, progress against stated 
company and industry carbon reduction targets and goals;  
	
-	
Continue its investment in research & development (R&D), prioritising 
pursuing technological solutions to the climate challenge; 
	
-	
Publish a clear roadmap later this year, setting out a pathway to 
enabling net zero carbon emissions by 2050, including interim 
milestones.
Rio Tinto 
•	 In February Rio Tinto’s published TCFD report contains the company’s new 
ambition to reach net zero operational emissions by 2050 (scopes 1 & 2 
emissions), and associated targets to reduce (a) emissions intensity by 30% 
by 2030, compared with a 2018 equity baseline (adjusted for divestments) 
and (b) absolute emissions by 15% over the same timeframe.
Anglo American 
•	 In April Anglo American responded to CA100+ investor questions at the 
virtual AGM and noted:
	
-	 Anglo American’s commitment to “achieving carbon neutrality across our 
operations (Scopes 1 and 2) before 2040 and we are aiming to have eight of 
our assets carbon neutral by 2030.”
	
-	 Also, in response to a question on thermal coal divesture: “We are 
therefore working towards a possible demerger of our thermal coal 
operations in South Africa as our likely preferred exit option, expected in 
the next two to three years, with a primary listing on the Johannesburg 
Stock Exchange for the demerged business.”
Other Collective Engagements 
In 2019 the SEC (US Securities and Exchange Commission) signalled they 
were potentially changing their rules to make it harder for shareholders 
to submit resolutions and involvement of proxy advisors. 
In January 2020 the PRI sought signatures to its letter opposing these 
changes and the Fund added its name to the letter in support. PRI’s strong 
view is that the SEC’s proposed rules would hinder or even eliminate 
discussion of emerging ESG issues before investors have had the chance 
to analyse and incorporate the latest thinking into voting behaviour.
TfL Pension Fund | 2020 Report on Sustainable Investing
14

ESG reporting
Assessing ESG outcomes through different angles 
MSCI ESG Ratings 
Key messages: The Fund’s ESG score outperformed the benchmark – active 
equity and bond holdings’ MSCI score increased from 4.87 to 5.23; carbon 
emission (tonnage) of the active portfolio fell by 20%.  
•	 The Fund has been analysing MSCI’s ESG ratings of companies in its 
segregated equity and bond portfolio since 2017 to help identify the most 
financially relevant ESG risks and opportunities. Companies are rated on a 
‘AAA to CCC’ scale according to their exposure to ESG risks and how well 
they manage those risks relative to their peers. 
•	 The MSCI ESG ratings are constructed using over 1000 data points from 
company disclosures and alternative data sets, across 37 key ESG issues 
that are reviewed weekly. MSCI employs artificial intelligence and machine 
learning to compliment a team of around 200 analysts to monitor and update 
companies on an on-going basis and deliver relevant ESG insights.
•	 In the year to 31 March 2020, the aggregate ESG score for the Fund’s active 
equity and bond holdings again outperformed the benchmark, 5.23 versus 
5.13. Since it began tracking its ESG score in 2017, the Fund has consistently 
been outperforming the benchmark.
•	 The Fund continues to track its performance on all key MSCI ESG metrics to 
provide a consistent framework. The Fund’s overall MSCI ESG score for its 
active portfolios has consistently outperformed the benchmark in the past 
3 years as can be seen above. The benchmark is constructed with weighted 
average ESG scores of MSCI World and Barclay Aggregated Corporate Bond 
indices – proxies for the Fund’s active equity and bond holdings
•	 Delving more deeply into each of the individual components of ESG that 
make up this score provides an interesting insight. As can be seen overleaf, 
the Fund has consistently been returning higher scores against the benchmark 
on environmental factors, 6.67 versus 6.26 in Q120. Where the Fund appears 
to have dipped in recent quarters, however, is on its Social score, 4.76 versus 
4.86 in Q120. The Governance score appears to consistently mirror the 
benchmark but did outperform in Q120, 5.4 versus 5.34. 
•	 Each quarter, the Fund reviews and analyses the ratings of individual 
companies in its active portfolio and the overall ESG score for the Fund. This 
regular examination allows the Fund to proactively engage with its managers 
at an early stage to address any concerns or issues that may arise with certain 
holdings. More importantly, it also plays a pivotal role in helping the Trustees 
construct a more resilient portfolio in the face of ESG headwinds.
•	 Since the Fund first started assessing the ESG ratings of companies in its 
active equity and bond portfolio in 2017, its ESG score has increased by 
around 7.5% from 4.87 in Q117 to 5.23 in Q120. Regular ESG analysis and 
the related-dialogue with its investment managers has enabled the Fund to 
continue to make steady progress in this area as evidenced by the steady 
uptrend in its ESG score.
Q1
2017
Q2
2017 
Q3
2017 
Q4
2017 
Q1
2018
Q2
2018 
Q3
2018 
Q4
2018 
Q1
2019
Q2
2019 
Q3
2019 
Q4
2019
Q1
2020
5.30
5.20
5.10
5.00
4.90
4.80
4.70
4.60
4.50
Fund
Fund
Fund
Fund
Benchmark
Benchmark
Benchmark
Benchmark
ACTIVE MANDATES (EQUITY & BOND)
ESG SCORE
ENVIRONMENTAL SCORE
SOCIAL SCORE
GOVERNANCE SCORE
2017
2018
2019
2020
Q1
2017
Q2
2017 
Q3
2017 
Q4
2017 
Q1
2018
Q2
2018 
Q3
2018 
Q4
2018 
Q1
2019
Q2
2019 
Q3
2019 
Q4
2019
Q1
2020
7.00
6.50
6.00
5.50
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
5.00
4.50
4.00
Q1
2017
Q2
2017 
Q3
2017 
Q4
2017 
Q1
2018
Q2
2018 
Q3
2018 
Q4
2018 
Q1
2019
Q2
2019 
Q3
2019 
Q4
2019
Q1
2020
5.50
5.00
4.50
4.00
Total Fund
 Environmental
 Social
 Governance
 ESG Score
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2020
8.00
6.00
4.00
2.00
0.00
2017
2018
2019
4.87
4.89
5.00
5.10
5.10
5.11
4.91
4.87
5.06
5.10
5.15
5.15
5.23
TfL Pension Fund | 2020 Report on Sustainable Investing
15

Sustainable Development Goals (“SDG”) 
Key message: The Fund’s active equity portfolios continue to deliver 
superior ESG scores and environmental footprint vs. benchmark
•	 In addition to employing MSCI’s ESG rating analysis, the Fund once again 
partnered with leading sustainability manager, LGT Capital Partners, to also 
conduct a holistic ESG analysis of the Fund’s active equity portfolio using 
their proprietary “ESG Cockpit” – a powerful, flexible, and state-of-the art 
tool.
•	 ESG assessment is based on a multitude of ESG raw data aggregated to 
over 40 proprietary key performance indicators which allows comparison 
between companies, portfolios, sectors and regions as well as measuring 
environmental footprint. The custom benchmark which the Cockpit uses 
to measure the Fund’s active equities against comprises MSCI World, MSCI 
Emerging Markets and MSCI Small Caps with weightings mimic the fund 
holdings. 
•	 As can be seen below the overall ESG score for the Fund’s active equity 
portfolio outperformed the custom benchmark by 5.7% using data as at 
31 March 2020. Interestingly, the ESG factors where the Fund comfortably 
outperformed the benchmark were environmental (as was seen with 
the MSCI ratings) and social with governance lagging slightly behind its 
benchmark.
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
ESG PORTFOLIO SCORES VERSUS REFERENCE INDEX1
ESG RATING DISTRIBUTION2
SDG IMPACT – FUND VS. BENCHMARK
100...80
80...60
60...40
40...20
20...0
 Equity Portfolio
 Custom Benchmark
9.40%
3.00%
34.50%
37.00%
39.40%
28.00%
6.50%
3.90%
22.30%
16.20%
Excellent
Outstanding ESG performance of company
Good
ESG performance of company is above average
Average
Company shows industry average performance on ESG issues
Low
Company is clearly lagging in terms of ESG performance
Poor
Among worst performing companies on ESG issues
Total ESG
SDG Impact
Environmental
Social
Governance
TfL Pension 
Fund Equity
59
1.7
60.8
61.3
52.8
Custom 
Benchmark
55.8
0.9
56.3
56.8
52.9
Relative in no.
+3.2
+0.8
+4.5
+4.5
-0.1
Relative in %
+5.7%
+8%
+8%
-0.2%
Source: LGT Capital Partners, Thomson Reuters
Data as of 31 March 2020. 
1  Absolute LGT Capital Partners ESG score: 100 = best possible score resp. 0 = worst possible score within the investment universe. 
2  Absolute LGT Capital Partners ESG score: 100 = best possible score resp. 0 = worst possible score within the investment universe. 
The distribution of the ESG scores are shown by portfolio weights.
•	 The cockpit also analysed the SDG impact of the Fund’s active equity 
portfolio by assessing the impact of different product and service categories 
on the respective SDGs, and summarising companies’ revenue share in these 
categories. The resulting impact values range from -10 (worst) to +10 (best).
•	 Below we can see in the table and spider graph how the Fund measures up 
against the custom benchmark for SDG impact. Note, SDGs 8, 9 and 10 are 
omitted as the Cockpit has no data on products and services that have an 
impact on these SDGs. These SDGs aside, however, we can see that the 
Fund outperforms notably from an SDG impact perspective on Goals 3 (Good 
Health and Well Being), 7 (Affordable and Clean Energy) and 13 (Climate 
Action). The Goal where the Fund lags mostly when measured against the 
benchmark is 16 (Peace, Justice and Strong Institutions).
•	 It must be noted, however, that this analysis was only performed on the 
Fund’s active equity holdings and does not capture the numerous private 
equity investments the Fund is invested in. If this analysis could capture the 
Fund’s numerous private market investments then undoubtedly the SDG 
impact scores would be materially superior versus the benchmark across 
several of the Goals. Later in this report, we will look in detail at some of 
these private market investments and how they map onto the SDGs.
SDG
Portfolio Impact
Benchmark 
Impact
relative
NO POVERTY
0.02
0.02
0
ZERO HUNGER
0.03
0.02
0.01
GOOD HEALTH AND WELL-BEING
0.53
0.47
0.06
QUALITY EDUCATION
0.03
0.03
0
GENDER EQUALITY
0.03
0.03
0
CLEAN WATER AND SANITATION
0
-0.01
0.01
AFFORDABLE AND CLEAN ENERGY
0.03
-0.23
0.25
DECENT WORK AND ECONOMIC 
GROWTH
–
–
–
INDUSTRY, INNOVATION AND 
INFRASTRUCTURE
–
–
–
REDUCED INEQUALITIES
–
–
–
SUSTAINABLE CITIES AND 
COMMUNITIES
0.07
0.11
-0.04
RESPONSIBLE CONSUMPTION AND 
PRODUCTION
0.03
0.04
-0.01
CLIMATE ACTION
-0.06
-0.3
0.23
LIFE BELOW WATER
-0.08
-0.05
-0.03
LIFE ON LAND
-0.11
-0.09
-0.02
PEACE, JUSTICE AND STRONG 
INSTITUTIONS
-0.08
-0.02
-0.07
PARTNERSHIPS FOR THE GOALS
0
0
0
 custom benchmark
 TfL Pension Fund equity portfolio
  1.00
 0.50
 0.00
-0.50
TfL Pension Fund | 2020 Report on Sustainable Investing
16

UNPRI
The Fund’s 2020 PRI review again gives the Fund high ratings, 
confirming ongoing commitment in the area of ESG
•	 The Fund has been a signatory to UN-backed Principles for Responsible 
Investment (“PRI”) since 2016 and strives to align its approach to their six 
principles and definition of responsible investment:
	
-	 Incorporates Environmental, Social and Governance (“ESG”) issues into 
investment analysis and decision-making processes.
	
-	 Is an active owner and incorporate ESG issues into ownership policies and 
practices.
	
-	 Seeks appropriate disclosure on ESG issues by the entities in which it 
invests.
	
-	 Promotes acceptance and implementation of the Principles within the 
investment industry.
	
-	 Works together to enhance our effectiveness in implementing the 
Principles.
	
-	 Reports on activities and progress towards implementing the Principles.
	
-	 The Trustees recognise and accept that for the Fund to continue to make 
noteworthy progress as a responsible investor and active owner it must 
open itself up to scrutiny and external examination. For this reason, each 
year, the Fund dedicates a significant amount of time and resources in 
answering the annual PRI questionnaire.
What’s new 
•	 This year, building on previous efforts, the Fund expanded its response to 
the PRI assessment to cover four more asset classes, namely, the Private 
Markets (infrastructure, private equity and property) and securitised fixed 
income (asset-backed securities). This means the Fund now reports on all 
asset classes that PRI assesses for indirect management (i.e. assets that are 
managed by external managers). The Fund received straight A’s for the new 
asset classes it reported on.
•	 To support investors’ disclosure through the TCFD framework, the PRI has 
incorporated climate risk indicators in its questionnaire this year, which are 
aligned with the TCFD recommendations. The indicators are voluntary and 
a non-assessed part of the PRI Reporting Framework. The Fund completed 
these climate risk indicators, which can be found in the Transparency Report 
mentioned below. 
•	 The PRI has also informed signatories that a new reporting and assessment 
framework will be introduced for 2021. This is part of PRI’s 10 year blueprint, 
and to ensure that its framework remains relevant to evolving responsible 
investment practices and is useful for signatories and the responsible 
investment market. A consequence of this is that it may raise the bar for the 
assessment, making it harder to achieve high scores. 
Results 
•	 As with last year, in 2020 the Fund was formally assessed for its overall 
Strategy & Governance, as well as individually assessed for each asset class. 
For each asset class, PRI looks at Manager Selection, Appointment and 
Monitoring. 
•	 Apart from the 4 A’s achieved in the new asset classes, in the existing 
categories the Fund received 3 A+’s and 2 A’s, in line with last year’s results. 
It’s worth noting that the Fund already made substantial progress in the PRI 
scores in 2019. A+ is the highest score given by PRI. 
•	 The results are shown in the table below, which also globally benchmarks the 
Fund’s scores to all the other PRI members. 
SUMMARY SCORECARD
 
 
 
 
AUM
Module Name
Your 
Score
01.Strategy & Governance
A
Indirect – Manager Sel., App. & Mon
10-
50%
02. Listed Equity
  A+
10-
50%
03. Fixed Income – SSA
A
<10%
04. Fixed Income – 
Corporate Financial
  A+
<10%
05. Fixed Income – 
Corporate Non-Financial
  A+
<10%
06. Fixed Income – 
Securitised
A
<10%
07. Private Equity
A
<10%
08. Property
A
<10%
09. Infrastructure Not
A
Your Score
Median Score
B
A
A
A
A
A
A
A
Category: Asset owner (452)
Category: Asset owner (355)
100
80
60
40
20
0
100
80
60
40
20
0
E
D
C
B
A
A+
E
D
C
B
A
A+
(%)
(%)
 The 
Fund’s 
Rating 
Band

 The 
Fund’s 
Rating 
Band

THE FUND’S STRATEGY AND GOVERNANCE MODULE SCORE HAS 
BEEN COMPARED TO RELEVANT PEER GROUPS
THE FUND’S LISTED EQUITY MODULE SCORE HAS BEEN COMPARED 
TO RELEVANT PEER GROUPS
A
TfL Pension Fund | 2020 Report on Sustainable Investing
17

Further notes 
•	 The Fund has been undertaking a PRI assessment since 2016 and the 
PRI expects a participant to undertake two full assessments before 
taking its third and first publicly available assessment. As a result, the 
above is the Fund’s second public assessment covering activities for 
the 2019 calendar year. 
•	 The Fund’s assets are managed by 30 external investment managers 
and of these 24 are signatories to PRI (was 22 last year). Where 
relevant, the Trustees are nudging the remaining managers to become 
signatories for better alignment of the objectives. The charts below 
demonstrate an overall improvement in the managers’ PRI ratings over 
the year. 
•	 The “Transparency Report” for the Fund (reference: Transport for 
London Pension Fund) and for the other PRI signatories can be found 
on the PRI website here. The report contains details of the Fund’s 
response to the PRI questionnaire. 
0
2
4
6
8
10
12
14
16
18
new entry
C
B
A
A+
STRATEGY & GOVERNANCE SCORE
 2020
 2019
0
2
4
6
8
10
12
14
new entry
C
B
A
A+
ASSET CLASS-SPECIFIC SCORES
 2020
 2019
•	 It’s worth noting that the median scores (indicating peer group performance) 
are high. Indeed, this reflects a general and substantial improvement in RI 
practice across the industry over the past decade, though this may change 
following the new assessment framework next year. 
•	 The table below summarises the Fund’s detailed scores versus the maximum 
scores in each category. The maximum score is calculated as the number of 
reporting indicators in each category times 3 (3 being the highest score for 
each indicator). This gives an idea of how the A and A+ ratings are derived 
from the raw scores.
Category
The Fund’s 
Score
Maximum Score 
The Funds’ 
Rating Band
STRATEGY & 
GOVERNANCE
28
30
A
LISTED EQUITY
41
42
A+
FIXED INCOME – SSA*
37
39
A
FIXED INCOME – 
CORPORATE 
(FINANCIAL)
39
39
A+
FIXED INCOME – 
CORPORATE (NON 
FINANCIAL)
39
39
A+
FIXED INCOME – 
SECURITISED
35
39
A
PROPERTY 
36
39
A
PRIVATE EQUITY
36
39
A
INFRASTRUCTURE
36
39
A
* SSA means sovereign, supranational and agency bonds 
•	 As outlined in last year’s report, the Trustees do not treat PRI assessment 
and benchmarking scores as an end itself, rather it’s a tool to benchmark 
to improve and prioritise ESG strategy and initiatives. Following this year’s 
results, the Trustees have identified two areas for improvement, namely: 1) 
Providing a publicly available RI policy. The formal inclusion of the ESG Policy 
in the Fund’s SIP in 2019 has helped to enhance the score compared to 2018 
but clearly more can be done within the resources available. 2) Manager 
monitoring. As a result, the Fund has put in place an enhanced monitoring 
framework this year, formally incorporated into the contracts with the equity 
managers, enabling the Fund to monitor manager progress consistently, 
which will address this underperformance in next year’s PRI assessment.
TfL Pension Fund | 2020 Report on Sustainable Investing
18

Case Studies
Investment opportunities which not only meet the Fund’s 
return expectations but also positively contribute to the United 
Nations Sustainable Development Goals 
•	 Since announcing its first green bond in 2017, Anglian Water 
has funded 850 capital investment projects as a result of 
financing from green bonds totalling £811 million. The 
investments made through the green bonds issued to date 
are estimated to save 160,736 tonnes of carbon.
Wetland Treatment Sites
•	 In 2018, Anglian Water partnered with the Norfolk Rivers 
Trust to create a wetland treatment site at Ingoldisthorpe; 
the first of its kind in England. The site works as a natural 
treatment solution for one million litres of water that pass 
through the neighbouring Anglian Water recycling centre 
each day. Pre-treated water from the centre passes through 
the wetland to be further filtered and cleaned by the 
wetland’s aquatic plants, before flowing into the River Ingol.
•	 The use of wetlands to provide a natural filtering process 
is an innovative, sustainable solution that avoids the use 
of further chemicals or the construction of greenhouse 
gas intensive infrastructure to treat wastewater. Aside 
from having a practical purpose, the wetland is a significant 
biodiversity asset attracting breeding birds, amphibians, bats 
and water voles to the local environment.
Outcome
•	 In conjunction with wider improvements made to plant and 
equipment at the Ingoldisthorpe water recycling centre, this 
project has yielded an 89% reduction in capital carbon versus 
the 2010 Plan baseline. Capital carbon is the greenhouse gas 
emissions generated from construction and expected end-of-life dismantling 
of long-term physical assets. Additionally there has been a 53% saving in 
water consumption and a 6% saving in energy consumption per annum.
•	 Given the success of the project, Anglian Water has incorporated the 
construction of dozens more wetland treatment sites into its business plan 
for the 2020 – 2025 regulatory period. The wetlands will form part of Anglian 
Water’s ‘Water Industry National Environment Programme’. At nearly £800 
million, the company’s proposed investment in protecting and enhancing the 
region’s environment is more than double that of the previous five years.
•	 IHS Towers is the largest independent tower operator in 
Africa by tower count and one of the largest independent 
multinational tower companies globally.
•	 IHS’s tower network spans 5 African countries, facilitating 
infrastructure-sharing by mobile operators, and helping bring 
the power of mobile communications to Nigeria, Cameroon, 
Côte d’Ivoire, Rwanda and Zambia’s collective ~260 million 
mobile subscribers. 
•	 IHS embeds environmentally responsible approaches 
throughout its business. The company focuses on and 
monitors carbon emissions against a 2015 benchmark and 
has been able to deliver significant reductions. Sustainability 
initiatives include: continued monitoring and reduction of CO2 emissions, 
improved waste management, and battery and generator recycling.
•	 Moreover, IHS strives to achieve energy efficiencies by actively investing in 
eco-friendly power solutions such as solar panels and deep cycle batteries. 
The company has deployed solar and hybrid power solutions to existing and 
new towers which equates to approximately 60 MW of solar energy in Nigeria 
alone. Finally, more than a third of IHS’s towers have some reliance on solar 
power.
•	 IHS Towers aims to make a positive impact in the communities of operation 
by helping improve the quality and availability of the communications 
infrastructure.
#1: Infrastructure – Anglian Water 
Group – £11m investment 
#2: Emerging Market Infrastructure : 
IHS Towers – Bringing the Power of 
Mobile Technology to Millions; US$10 
m Investment in Africa’s Largest 
Independent Telecom Tower Operator
39,934 
Total number of batteries recycled
103,986 
Total number of batteries deployed
>9,000 
Over 9,000 sites with hybrid solar power systems
>320
Approximate CO2 emissions saved from using hybrid solutions, efficient 
generators, new batteries and grid connections in million Kgs
OVER $1 BILLION
Invested in renewable energy and hybrid solutions across the IHS operations.
298 GENERATORS
Donated to schools, orphanages, hospitals and NGOs since 2016
FOUR PILLARS
Formulated to align with the United Nations’ Sustainable Development Goals underpin IHS’ 
CSR Programs:
i.	 Ethics and Governance
ii.	 Our People and Communities
iii.	Environment and Climate Change
iv.	Education and Economic Growth
TfL Pension Fund | 2020 Report on Sustainable Investing
19

•	 The Prologis European Logistics Fund is a core open-end 
logistics fund offering high-quality exposure to logistics 
facilities across Europe. 
•	 (Global ESG Benchmark for Real Assets): Prologis is 
measuring its ESG performance relative to peers through its 
annual participation in the GRESB survey. The manager has 
outperformed its peers scoring 5 Green stars and continues 
to progress its ESG strategy as (1) properties are refurbished/
built to incorporate sustainable features, (2) working toward 
reaching 85% smart metering by 2020 and 100% utility 
data coverage in Measurable, and (3) new initiatives being 
implemented in the fund to support the emission reduction 
efforts, such as:
Solar Power: by end of 2019, the fund almost met 
its 2021 roll-out target, installing 30 MW of solar 
capacity, supporting the new ambition of 65 MW 
installations by 2022 
Green financing: as part of the ETMN program, in 
2019 the Fund issued its third Green bond for a 
total nominal of EUR 450m, lowering the cost of 
debt to 2.0% 
Buildings improvement: the manager is working 
towards a) certifying all assets in portfolio; b) installing LED lighting 
across 100% assets by 2025 and c) seeking roof replacement 
with cool roof material for 100% new development and property 
improvements 
•	 Customer-centric solutions: The manager is focused on developing 
customer-centric solutions for its tenants. In 2019, Prologis was tasked to 
develop a carbon neutral build-to-suit facility in Muggensturm, Germany, to 
meet the needs of L’Oréal.
•	 In 2019 Prologis completed the development of this carbon neutral facility 
(pictured below). The solution was to add to the building a number of 
sustainability features, including: 
	
-	 120% of emissions neutralised through renewable energy procurement 
and a solar installation 
	
-	 7,400 solar panels generating 2.0 MW (enough capacity to power more 
than 510 average homes for a year)
	
-	 Reinforced insulation, rainwater capture for irrigation, a 30,000 sqm green 
roof that provides habitat for local skylarks in the area, a DGNB gold 
certification, and LED lighting.
•	 To achieve carbon neutral operations, the facility will procure renewable 
energy from the grid, in addition to supplying solar energy to the grid from 
the 2 MW system on the roof.
•	 In addition to the environmental benefits associated with the building’s 
design, L’Oréal has also made a significant investment into the local 
community, as well as supporting the company Murgtal-Werkstatten & 
Wohngemeinschaften, which provides jobs to people with disabilities. A 
team from MWW will help to maintain the green space of the property on an 
ongoing basis. 
#3: Real Estate – Prologis European 
logistics fund – £11m investment
Overview: The Fund became a co-investor in Waterlogic 
in 2020, having been approached by one of our private 
equity managers at the time regarding this potential exciting 
opportunity that not only offered an attractive rate of return, 
but equally was also contributing to several of the UN SDGs by 
providing an alternative hydration solution to bottled water.
•	 Waterlogic is a leading point-of-use (“POU”) water filtration 
& dispenser company, that designs, assembles, distributes and services POU 
water systems, mainly on full-service rental contracts, to a wide range of B2B 
clients.
Challenge: Bottled water consumption has been increasing in part due to 
wellness trends and a shift away from sugary beverages. Only 8% of plastic 
waste is recycled and most of it ends up in landfill, taking up to 1,000 years to 
decompose. Plastic waste contributes to ocean pollution (8mm metric tonnes/yr).
•	 In some instances, bottled water is sourced from areas that face water 
scarcity and utilise water during the manufacturing process (1.4L of water is 
needed to produce every 1L of bottled water in North America).
•	 Water contamination concerns have been increasing – 56% of U.S. 
households were ‘extremely concerned’/‘concerned’ with the water quality 
and safety concerns cited as the main reason.
Solution: POU water purification systems play an important role in displacing 
bottled water by improving confidence in the quality and safety of tap water for 
consumption.
•	 The long-term outcomes are to:
	
-	 Reduce demand for bottled water, leading to reduced plastic waste
	
-	 Reduce demand for water to source and manufactured bottled water, 
especially in areas facing water scarcity
POU water enables lower plastic usage (Waterlogic machines deliver 6 billion 
litres of water, equivalent to ~24 billion bottles per year) but also lower 
distribution needs (e.g. POU twice yearly service vs. frequent bottled water 
delivery), which lowers overall carbon footprint 
as well.
#4: Private Equity Co-Investment 
EUR1.8m in Waterlogic 
TfL Pension Fund | 2020 Report on Sustainable Investing
20

Produce up to 60% less CO2
Require 64% less energy
Consume 80% less water
Produce 86% less solid waste
Keeping employees safe and well is a key objective, and 
Renewi have the same responsibility to local communities.
One of Renewi’s key treatment activities is cleaning waste 
water to make it available again.
Renewi lower their carbon footprint by using renewable 
energy and also sell green energy produced on site.
Renewi reduce their carbon and other emissions in waste 
collection in cities and urban areas.
Renewi enable the circular economy, so support 
responsible consumption and production. 
Renewi take action to protect the climate by carbon 
avoidance and recycling waste instead of sending it for 
incineration or to landfill.
•	 The largest waste to product company in the Netherlands and Belgium, two of 
the most advanced circular economies in the world.
•	 Renewi owns and operates assets utilised in the collection, treatment and 
repurpose of commercial and hazardous waste. Operating primarily in the 
Benelux region, the company also has municipal waste treatment facilities in 
the UK.
•	 The company focuses on extracting value from waste rather than on disposal 
through landfill. This waste-to-product approach offers the most capital 
efficient solution to the effective recycling of used materials. 
•	 Renewi’s assets and sustainability strategy is structured to enable the circular 
economy, reduce carbon emissions and waste, and emphasise care for people.
•	 The company is entirely green financed. With the issuance of its most recent 
green bond, all of the company’s core borrowings of bonds and loans are 
aligned within their best practice Green Finance Framework.
•	 A strong partnership model promotes innovation in renewable and second 
use products. Key areas Renewi has identified for future growth are biogas 
production, mattress and nappy recycling, sand and gravel secondary products 
from contaminated soil and water, glass and electronic waste recycling, 
and organic waste treatment aimed at producing green electricity and soil 
enhancing materials. 
•	 It supports the United Nations 2030 Agenda for Sustainable Development and 
the Sustainable Goals, as shown by its activities below:
•	 IFCO is a leading global provider of reusable packing solutions for the fresh 
produce supply chain, serving over 320 retailers and 14,000 producers 
worldwide
•	 The company was acquired by private equity investors in May 2019. In support 
of the transaction, the Fund, through its private debt mandate, provided 
US$28m of loans to the company.
•	 Reusable Plastic Crates (RPCs) are primarily used for transporting fresh 
produce, forming a critical component and backbone of the fresh produce 
retail supply chain
•	 IFCO issues RPCs to producers and manages the collection of used RPCs from 
the retailer, cleaning and repairing RPCs in the process. Producers are charged 
a per trip rental price fee for the service.
•	 RPCs have a much lower environmental footprint than their popular alternative 
(75% global market share), single-use cardboard boxes:
#5: Public Equity (small/mid cap) – 
Renewi – $2m investment 
#6: Private Debt to a leading provider 
of reusable packing solutions – 
US$28m investment
TfL Pension Fund | 2020 Report on Sustainable Investing
21

•	 The Fund has made significant strides in the area of Sustainability in the last couple of years but the hurdle itself has moved in line with higher expectations from 
our stakeholders and greater body of knowledge and understanding at our disposal. The Fund will continue to push its sustainability envelope.
•	 From a regulatory standpoint, TCFD will be an important area for the Fund to not just keep an eye on but use it as an opportunity to sharpen its risk management 
and reporting framework.
•	 There will be renewed focus on finding ways to further reduce the Fund’s carbon intensity without necessarily excluding any sectors but by tilting the portfolio to 
“winners” as the world decarbonises. 
•	 ESG Integration in the Fund’s actively managed equities and bonds portfolio will be a major focus for the next year as the Fund turns its ESG Framework and 
Approach into tangible and measurable actions for our managers. 
•	 There will also be more work done to expand the ESG Integration to the Fund’s Alternative Assets, namely real estate, infrastructure and private equity. This is 
expected to take time but the lessons learnt from public markets should make it very much possible.
•	 The Fund will look to further consolidate its engagement initiative with Sustainalytics and, where is a good case, to expand it into newer themes – Climate Change 
and Forestry being one of them. 
•	 Momentum of investing in “ESG tilted” assets is expected to continue into next year as the Fund continues to see some very attractive opportunities.
Way Ahead
•	 AMNT: Association of Member Nominated Trustees
•	 Climate Action 100+: An investor initiative to ensure the world’s 
largest corporate greenhouse gas emitters take necessary action on 
climate change
•	 DB: Defined Benefit 
•	 ESG: Environmental, Social and Governance
•	 Fiduciary duty: The legal duty of one party (the fiduciary) to act in the 
best interests of another (the principle). In the investment chain there 
are a number of these relationships including the duty that boards have 
to shareholders, the duty between trustees and beneficiaries and the 
duty between asset managers and their clients
•	 FRC Stewardship Code: Financial Reporting Council Stewardship Code
•	 GHG: Greenhouse Gases
•	 IIGCC: Institutional Investors Group on Climate Change
•	 MSCI: Morgan Stanley Capital International, a global provider of equity, 
fixed income, hedge fund stock market indexes, and multi-asset 
portfolio analysis tools
•	 Paris Pledges: By joining the pledge, businesses, cities, civil society 
groups, investors, regions, trade unions and other signatories promised 
to ensure that the ambition set out by the Paris Agreement is met or 
exceeded to limit global temperature rise to less than 2 degrees Celsius.
•	 Scope 1 emissions: Direct emissions from owned or controlled 
sources
•	 Scope 2 emissions: Indirect emissions from the generation of 
purchased energy
•	 SDG: Sustainable Development Goals 
•	 SIP: Statement of Investment Principles
•	 Stewardship: A purposeful dialogue between shareholders and boards 
with the aim of ensuring a company’s long-term strategy and day-to-day 
management is effective and aligned with shareholders’ interest. Good 
stewardship should help protect and increase the value of investments
•	 TCFD: Task Force on Climate-related Financial Disclosures
•	 TPI: Transition Pathway Initiative
•	 UN PRI: United Nation Principles of Responsible Investment
•	 Voting rights: Equity investors typically enjoy rights to vote at annual 
and extraordinary general meetings (AGMs and EGMs). The resolutions 
on which shareholders vote will vary according to individual countries’ 
legal frameworks. They may include voting on an individual director’s 
appointment, remuneration or mergers and acquisitions
Glossary & Terms