Active ownership
report2021

Contents
A message from our Chief Investment Officer

22021 active ownership snapshot

3

Engagement activity

3

Proxy voting

3

Responsible investing

4

Investment beliefs

4

Responsible investing beliefs

5

Delivering on responsible investing objectives

6

Engagement

9

Our approach9

Tracking progress

13

2021 engagement activity

15

Activity across our focus areas

20

Voting and reporting30

Our approach30

2021 proxy voting activity

33

Voting activity on contentious topics

36

Policy advocacy and collaborations

44

Sustainable investment advocacy groups

44

Climate change and net zero commitment

45

UK Stewardship code

45

Diversity, equity and inclusion46

Principles for Responsible Investment (PRI)

46

Blog posts

46

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A message from ourChief Investment Officer
Furthering our commitment to stewardship
2021 was another eventful year, and one that yet again shone a spotlight on Environmental, Socialand Governance (ESG) topics.
The ongoing coronavirus pandemic and the run up to the COP26 conference significantly increased
focus on ESG topics by governments, NGOs, the business sector, and various other important
stakeholders around the globe. While the long-term implications of these events are still unfolding,this much is obvious: security pricing is increasingly reflecting ESG factors, and ESG risks andopportunities must be taken into account when designing investment strategies.
When our clients entrust us with their capital, it is our duty as stewards to serve their interests bynavigating the challenges and uncertainty in an ever-changing regulatory and investment landscape.
To this end, stewardship is embedded in Russell Investments’ DNA. We are actively and constantly
assessing ESG trends, what they mean for our clients, and how we can provide investment solutions
with the goal to deliver competitive and long-term performance. Through our active ownership
activities, we encourage changes in the businesses in which we invest, which should benefit bothshareholders and society as a whole.
A key part of staying in step with ESG trends is evaluating and updating our existing responsible
investing and active ownership policies and processes on an annual basis. These include ourEngagement Focus Areas and practices and our custom Proxy Voting Guidelines, crucial tools to fulfil
our fiduciary duties. The updates made to our Proxy Voting Guidelines in the last year have directly
led to increased scrutiny on significant Environment and Social topics by our Active Ownership
Committee, and further bolstered our stance on director accountability.
In the past year, Russell Investments has also significantly enhanced our engagement program. We
have evolved our systematic and comprehensive engagement selection process and grown our
dedicated active ownership team to expand our collaborations with subadviser partners and thirdparty shareholder groups. This has extended the breadth of our outreach and strengthened ouroverall responsible investing approach.
In 2022 we face a busy regulatory calendar that includes new requirements under the Taskforce for
Climate-related Financial Disclosures (TCFD), Mifid II, the implementation of the EU taxonomy, andpreparation for phase two of the Sustainable Financial Disclosure Regulation (SFDR). I am confident
that the strong team supporting our sustainability and active ownership efforts across the firm will rise
to meet any challenges as regulators and market participants continue to advance standards,
definitions, and requirements.
Our clients and their interests come first when we design investment solutions, and we believe astrong active ownership program is core to achieving client aims. At Russell Investments we aim toleverage the unique aspects of our platform engaging and influencing industry standards, asset
managers and companies to create an active ownership program that has the most impact andalignment with client objectives and interests. We trust this report provides you with useful insightsthat demonstrate our commitment to continuing to improve our approach to stewardship. As is moretrue with ESG than most any client solution, we will get better together through strong partnership,
shared insights, and transparency. Please do not hesitate to contact us if you would require more
information or to provide us with your valuable feedback.
Sincerely,

Kate El-Hillow
Global Chief Investment Officer, Russell Investments

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2021 active ownership
snapshotEngagement activity

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Responsible investing

Investment beliefs
We believe that open
architecture investing is asuperior approach tostewardship when donewith appropriate care, as itenables independent
oversight and decisionmaking.

Russell Investments’ open architecture investment approach was developed
during the 1960s, 1970s, and 1980s out of a recognition that the investment
management industry lacked a robust standard of stewardship for both
institutional and individual investors. As the manager of the first multimanager funds, we sought to bring resources, focus and a client-centric view
to some of the most important questions investors face – the informed
selection and oversight of sub-advisers, cost- and risk-aware portfolio
implementation and the creation of truly outcome-oriented investment
solutions.
Today, we believe that open architecture investing is a superior approach tostewardship when done with appropriate care, as it enables independent
oversight and decision-making. This approach has significantly raised in
popularity over the years, and continues to drive innovation in stewardshippractices, enforcing greater transparency and accountability among
investment managers and service providers. Our investment advisory
capabilities, coupled with a firm-wide focus on superior client service, havenaturally led to stewardship and fiduciary responsibility being core to ourinvestment approach and our corporate values and identity.
Every investment solution we construct and investment decision we makefocuses on seeking long-term investment outcomes for our clients using themost powerful investment toolkit available.

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Russell Investments has established a set of investment beliefs to provide a transparent and objective
framework that facilitates an effective internal decision-making process, and to guide the delivery of all
our investment solutions.
1.

Outcome-oriented investing: Investment decisions are more impactful when they directly serve
the achievement of client objectives, respect for client preferences, and consideration of client
circumstances.

2.

Open architecture: Independent consideration, informed diversification, and intelligent
implementation of the right asset classes, best investment strategies, and appropriate risk levels
give investors the best chance of success. The ability to identify skill-based and differentiatedprocesses is a critical edge.

3.

Investment discipline: Investors require rigorous decision-making paradigms, excellent
analytical capabilities, and an ability to think and act independently to deliver superior outcomes.

4.

Effective risk management: Real-time measurement and management of risk must be
integrated into the management of portfolios and solutions to ensure well-informed decisionmaking.

5.

Dynamic portfolio management: The ability to adapt to changing market conditions is critical toinvestment success.

6.

Specialization leads to investment decisions at the point of greatest insight: Informed andobjective assessment of investment excellence is foundational to the success of open
architecture, both in selecting sub-advisers and in evaluating and enhancing internal capabilities.

Responsible investing beliefs
Responsible investing is at the heart of our investment beliefs. Russell Investments believes
Environmental, Social and Governance (ESG) factors can have a material impact on investment
outcomes. As a global investment solutions provider, we believe that transparency and investing
responsibly can help deliver attractive investment returns and meet client objectives in the long term.
We have established an integrated responsible investing practice to provide stewardship inincorporating ESG considerations into investment decisions and active ownership across the firm.
The practice is founded on the following set of four core beliefs:
Exhibit 1: Responsible investing beliefs

Source: Russell Investments. For illustrative purposes only.

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Delivering on responsible investing objectives
Drawing on the core responsible investing beliefs outlined above, Russell Investments hasdeveloped formal policies on responsible investing, climate change, and sustainability risks that
underpin our efforts to efficiently integrate environmental, social and governance considerations into
our investment manager evaluation process, our portfolio management, our advisory services andwhen implementing proprietary solutions as desired by clients.
To achieve these responsible investing objectives, Russell Investments has developed a firmwide,
holistic, ESG-integrated approach that interconnects our core responsible investing beliefs:

Exhibit 2: Responsible investing beliefs in practice

Source: Russell Investments. For illustrative purposes only.

1. Portfolio management process
Responsible investing is integrated throughout our investment process, including in our manager
research, portfolio management, and portfolio construction activities. We believe ESG
considerations should sit alongside traditional assessments as a part of the overall investment
considerations for strategy evaluation. Manager research analysts have assigned an ESG rank toindividual strategies since 2014, but as a natural evolution, we have expanded and refined our due
diligence to cover a wider set of sub-advisers’ stewardship activities. Furthermore, we produce anannual ESG survey of active managers, which assesses the integration of ESG considerations ininvestment processes among equity, fixed income and private markets managers.
Russell Investments’ portfolio managers select active managers from among those ranked highly by
our manager research teams. Through close collaboration we ensure that sustainable mandates
employ managers with strong ESG integration. Furthermore, portfolio managers seek to identify andassess financially-material sustainability risks on an ongoing basis within portfolios. Potential risks
are identified using available metrics and in communication with external investment managers.

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2. Insights and research
We tailor our research to evolve our understanding of sustainability risks, and this is reflected in our
strategy development, metrics and reporting, as well as industry analysis.
Our researchers are continually developing and refining our ESG-related strategies, such as
Decarbonization 2.0, impact investing, and ESG-themed solutions. Our internal reporting andoversight incorporate third-party data and industry-standard frameworks, along with our own
proprietary metrics such as the Material ESG Score.
As climate change remains one of the most pressing challenges of our generation, in addition to
making a firmwide commitment to net zero1, in 2021, we have further strengthened our capabilities
by establishing an ongoing partnership with a specialist climate risk provider2 to supplement ourexisting climate metrics.

3. Active ownership
Russell Investments has built a robust proxy voting and governance process over the last 30 years,
geared toward engagement on issues related to ESG factors. Our Active Ownership Committee(“the Committee”) oversees a globally consistent and rigorous approach to proxy voting andengagement activities. The dedicated professionals on our Active Ownership Team enable our
proxy voting policies, procedures, guidelines and voting decisions, while continuing to adapt our
processes to meet evolving client needs and expectations.
The Committee is made up of experienced Russell Investments’ professionals from a variety ofroles, including portfolio management, manager research, and investment strategy. All proxy voting
and engagement activities are advised by a member of Russell Investments’ legal team.
Within the Committee, our Guideline Sub-Committee meets regularly to review and propose
adjustments that ensure our guidelines are aligned with current best practices, and our Engagement
Sub-Committee directs and monitors our engagements with public companies, our sub-advisers andother market participants. This organizational structure and the diverse set of participating
investment professionals keeps our active ownership function integrated within our investment
process.
Exhibit 3: Governance of active ownershipResponsibilities: Chair: Oversight of all processes and procedures of the committee and its sub-committees.
Voting members: Comprised of senior investment professionals charged with voting on policy/proceduralchanges and proxy proposals.
Legal representative: Oversees all developments and actions of the committee and its sub-committees.
Source: Russell Investments, for illustrative purposes only.

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https://russellinvestments.com/de/about-us/newsroom/2021/russell-investments-announces-net-zero-carbon-emissions-goal
https://russellinvestments.com/nz/blog/tcfd-explained

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At Russell Investments, we believe that being an active owner is an important component of ourinvestment responsibilities, as well as our fiduciary duty. As part of our stewardship activities, we
aim to engage with companies on overall business strategy, capital allocation, and environmental,social and governance practices while encouraging appropriate levels of risk mitigation in line with
our engagement policy.
Additional information regarding our proxy voting and engagement actions during 2021, as well as
our plans to further strengthen Russell Investments’ active ownership function going forward, aredetailed below in the sections titled Engagement, Voting and Reporting, and Policy Advocacy andCollaboration.

4. Culture and process
At Russell Investments, we believe that the effective management of diverse ideas and perspectives
brings richness to our culture and increases our ability to provide innovative solutions to our clients,
while adding value to our shareholders and community. The following four key pillars support ourculture and process:1.

Corporate values: Russell Investments' people and values3 are the foundation of our company
and the reason for our long-term success.

2.

Sustainable work practices: Our mission is to identify and reduce our impact on theenvironment by ensuring that our day-to-day procedures are carried out in the most sustainable
manner.

3.

Diversity, equity and inclusion: We believe that diversity, equity and inclusion in theworkplace drives better performance. Diversity is integral to our long-term growth.

4.

Community involvement: We are committed to supporting the communities in which we live
and work.
Full details of our approach to corporate responsibility can be found here.

3

https://russellinvestments.com/us/careers#ColorBoxesRoot_7d81fda3-3ae3-4990-b8f8-1f8ee87b810e

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Engagement

Our approach
As a leading investment
solutions partner with multiasset and multi-manager
capabilities, we leverage abroad set of relationships toexert influence and enablemultiple levels of
engagement. These
relationships extend acrossand through sub-advisers,
standards setters, proxy
and engagement service
providers, other market
participants and of course,
corporate issuers.

Ongoing dialogue with companies is a fundamental part of our responsible
investing strategy. Our engagement approach is to build a mutually
beneficial long-term relationship with the investee companies and to help
them set a direction of travel from an ESG perspective.
Russell Investments’ engagement process and activities are led by the
Active Ownership Team with participation from a wide group of global
investment professionals from both research and portfolio management.
Throughout 2021, we rolled out a program to increase each portfolio
management team’s involvement in our active ownership efforts – thisincluded hiring dedicated active ownership professionals to oversee thedevelopment and strategy of our engagements.
Our business model and service capabilities enable a multi-channel
approach to stewardship, meaning that we engage directly with issuers,
engage through and with our sub-adviser partners, and join collaborative
engagement efforts with third-party market participants. Further information
can be found in our engagement policy.
As a leading investment solutions partner with multi-asset and multimanager capabilities, we leverage a broad set of relationships to exert
influence and enable multiple levels of engagement. These relationships
extend across and through sub-advisers, standards setters, proxy andengagement service providers, other market participants and of course,
corporate issuers. These connections provide information sharing and serveas an important feedback loop into our active ownership process.

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Exhibit 4: Impactful ownership practices

Source: Russell Investments, for illustrative purposes only.

Russell Investments-led engagements
At Russell Investments we believe that a strong stewardship program includes pursuing activities
that offer the highest return or risk mitigation opportunities. To this end, Russell Investments’ Active
Ownership Team strategy is focused on material issues under the general categories ofEnvironment, Social, and Governance. While we recognize that a broad set of issues are worthy ofshareholder attention, we believe that identifying a select set of engagement priorities supports
accountability and successful outcomes.
Russell Investments maintains six focus areas that have been chosen through consideration of ourclients’ expectations, our proxy voting and engagement practices through time, our corporate
values, and our responsible investing beliefs.
Our Engagement Focus areas are monitored and updated as required to address regulatory
developments, emerging investment risk and opportunities, as well as clients’ requests and needs.
More information on this approach can be found on our website.
Exhibit 5: Engagement focus areas

Source: Russell Investments, for illustrative purposes only.

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These focus areas are underpinned by two overarching principles:
ESG disclosure
Russell Investments encourages companies to make public how they are addressing key ESG
issues relevant to their business practices in a timely manner. To this end, we promote thepublication of an integrated or standalone sustainability report an annual basis, which provides
information in line with peers and industry good practices.
For most small market capitalization and emerging market holdings, we expect ESG disclosure to be
the main engagement topic. We recognize that these companies have a disadvantage compared totheir larger or developed market peers due to resource constraints and the financial burden thatcomes with measuring and disclosing ESG risks. Our advocacy to small cap and emerging market
holdings therefore starts with improving ESG disclosures.
UN Global Compact
Established in 1999, the UN Global Compact (‘UNGC’) is a voluntary framework that has Ten
Principles built around human rights, labor standards, the environment, and anticorruption. These
principles promote the integration of sustainable business practices and challenge companies tobecome more open and transparent about their strategies, policies, and procedures pertinent tosustainability issues.
Since the framework’s inception, over 15,000 companies and 3,000 non-business signatories basedin over 160 countries have become signatories to the UNGC, growing into the largest corporate
sustainability initiative in the world4.
To ensure that companies meet a minimum standard for good governance practices, we check
whether a company has breached global “norms,” as represented by the UN Global Compact
Principles. If a company is identified as being in breach of one of the principles of the UNGC, we
consider the company a high priority engagement target with the purpose of understanding why abreach has been flagged, to promote improvements in governance practices, and to ultimately
assess whether the company exhibits good governance.

Engagement selection
In addition to our core focus areas, Russell Investments also considers the following criteria whenselecting targets for engagement:•

Russell Investments’ ownership stake as percent of shares outstanding and/or weight of fundexposure;•

Proxy voting history and management responsiveness to shareholder concerns;•

ESG analysis performed in-house and by third-party vendors of ESG metrics focusing on
subindustry peer comparison and ESG related controversies;•

Research and analysis from Glass Lewis, our proxy voting administrator;•

Any history of previous engagement activity; and•Opportunities highlighted by our sub-advisers.

Engagement targets are finalized using the input and insights of our portfolio management teams
and approved by Russell Investments’ Investment Strategy Committee.

4

https://express.adobe.com/page/k93cLbjYIzmME/

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Sub-adviser partner engagements
Given our position as a multi-asset manager-of-managers, we leverage our relationships with our
sub-advisers to provide an informed and integrated approach to active ownership. Sub-advisers are
hired to play targeted, value-enhancing roles in our portfolios. Day-to-day they are routinely in close
contact with our investee companies, so it is natural that their insights and recommendations
regularly contribute to our engagement and voting processes.
We consider our sub-adviser relationships to be a strategically important element of our stewardshipprogram. Whenever possible, our portfolio managers solicit input from our sub-adviser partners inthe selection of our engagement priorities. Discussions with our sub-advisers can validate thebenefit of an engagement and inform our approach. Through consultation with our sub-adviser
partners, we determine whether joint outreach or separate but aligned efforts are more likely to beeffective. Opportunities highlighted by our sub-advisers might result in partnered engagement
efforts, Russell Investments-led engagements with sub-adviser input, or reinforcement ofengagement efforts that are already underway.

Sub-adviser partner input

54% of total

Joint engagements

29% of total

During 2021 we received input from sub-adviser partners for 54% of the engagements conducted.
Furthermore, Russell Investments conducted joint engagements with several sub-advisers
throughout 2021; these represented 29% of the total engagements. Joint engagements are pursued
when we believe additional investor presence and expert insight into company operations will further
our intended outcomes. We value the expertise our sub-advisers can provide to engagement
conversations, and we assess the utility of a joint engagement on a company-by-company basis.

Collaborative engagements
Since early 2020, Russell Investments has leveraged a partnership with Sustainalytics for thematicand collaborative engagements. Sustainalytics’ engagement programs enable participants to build
relationships with a selected set of issuers to encourage action on specific issues in ways that
promote long-term value. Russell Investments has selected engagement themes that align with our
focus areas and provide expertise and access in areas where partnership increases the likelihood of
success. Across all five themes selected, our investment professionals participate directly in callswith the targeted companies.
Russell Investments’ collaboration with Sustainalytics has materially broadened our scope ofengagements. Sustainalytics thematic engagement programs are designed to run a three-yeartimeline. At the beginning of 2021, the Climate Change Transition program concluded, but Russell
Investments joined two more: Climate Change-Sustainable Forests and Financing, and Modern
Slavery. We chose the former to maintain our high activity on environmental issues and added thelatter to bolster our outreach on an important social problem. These themes align with our active
ownership strategy and our engagement focus areas.

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Exhibit 6: Sustainalytics engagement themes

Source: Russell Investments, for illustrative purposes only.

In addition to our efforts with sub-advisers and through Sustainalytics, we play an active role insustainability and responsible investing through involvement in organizations promoting sustainable
operating and investment practices. Memberships in these organizations and investor groups
broaden our scope of influence beyond the companies in which we invest. Further information canbe found in the Policy Advocacy and Collaborations section.

Tracking progress
Russell Investments understands that addressing risk and return opportunities through stewardshipcan be a lengthy process – not every action will move in a straight line toward success. To that end,
we track and monitor company progress and record the status of each individual engagement
action, including the relevant focus area and the aim of each outreach. Engagements are ’on-going’
as long as we believe that progress can be made. On-going actions include early-stage
conversations that result in raised awareness, as well as companies that have moved toward
implementation of a revised strategy. While we do not subscribe to an explicit time frame for
escalating or closing our internally led engagements, we expect and plan for most issues to beresolved over a three-year period.

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Exhibit 7: Tracking engagement process

Source: Russell Investments, for illustrative purposes only.

Divestment
We believe that engagement is usually the most effective tool for changing corporate behavior, andRussell Investments’ position as a manager-of-managers means that we do not make investment ordivestment decisions on behalf of our sub-adviser partners. As a result, divestment is currently not afrequently used escalation strategy. However, we communicate with our sub-advisers whencompanies we engage with refuse to change or are not moving quickly enough to operate
sustainably.
Our escalation strategies, shown in Exhibit 8, are assessed on a case-by-case basis and do notfollow a particular order. We believe that achieving a positive outcome is more important executing alinear path.

Exhibit 8: Escalation strategies

Source: Russell Investments, for illustrative purposes only.

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2021 engagement activity
Engagement channels
Russell Investments occupies a special position in terms of industry influence and reach, and thiscreates multiple avenues for engagement. Over half of our engagements have been conducted
through partnership with Sustainalytics, while one third of the engagement activities in 2021 were
proactively identified and led by Russell Investments. In 2022, we aim to continue to increase ourRussell Investments-led engagements, as well as our collaborative activity through third parties suchas Climate Action 100+.

Exhibit 9: Engagement channels

Source: Russell Investments. For illustrative purposes only.

Engagements by sector
At Russell Investments we recognize the importance of materiality, and we seek to evaluate how
companies are managing the ESG factors that also impact financial performance. For this reason,
we support the Sustainability Accounting Standards Board (‘SASB’) Standards as a fundamental
way for companies to communicate financially material sustainability information to investors in anindustry-specific and comparable way. In the same manner, we use SASB Standards to identify
sector specific priority issues for corporate engagement.
In line with the breadth of our engagement strategy, during 2021 we engaged with companies across

63 different subindustries. Almost one quarter of the engagements conducted over the reporting
period were with companies in the materials sector followed closely by the industrial sector.
Exhibit 10: Percentage of engagement by sector

Source: Russell Investments.

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Engagement by focus area
As a result of our active ownership development and efforts, during 2021 we successfully increased
the number of engagements with companies on ESG topics by 47% compared to 2020. All our
engagements were undertaken remotely, given the travel restrictions imposed in response to the
Covid-19 pandemic.

Our engagements related to environmental topics:

Climate Change
Resilience

68%

Natural Capital

32%

Environmental

32%
Our engagements related to social topics:
Diversity &Inclusion

Human Capital

78%

22%

Social11%
Our engagements related to governance topics:
Board Composition &Accountability

46%

Executive
Compensation
Other*

Governance

39%

43%
11%

* Identifies topics outside our engagement focus areas (capital allocation, related party
transactions, and share capital structure)

Russell Investments / Active ownership report / 2021

ESG Disclosure

UNGC

17%

1%

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Engagements by region
Because we are a global firm with global investments, our active ownership strategy can achieve
wide geographic impact. In the last two years, through our partnership with Sustainalytics, we
increased our engagement activity with companies in some emerging markets where we had limited
outreach in the past. Across all our engagement channels in 2021, we held engagements withcompanies in 31 different markets, distributed in seven main geographic regions:Exhibit 11: Engagement distribution by region

25%

30%

9%

Canada &United States

EuropeAsia ex-Japan

26%
Japan

6%
Latin America &Caribbean2%
Africa & Middle East2%
Oceania

Source: Russell Investments. For illustrative purposes only.

Engagement outcomesA crucial part of Russell Investments’ engagement process, and a key part of our stewardship
responsibilities, is tracking the progress of corporate action and measuring the impact of ourengagement activities.
During 2021, more than half of the companies we engaged with acknowledged and showed a clear
appreciation of the concerns we raised. Approximately one third committed to address the issues
and/or has developed a strategy to do so. Furthermore, a small proportion of the ongoingengagements have been closed due to a satisfactory response and implementation of a strategy by
the company.
Exhibit 12: Breakdown of engagement outcomes

Source: Russell Investments. For illustrative purposes only.

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Engagement by asset class
The fixed term and contractual nature of bond investments afford bondholders a finite number ofengagement opportunities to make explicit impact with individual issuers. These opportunities areoften very brief, before an investment decision must be made, and they are not open to all parties,
but rather at the discretion of the issuer’s willingness to engage in most instances. Russell
Investments typically focuses on evaluating and hiring managers with strong awareness andcapabilities to engage on ESG issues and then allows the managers to engage with issuers on ourbehalf.
Our sub-adviser due diligence framework incorporates an assessment of the level and quality of
ESG integration and active ownership across all asset classes, including fixed income.
Consideration taken in this process includes, but is not limited to:•

How managers prioritize engagement activities;•

How engagement objectives are set;•

Who is involved in the engagement activities;•

How the progress is monitored;•

How engagement activity success is measured; and•Publication of product or asset class specific sustainability reports.

Bondholder engagement has become a key information source in assessing ESG related risk andreturn opportunities in the marketplace, and our sub-advisers are actively utilizing their engagement
activities to obtain greater insights of the underlying companies or entities, as well as improve theirtransparency and influence on business practices. Based on our monitoring activities, our subadvisers increasingly exercise proactive engagement activities considering the materiality ofindustry-specific and company-specific risks.
The ability for bondholders to influence bond issuers also depends on how often bond issuers issuedebts for their capital needs: repeated bond issuers are more incentivized to listen to bondholders.
Investment-grade corporate bond issuers are, by definition, companies with higher credit ratings
resulting from healthier financial conditions. Such companies are often large, listed on the stock
market, and employ dedicated investor relations personnel to address investor concerns. Therefore,
the transparency of the investment-grade bond issuers tends to be greater than that of the belowinvestment-grade bond issuers. As such, although we have seen a substantial expansion ofengagement efforts among below-investment-grade bond managers (such as high yield managers),
engagement activities seem to be more established among sub-advisers with investment-grade
corporate bond mandates.
Depending on the market conditions, one can say high-yield issuers potentially have a greater
incentive to listen to potential investors’ needs, as their ability to access capital markets is less thanthose of investment-grade companies. There are more private companies in the high-yield market
than in the investment-grade corporate market. Private companies often lack transparency, such astransparency into the composition of board membership. While our high-yield managers werealready communicating with underlying companies’ managements and their stakeholders, their
engagement activities are shifting dialogues to ask broader ESG-related questions. Our high-yield
managers have focused on increasing transparency and influencing corporate behaviors in efforts toimprove the long-term enterprise value of the company in the past. At the same time, our subadvisers are increasingly focusing on their engagement activities around climate risk.

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3.02

Case Study: High yield manager
engagement
TYPE OF ENGAGEMENT
Sub-adviser partner
COUNTRY OF INCORPORATION
Brazil
MARKET CAP
BRL 74.96bn
SECTOR
Materials
CONTEXTOne of our high yield managers engaged on several occasions with the world’s
largest pulp producer based in Brazil. Our sub-adviser already had a long-term
relationship and climate change was recognized as key material risk for thecompany.
ACTIONS
Our sub-adviser encouraged the company to address climate change in line with
their engagement priorities. Encouraging bond issuers to issue sustainabilitylinked bonds to align certain KPIs is a key trend we see for the bondholder
engagements.
OUTCOMES
The company issued a sustainability-linked bond which is linked to a scope 1
and 2 emission target, in line with the company’s goal to achieve net zerocarbon emissions by 2030. If the established targets are not met, the company
must pay higher coupons to its investors.
NEXT STEPS
While the initial objective of the engagement has been achieved, the financial
implication of the outcomes requires further monitoring. Our sub-adviser will
track the company’s performance against the targets set.

Engagement activities with sovereign issuers can be a very challenging. Changes are often slower
at the country level than at the company level. Other differences between sovereign and company
engagements we have identified are in relation to the communication channel, the political regime,
and the election cycle. During 2021, we have seen our emerging market debt managers engaging
with bond issuers to seek sustainable outcomes. Collaborative engagement – where a group of
institutional investors comes together to engage with entities – appears to be a popular engagement
practice with sovereign-debt investors.

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Case study: Sovereign bondmanager
TYPE OF ENGAGEMENT
Sub-adviser partner
COUNTRY
Malaysia
CONTEXT
Malaysia is heavily reliant on coal and natural gas to generate electricity. While
the government has made pledges and set targets that align to net-zeroemissions pathways, the actual strategic plan is below standards.
ACTIONS
Our sub-adviser reached out to multiple government officials, including the
Minister of Finance, about Malaysia’s commitment at COP26 and how to achieve
it. To this end, our sub-adviser pushed for a detailed action plan. The manager isalso involved in collaborative engagement activities with other asset managers
and asset allocators to put further pressure the local policymakers.
OUTCOMES
While we acknowledge that a detailed plan has not been published at this time,
we recognize that desired engagement outcomes, particularly in this asset class,takes longer than others.
NEXT STEPS
Russell Investments continues to encourage and support our sub-advisers topush a sustainable agenda through engagement activities.

Activity across our focus areas
This section of the report offers detailed examples of engagement conducted and topics discussed
based on our focus areas.
Our corporate engagement efforts address companies and issues that extend across ourinvestment portfolio strategies to capture our presence globally, and we have selected examples
that demonstrate the range of our active ownership efforts in terms of geographical distribution,
size and sector of the companies, channel used, and engagement topics.
As noted above, Russell Investments engages across six ESG focus areas, underpinned by two
overarching principles based on meaningful ESG-related disclosure and compliance with the Ten
Principles laid out in the UN Global Compact.

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Climate change resilience
Russell Investments recognizes that climate change is one of the defining, global challenges of this generation and isa material investment issue across regions and industries. Based on a research report published by CDP, the world’s
215 largest companies, representing USD 17 trillion in market capitalization, estimate5 the financial impact of climate
risks to total at least USD 1 trillion, the majority of which are expected to hit in the next three years. Our policy is toresearch, measure, report and consider climate change risk and opportunities as an integral part of our investing
practice, our active ownership, and our business operations to mitigate the impact of the climate change-related risks.
Further details of Russell Investments’ climate response can be found in our TCFD report
Russell Investments has been an official supporter of the TCFD since 2019, and we promote the TCFD’s
recommendation that companies provide effective climate-related disclosures that enable more informed financial
decision making. In addition, we advocate for companies to have board-level oversight and governance of climatechange impacts. Finally, Russell Investments expects companies to explain how they have incorporated climaterelated issues into their business, strategy, and financial planning – including the disclosure of key metrics and risk
management processes.

Case study: Engaging on climatechangeENGAGEMENT CHANNEL
Russell Investments-led
COUNTRY OF INCORPORATION
Japan
MARKET CAP
JPY 248.7 bn
SECTOR
Consumer Discretionary
CONTEXT
Russell Investments engaged with a Japan-based tire company. The company is materially
exposed to GHG emissions as the manufacturing of tire and rubber products (the extraction of
petroleum, milling, curing, and cooling of rubber requires a considerable amount of energy) is
becoming more frequently regulated. In addition, the company uses large quantities of wateralongside the natural resources needed to source rubber for tires.
ACTIONS
Russell Investments identified that the company lagged in practices and disclosure compared to
its regional and market cap peers. We engaged with the company to encourage improvementsin the company’s overall ESG disclosures, in particular climate change related disclosures.
Moreover, we sought to collaborate with the company on their strategy and management of
natural resources relevant for their operations.
OUTCOMES
From discussion with the company, Russell Investments determined that the company wasquite advanced in incorporating ESG issues into its strategic planning even though its public
disclosures were weak. Recognizing that regulatory pressures are rising to reduce emissions
footprint and sustainably manage supply chains, the company has conducted a materiality
assessment and set new targets around sustainability issues looking at its value creation,
operational risk reduction, and the safety and quality of their product.
NEXT STEPS
Although the company has committed to address our concerns and has developed a strategy to
do so, we consider this engagement to be ongoing. In 2022, we will follow up with the company
on execution of their plans, including but not limited to TCFD reporting, setting Science Based
Targets for GHG reduction, and water reduction targets at the regional level.
5

https://www.cdp.net/en/articles/media/worlds-biggest-companies-face-1-trillion-in-climate-change-risks

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Natural capital management
Measuring and valuing natural capital can provide companies with detailed statistics for better management of natural
resources that contribute to economic development and growth. Better understanding of the mechanisms that link
ecological systems to human wellbeing are required to assess both the value of benefits from natural resource
systems, and the expenditure required to maintain those benefits.
Russell Investments believes that companies should display an understanding of their environmental resource use
across their businesses, and demonstrate responsible environmental management aimed at maintaining the longterm usage of assets. We expect companies to implement sound and sustainable environmental practices acrosstheir operations and supply chains to protect against material and reputational risks that can arise from themismanagement of natural capital.
Initiatives and policies that avoid and/or reduce deforestation is an area of focus for Russell Investments. We
advocate for disclosure as a starting point. In addition, for companies with material biodiversity exposure, and/or
those that operate in natural resource-constrained regions, we seek policies on restoration, preservation, and efforts
to control any soil and water contamination.

Case study: Engaging on natural capital
TYPE OF ENGAGEMENT
Sub-adviser partner
COUNTRY OF INCORPORATION
United States
MARKET CAP
USD 18.69 bn
SECTOR
Materials
CONTEXT
Russell Investments engaged with a U.S. manufacturer of packaging products and printing
papers with international operations. As a paper & pulp company, it has a large environmental
footprint from its sourcing of raw materials to its processing involving large amounts of waterand subsequent emissions. We connected with the company to conduct a joint engagementwith our sub-adviser. The company has experienced a series of corporate actions and ESG
controversies that made this approach beneficial given the existing relationship of the subadviser with the company.
ACTIONS
Russell Investments engaged to encourage the company to set sustainability targets for its
operations – including emissions reduction targets and water stewardship targets. Our subadviser led a discussion on the operational and financial impacts of previous environmental
issues and recent corporate actions. This supported Russell Investments’ goal in illustrating thecurrent liability facing the company from its environmental practices.
OUTCOMES
The company has a long history of considering its environmental footprint and has published anannual Sustainability Report since 2012. While they integrate sustainable practices into theiroperations, they have yet to set targets in line with international best-practice (e.g., emission
reduction targets aligned with the Paris Agreement’s 1.5c scenario). Further, while a large
portion of company operations rely on sustainable water usage and resourcing, the company’s
disclosures on its water stewardship and natural resource management is limited.
NEXT STEPSThe company is committed to aligning future disclosures with international standards including
expanding its water stewardship efforts and setting science-based targets for emissions
reduction. Russell Investments expects to continue engaging with company to follow
progression towards the indicated commitments and targets.

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Human capital management
Research6 shows that the relationship between diversity on executive teams and the likelihood of financial outperformance
has strengthened over time. The most diverse companies are now more likely than ever to outperform less diverse peers
on profitability.
Human capital management is, therefore, a critical component in company performance. It determines how companies
attract, develop, and retain employees while providing working conditions favoring greater employee engagement. Human
capital is material across all companies; hence we expect companies to provide meaningful and comparable disclosure inthis area.
The Covid-19 pandemic has greatly increased global stakeholder interest in human capital. An increasingly tight labormarket has led to a greater focus on employee recruitment, retention, and inclusion. Furthermore, the global pandemic hasheightened emphasis on gender, racial, and ethnic equity, which we address in a separate focus area given its relevance.

Case study: Engaging on human capitalmanagement
TYPE OF ENGAGEMENT
Russell Investments-led
COUNTRY OF INCORPORATION
Nigeria
MARKET CAP
USD 821.02bn
SECTOR
Financials
CONTEXT
During 2021, Russell Investments engaged with a Nigerian-based bank. The industry faces ahigh degree of competition for skilled employees and has a low level of diversity, especiallyamong senior roles. In recent years, considerable media attention has been focused on casesof gender discrimination involving publicly-listed companies in the financial sector.
ACTIONS
Russell Investments connected with the company to encourage improved human capitalmanagement practices, and to provide our views and expectations in relation to ESG disclosure
surrounding human capital management, financial inclusion, and ESG integration into financing.
Specifically, we engaged with the company on their employee training programs and initiatives
and the impact of Covid-19 from a human capital perspective.
OUTCOMES
The company has incorporated ESG training and understanding of risks into its employee
development programs. The company was responsive and supportive of its employees during
the initial stages of the Covid-19 pandemic with overall retention remaining high. It also
increased access to employee development resources for continued improvement since 2020.
The company is actively working to overcome the country-specific challenges of financial
inclusion by designing localised strategies for development. Moreover, the company integrates
ESG assessments into its lending practices including ESG specific covenants in its loan
contracts.
NEXT STEPSThe engagement with the company is ongoing. Russell Investments will evaluate thecompany’s year-over-year progress in its 2022 ESG Report once published. We expect to see
a greater level of detail disclosed by the company on their existing practices on human capitalmanagement and forward-looking strategic plans in this area.

6

https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters

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Diversity, equity and inclusion
There is ample evidence, and it is globally accepted by way of empirical research and good governance practices,that diversity helps create long-term shareholder value. Russell Investments promotes diversity as a valuable tool toenable high-performing teams and strong business outcomes.
A wide range of market participants are calling for greater diversity disclosure 7. This includes basic workforce
statistics, ethnic and cultural diversity, and details on policies. Russell Investments recognizes this lack of disclosure
as a barrier for investors to assess a company’s culture and for the wider workforce of the company to understandtheir employer’s approach to equity and inclusion. Companies should demonstrate how they are recruiting,promoting, protecting, and retaining a diverse workforce.

Case study: Engaging on diversity,
equity and inclusion
TYPE OF ENGAGEMENT
Russell Investments-led
COUNTRY OF INCORPORATIONFranceMARKET CAP
EUR 3.69bn
SECTOR
Technology and communications
CONTEXT
Russell Investments engaged with a France-based digital transformation company
specializing in solutions related to cloud storage, big data & analytics, cybersecurity, highperformance computing, business applications, the digital workplace, and automation. The
industry is characterized by relatively low representation from women and minority groups;
efforts to recruit from and develop diverse talent pools can serve to address the talent
shortage and generally improve the value of company offerings.
ACTIONS
Russell Investments engaged with the company to promote their diversity program andhuman capital management, after our internal research found that the company reported ahigh rate of employee turnover. While this engagement was identified, driven and led byRussell Investments in isolation, we did receive input from our sub-adviser ahead of ourconversation with the company.
OUTCOMES
The company recognizes the industry-wide diversity problem, including a gender bias, andthey have developed a clear strategy to recruit diverse talent where possible. The company
also has an inclusive technology strategy designed to increase accessibility to technology
for people with disabilities.
NEXT STEPSThis engagement is ongoing. Russell Investments will connect with the company after the2022 Annual General Meeting to monitor and discuss progress.

7

https://www.ft.com/content/b45f6a13-c8e6-484b-a75f-bb578178e87f

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Board composition and accountability
The board of directors is the focal point of corporate governance. Directors represent the shareholders, and they arecharged with safeguarding investors' interests. The board should promote the long-term best interests of the company byacting on an informed basis, with good faith, care, and loyalty. This helps to ensure the effectiveness of the board of
directors in promoting successful companies, thereby generating sustainable value creation for investors while having
regard to other stakeholders.
At Russell Investments, we expect companies to have foundational governance structures that promote accountability,
responsibility, transparency, responsiveness, diversity, and independence from company management.

Case study: Engaging on board
composition and accountability
TYPE OF ENGAGEMENT
Sub-adviser partner
COUNTRY OF INCORPORATION
Luxembourg
MARKET CAP
USD 17.27bn
SECTOR
Health care
ENGAGEMENT FOCUS AREA(S)Board Composition and Accountability
CONTEXT
Russell Investments, in coordination with our sub-adviser, conducted a joint engagement with a
Luxembourg-based laboratory equipment and services company. The company recently grew
the board from 6 to 8 members, achieving an independent majority despite three insiders on theboard. This is a positive step, but the board size is still relatively small and lacks substantial
business and science acumen among the independent members. Furthermore, the company
operates labs around the world and approximately one third of these are leased from a third
company owned by the CEO. Because the amount of cashflow from the leases exceeds thedividends and compensation received by the CEO for his public company ownership and role,these transactions create a conflict of interest.
ACTIONS
Russell Investments engaged with the company to discuss board composition and endorse
greater diversity, equity and inclusion at the board level. Moreover, our objective was toencourage the company to address the conflict of interest concerns arising from the relatedparty transactions, i.e. the lab leases.
OUTCOMES
On board diversity, the CEO believes the current board make-up is sufficient for the company's
size; however, should they add another director, the company will prioritize a diverse candidate
as it is one of the company’s strategic initiatives. On related party transactions, the CEO
understands the conflict and why investors are uneasy. The CEO is willing to recommend thatthe company purchase the buildings being leased as an investment, thus eliminating theconflict. A timeline was not provided for action, and it was noted that the investment was very
dependent on the company’s other needs.
NEXT STEPS
Russell Investments and its investment partner will monitor developments on the issues
discussed. On a separate topic, we aim to engage with the board’s remuneration committee todiscuss executive compensation practices and disclosures during 2022.

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Executive compensation
Russell Investments believes executive compensation should align the interests of a company’s management withthose of shareholders. Programs should offer clear and transparent disclosure, coupled with basic fairness in the useof shareholders’ capital to retain and incentivize management. Inappropriate and poorly designed remuneration
structures have been a contributing factor to excessive and imprudent risk taking by individuals. Hence, we regularly
engage with companies to ensure that remuneration packages effectively align the interests of the executive
directors, the workforce, and shareholders with the company’s strategy and performance achieved.

Case study: Engaging on executive
compensation
TYPE OF ENGAGEMENT
Russell Investments-led
COUNTRY OF INCORPORATION
United Kingdom
MARKET CAP
USD 528.07m
SECTOR
Materials
CONTEXT
Russell Investments engaged with a UK-based gold and silver mining company, which has
operations in Peru and Argentina. We voted against management on the advisory ‘Say on Pay’vote at the 2021 Annual General Meeting due to concerns at the relatively high payout under
the safety component of the annual bonus despite a fatality during the year under review.
Additionally, the company received high dissent from shareholders on both the binding vote on
the remuneration policy and the advisory vote on the remuneration report at the 2020 annual
meeting, meaning that shareholders were neither in favor of the guidelines nor the
implementation of executive pay.
ACTIONS
Russell Investments engaged with the company to measure and assess the company’s
response to the vote results and to encourage the company to improve remuneration-related
disclosures. Furthermore, we requested information regarding the decision behind the payout,
and the executive compensation package and structure.
OUTCOMES
The company understood why investors are dissatisfied with the level of disclosure provided
and demonstrated willingness to discuss and potentially change its disclosure practices tobetter fit investor expectations.
NEXT STEPSThis engagement has been classified as ongoing. Russell Investments will continue to monitor
disclosure improvement on executive compensation and engage with the company accordingly.

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ESG disclosure
During 2021, investors and regulators continued to focus on the scope and quality of public company disclosure of
ESG information. Not every jurisdiction has rules on ESG disclosures, and much guidance focuses on best practiceor best efforts rather than mandatory. For example, across emerging markets, corporate ESG disclosures are unevenand broadly lag those in developed markets. At Russell Investments, we believe that encouraging companies globallyto up their ESG performance and ESG disclosures can drive business success. To this end, we motivate companies
to make public how they are addressing key ESG issues relevant to their business practices in a timely manner.

SPOTLIGHT – ESG DISCLOSURE ON SMALL CAP COMPANIES

Case Study 1
ENGAGEMENT CHANNEL
Sub-adviser partner
COUNTRY OF INCORPORATION
United States
MARKET CAP
USD 454.6m
SECTOR
Consumer services
We engaged with a U.S. based company that operates and franchises restaurants featuringmade-to-order cuisine. Russell Investments identified that the company did not provide
meaningful disclosure on material sustainability issues relevant to the restaurant industry, and thecompany was falling behind peers on ESG reporting. We sought input and insights from our subadviser and decided that, strategically, a collaborative engagement alongside our sub-adviser
would be more impactful. We engaged with the company to find that they are currently exploring
ESG disclosures and are leaning towards the SASB framework. The company also noted thatthey have programs in place for waste management. In addition, the company is exploring
methods to integrate sustainability and health concerns into their supply chain.

-

Case Study 2
ENGAGEMENT CHANNEL
Russell Investments-led
COUNTRY OF INCORPORATION
United States
MARKET CAP
USD 7.85bn
SECTOR
Consumer discretionary
We engaged with a multi-jurisdictional gaming company based in the U.S. Russell Investments
established that the company released its first ESG report in 2021. We sought input from our
sub-adviser on the stock, and after further internal debate, we decided to connect with thecompany to encourage it making more explicit disclosure in certain material ESG-related topics,
such as carbon and water stress. In response, the company showed a clear understanding of
our concerns and displayed a strategic focus on ESG-related matters -- in particular, on
emissions reduction, sustainable resource use management, and robust human capitalmanagement and diversity programs. While the company described challenges in measuring
and reporting in some of these areas, they have committed to improve disclosure as they
improve their data collection methods.
OUTCOMES
Both companies indicated understanding of the concerns raised during our engagement, but
Russell Investments will continue to monitor and engage with them as they progress towards
ESG disclosures and greater incorporation of ESG factors in business practices.
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Escalation
Russell Investments believes executive compensation should align the interests of a company’s management withthose of shareholders. Programs should offer clear and transparent disclosure, coupled with basic fairness in the useof shareholders’ capital to retain and incentivize management. Inappropriate and poorly designed remuneration
structures have been a contributing factor to excessive and imprudent risk taking by individuals. Hence, we regularly
engage with companies to ensure that remuneration packages effectively align the interests of the executive
directors, the workforce, and shareholders with the company’s strategy and performance achieved.

Case study: Proxy voting escalation
ENGAGEMENT CHANNEL
Russell Investments-led
COUNTRY OF INCORPORATION
United States
MARKET CAP
USD 3.99bn
SECTOR
Consumer staples
ENGAGEMENT FOCUS AREA(S)
Human capital management
CONTEXT
A shareholder resolution requesting that the board report the Company’s human rights due
diligence process was proposed at the 2020 Annual General Meeting of a poultry producer
based in the U.S. Given the company's industry, it could be exposed to several human rightsrelated risks in its own operations as well as those maintained by its contract growers. As has
been seen with other companies, allegations of human rights abuses can inflict, at a minimum,
reputational damage on targeted companies and may dramatically affect shareholder value.
ACTIONS
There was debate among Committee members over whether to support the shareholder
proposal. The committee ultimately voted to reject the proposal in 2020 on the basis thatengagement would be a more effective tool to communicate our concerns. In August 2020,
Russell Investments met with the company to discuss their response to the shareholder
proposal. The company pointed out that they had in fact had a decline in worker injury in the
period 2017-2019 due to their efforts, and are ahead of peers in their sustainability efforts,having adopted the SASB disclosure framework in 2019. Although we had an overall positive
view on management’s efforts within their own plants, the company was not able to outline aplan for screening contract growers. As a result, we escalated the company for further
monitoring.
OUTCOMES
After finding no progress made on risk mitigation in the supply chain in 2021, Russell
Investments’ Committee voted to support a repeat of the shareholder proposal requesting ahuman rights due diligence report.

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Participation in Sustainalytics activity
Sustainalytics’ engagement services allow for close oversight and integration with our internal active ownership andinvestment processes. Our Engagement Sub-Committee, responsible for the selection and monitoring of engagement
themes, communicates regularly with Sustainalytics on the positioning of these themes and target company selection
and monitors progress and outcomes. Additionally, members of the Active Ownership Team, portfolio managers andmembers of the wider investment division regularly participate in the direct company engagements led by
Sustainalytics.

Case study: Concluding climate changetransition theme
CONTEXT
Russell Investments, in alignment with our focus area on Climate Change Resilience, joined
Sustainalytics’ Climate Change Transition engagement theme in early 2020. The theme
targeted twenty companies in the steel and construction industries. These industries wereselected because they had received comparatively less attention than the oil and gas, power
utilities, and transportation sectors within the climate debate, and on a combined basis, steel
and cement represent approximately 13% of anthropogenic greenhouse gas (GHG) emissions
globally. This set of engagements aimed to further climate-related international disclosure
standards and company alignment with a 2-degree or lower transition pathway. Specifically,
participants advocated for the integration of transitional and physical risk and a mitigation
strategy beyond 2020 utilising science-based targets or the equivalent.
ACTIVITY
Over the course of the engagement, Sustainalytics led 73 engagement meetings, sent
approximately 600 communications, and coordinated responses to an investor letter on climatetransition. Through this collaborative engagement, Russell Investments was able to engage
with 20 companies in 13 different countries in four main regions, held across 93 different
Russell Investments’ funds. To each company, we promoted the integration of environmental,social, governance and climate-related factors into reporting, strategic planning, and risk
management for long-term value creation.
OUTCOMES
Through this collaboration, we contributed to the following outcomes8:
•
•
•
•
•

•

Between 2018 and 2020, 10 of the 15 companies (20 total) that reported to CDP
improved their Climate Reporting score.
Nine of the twenty companies were included under the Climate Action 100+ list of theworst contributors to global GHG emissions, and each of these companies showed
evidence of improvement in their scoring with the Climate Action 100+.
80% of the engaged companies set 2030 targets or equivalent, while 90% established a2030 target and/or 2050 carbon neutrality ambition. Five of the twenty companies also set
science-based targets.
Throughout the engagement, targeted companies showed significant improvements interms of various aspects relating to climate transition innovation.
Several companies used CDP reporting as a steppingstone to alignment with the Task
Force on Climate Related Disclosures (TCFD), and by the end of the engagement in
2020, three of the more advanced companies were considering how to best align theirreporting and target setting with the TCFD.
While none of the companies had yet directly tied climate-related objectives to executive
or board level compensation – more advanced companies were open to or had alreadystarted discussions to put this in place.

NEXT STEPS
While the Climate Transition engagement has concluded, the issues it addressed remain
important and unresolved. Russell Investments will continue outreach through:••8

Russell Investments-led activity under our environmental-related focus areas, Natural
Capital and Climate Change Resilience.
In partnership with Sustainalytics on the Localized Water Management and the Sustainable
Forest and Finance themes.

Sustainalytics Climate Transition Final Report

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Voting and reporting

Our approach
For 30 years, Russell
Investments has executeda robust, global proxyvoting program that is afoundation of ourstewardship efforts. Russell
Investments’ Guidelines arecarefully drafted to result invotes that promote the bestinterest of our clients.

Proxy voting is a fundamental tool for listed equity, whereby shareholders
are entitled to express support or concern with aspects of corporate
governance, operations, or disclosures. As stewards of our clients’ capital,
we have an obligation to vote responsibly and hold companies to account on
their behalf.
For 30 years, Russell Investments has executed a robust, global proxyvoting program that is a foundation of our stewardship efforts. Russell
Investments has documented Proxy Voting Policies and Procedures andmaintains custom Proxy Voting Guidelines. Our Guidelines are a bespoke
set of rules and policies, based on industry best practices and regulation,that dictate how to vote on certain topics. Russell Investments’ Guidelines
are carefully drafted to result in votes that promote the best interest of ourclients, and, at least annually, our Guidelines Sub-Committee reviews andupdates them to stay in line with shareholders’ best interests. The Voting
Guidelines address most proxy issues with detailed specificity; however, theActive Ownership Committee (“the Committee”) recognizes that some issues
require more scrutiny and a non-prescriptive approach; in those instances,
the Guidelines refer the votes to the Committee for review.
An external service provider, Glass Lewis, serves as our proxy administrator
and is responsible for aggregating proxy ballots received directly from
Russell Investments’ custodians and applying our custom guidelines when
executing proxy votes. Russell Investments’ internal proxy coordinatormonitors our voting activity via Glass Lewis’ online platform and directs any
proposals that require case-by-case review to internal analysts, who in turnprovide a recommendation to the Committee based on individual researchand the research provided by the proxy administrator. The majority of
proposals voted by Russell Investments do not require case-by-case review– Glass Lewis applies our Guidelines directly. To ensure that Glass Lewis
casts votes in accordance with our Guidelines, the Committee oversees anannual internal audit process to verify the accuracy of vote execution.
Our Proxy Voting Guidelines are available to review in their entirety on our
Responsible Investing site here9.

9

https://russellinvestments.com/us/corporate-responsibility/responsible-investing

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Impact of 2021 guidelines updates
As described above, the Guideline Sub-Committee’s annual review of our Proxy Voting guidelines
allows the Committee to remain abreast of regulatory updates and industry trends. Twoamendments to the Proxy Voting Guidelines that were implemented for the 2021 proxy season
made a considerable impact on our voting activity:
Time commitment of directors
Over-commitment is considered a material governance concern as it could potentially compromise
the quality of the board, because of the directors in question being spread too thinly. This lack ofsufficient ’dedication’ results in lesser quality decision-making by the directorship and is associatedwith negative performance and company valuations. To discourage overboarding and promote
proper director oversight, we tightened our guidelines to oppose the election of directors who serveon the boards of more than three publicly traded companies, a decrease from five in the previous
iteration. This provision alone accounted for 38% of votes against provider, demonstrating our
independent stance on director accountability.
Exhibit 13: Rationale for votes against management on director elections
81%

42%
24%
15%

10%

Board
Independence

10%

3%

Overboarding

Attendance
2020

3%

LeadershipConcerns

9%3%

Diversity

2021

Source: Russell Investments.

Environmental and social proposals
Russell Investments believes it is important for companies to effectively oversee and manage
material environmental, social, and governance issues. To ensure close attention by the Committee,
starting in 2021 all proposals relating to environmental and social proposals and those requesting
creation or improvement of ESG risk reporting were made subject to a case-by-case review by theCommittee. As a result of this amendment, the number of referred proposals increased 180%
compared to the previous year.
Exhibit 14: Number of referred proposals reviewed by the committee
181

83
69
36
8
Q1

Q2
2020

18
9

22

Q3
2021

Q4

Source: Russell Investments.

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Looking ahead: 2022 guidelines updates
For the 2022 proxy season, the Committee has further refined our guidelines to reflect Russell
Investments’ consideration of various ESG topics, as well as increase the efficiency of the voting
process.
The ESG landscape is constantly changing, and Russell Investments aims to keep pace with anever-expanding regulatory environment. Beyond refining the guidelines concerning ESG
shareholder proposals, the Committee ratified amendments for the 2022 proxy season, including but
not limited to:•‘One share, one vote’: We have simplified our existing guidelines to explicitly express support
for the ‘one share, one vote’ principle, and clarify our approach pertaining to dual class sharestructures and loyalty shares.

•

Board diversity: We have bolstered our diversity guideline at board level. From 2022 proxyseason, we will hold the chair of the nomination committee accountable by voting against theirre-election when gender diversity of the board members is not in line with the expectations ofeach market.

Referred items
The Committee reviews those proposals that require more scrutiny and a non-prescriptive approach,and any proposals that are not specifically addressed in the guidelines. At Russell Investments, we
believe good stewardship requires careful consideration of each proposal on its individual merits.
To this end, the Committee evaluates each proposal considering the following factors:•

our internal proxy analyst research,•

external research from our proxy administrator,•

external research from Sustainalytics,•

input from our sub-advisers on voting and engagement,•

input from the Active Ownership Team when a Russell Investments-led engagement has beenpreviously conducted.

During 2021, 639 proposals were referred to Russell Investments internal proxy analysts, either
because our Guidelines dictated case-by-case review, or because the proposal topic was notcovered by the Guidelines. Of the referred proposals, 43% were evaluated and voted on by theCommittee. The remainder of the referred proposals were of a technical nature, so our internal proxyanalysts were able to make a vote decision based on existing proxy voting guidelines without
additional input from the Committee. An overview of how the Committee has voted is provided on
the graph below:
Exhibit 15: Russell Investments votes on referred items

Environmental
proposals

Socialproposals

46.26%

53.73%

61.26%

Governanceproposals

38.73%

82.14%

Against Management

17.85%

With management

Source: Russell Investments.

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Fixed income
The right to exercise our votes through non-equity asset classes varies by the type of asset andeven among individual investments. In all circumstances, we seek to achieve mutually beneficial
outcomes while being consistent with our fiduciary duty of protecting our clients’ interests. For fixedincome assets, the number of occasions when Russell Investments will be engaged in proxy voting
will be very limited. In 2021, the bondholder votes that Russell Investments cast were all of atechnical nature. In cases where we can exercise our voting rights on environmental, corporate
governance, and social matters, we ensure that the same process and policies are applied acrossgeographies and instruments.

Stock lending
As a fiduciary, Russell Investments maintains the voting rights for all holdings. We do not delegate
voting to any of our sub-advisers, though in some cases we may reach out to a sub-adviser for
additional information regarding specific proxy items. The proxy coordinator is responsible for
ensuring that all of Russell Investments’ voting rights are exercised and conducts a quarterly review
of accounts that should have voting rights against the accounts on record with Glass Lewis. Ourpolicy on securities lending as it applies to proxy voting ensures that we exercise full voting rights onbehalf of our clients. Glass Lewis currently produces a weekly report of shares that we have out onloan with upcoming proxy votes. We restrict these securities (either 15 business days out from therecord date, or as soon as we are notified, whichever comes first) from being loaned before theirrecord date, recalling any loans as necessary. The restriction is lifted one business day after therecord date.

2021 proxy voting activity
10,041

97,534893

5,577

12,375

Meetings voted

Proposals voted

Shareholder
proposals

Votes against
providerVotes against
management

97%

97%

1%

6%

13%

Of eligible
meetings

Of eligible
proposals

Of total voting
activity

Of proposals
voted

Of proposals
voted

Exhibit 16: Voting activity per topic
Audit/Financials 3%

97%

Board Related

14%

86%

Capital Management

15%

85%

Changes to Company
Statutes

10%
22%Compensation
M&A
Meeting Administration

90%
78%

3%

97%

8%

92%

Shareholder Proposals- Environment- Social- Governance

27%

73%
47%
53%
Against Management

53%
47%
With Management

Source: Russell Investments.

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Proxy season overview
In 2021, Russell Investments voted on 97,534 individual proposals, representing 97% of proposals
eligible, and on 10,041 individual meetings, representing 97% of meetings that Russell Investments
was eligible to vote. The small percentage of unvoted meetings (marked as ‘take no action’ in ourreporting) were due to share blocking, power of attorney markets (POAs), or operational barriers. As
is frequently the case, most items voted related to governance issues, with the largest portion being
board related.
Exhibit 17: Votes by issue

1%

2%

1%
Audit/Financials

12%

Board Related

16%

Capital Management

5%
Changes to Company Statutes

8%Compensation
M&A
Meeting Administration

55%

Shareholder Proposals

Source: Russell Investments.

Russell Investments voted against management on 13% of proxy items and voted against Glass
Lewis recommendations on 6% of proposals. Of the votes against management, 35% were also
against Glass Lewis’ recommendation, which is, once again, reflective of the independence ofRussell Investments’ guidelines and voting activity.
Regarding management proposals, we have most frequently voted against items relating to
executive compensation (23% against), but we also frequently disagreed with management
proposals concerning capital management (15% against). On the other hand, we have been largely
supportive of proposals categorized as Audit/Financial.

Exhibit 18: Russell Investments voting behavior

Audit/Financials
Board Related
Capital Management
Company Statutes
Compensation
M&A
Shareholder Proposals- Environment- Social- Governance

97%
88%
85%
90%
77%
96%
29%

1%
48%
52%
For

3%
11%
15%
10%
23%
4%

2%

71%
7%
Abstain

52%
42%

AgainstSource: Russell Investments.

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Proxy voting by region
Russell Investments applies a consistent proxy voting practice around the globe. We exercised ourvotes across 89 different countries in 2021. Approximately half of the proposals voted applied tocompanies based in North America and Europe, with Asia-based companies (including Japan)
accounting for over a third of the votes. Africa and the Middle East were the regions with the lowest
voting activity registered in 2021.
Exhibit 19: Proxy voting distribution by region

17%

30%

EuropeCanada &United States

26%
Asia ex-Japan

11%
Japan

8%
Caribbean

3%
Africa & Middle East

4%
Oceania

Source: Russell Investments. For illustrative purposes only.

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Voting activity on contentious topics
Climate risk voting
During 2021 our voting activity has been consistent with our commitment for all assets undermanagement to achieve net zero emission by 2050 or sooner. In this regard, Russell Investments
has voted on 118 climate-change related proposals, and it has supported all resolutions flagged by
Climate Action 100+. Furthermore, we took voting action against 42% of the companies for theirfailure to make sufficient progress in terms of climate risk disclosure and/or management.
In line with our engagement focus areas, we have refreshed our voting guidelines regarding ‘Say on
Climate’ proposals. This new provision expands Committee review to include management
proposals, advisory or otherwise, which propose a plan for climate risk management. We expect
portfolio companies to provide necessary disclosure that allow us to assess their preparedness forthe transition to a low-carbon economy. We evaluate climate plans on a case-by-case basis, withparticular attention to:•

How the company explains the roles of the board and shareholders in executing the plan•

What the proposal is asking shareholders to approve; we are wary of providing direct votes on
strategy, preferring to leave that detail with management.

Exhibit 20: Management support on climate change-related proposals

42%

Against Management
With Management

58%

Source: Russell Investments.

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Case study: Voting with management on
climate risk
COMPANY NAME
Origin Energy Limited
COUNTRY OF INCORPORATION
Australia
MARKET CAP
AUD 10.20 bn
SECTOR
Utilities
MANAGEMENT RECOMMENDATION
AgainstRUSSELL INVESTMENTS VOTE
AgainstCONTEXT
Origin Energy Limited is an Australia-based energy company. The Company is engaged in the
exploration and production of natural gas, electricity generation, wholesale and retail sales ofelectricity and gas, and the sale of liquefied natural gas. At the 2021 shareholder meeting, ashareholder proposal requested that the company strengthen its review of industry associations
to ensure that it identifies areas of inconsistency with the Paris Agreement.
RUSSELL INVESTMENTS ACTIONS
As part of the Committee’s review, Russell Investments sought a recommendation from a•
sub-adviser partner that holds the Company. The sub-adviser has continuously engaged
with the company on climate change risks and mitigation over the last several years andnoted that they have seen significant progress made by the company since the beginningof their engagement, including improved disclosure on industry associations and theirpositions on climate change versus the company’s own position.
•

The Committee voted to reject this proposal, based on the company’s responsiveness on
this issue, as well as the fact that, while there may be discrepancies between thecompany’s positions on climate and those advocated by its trade associations, thecompany has already addressed these issues in existing disclosures.

OUTCOMES
While the resolution did not pass, it received approximately 37% support from shareholders,which is deemed to be a significant level of support. Russell Investments will continue tomonitor the company’s progress on this area and dialogue with our sub-adviser on the matter.

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Case study: Voting against management
on climate risk
COMPANY NAME
Imperial Oil
COUNTRY OF INCORPORATION
CanadaMARKET CAP
CAD 34.14 bn
SECTOR
EnergyMANAGEMENT RECOMMENDATION
AgainstRUSSELL INVESTMENTS VOTEFor
CONTEXTThe company is one of Canada's largest integrated oil companies. It is active in all phases ofthe petroleum industry in Canada, including the exploration, production, and sale of crude oiland natural gas. The company is controlled by Exxon Mobil Corporation that owns
approximately 69.6% of the company's outstanding shares. Given the nature and scope of thecompany's operations, it could be subject to significant risks with respect to climate change
effects and the associated regulatory and/or investor pressures.
RUSSELL INVESTMENTS ACTIONS
The proposal requested that the Company adopt an ambition to achieve net zero carbon•
emissions at or before 2050, covering Scope 1 (direct emissions) and 2 emissions(indirect emissions from purchased electricity), which we believe is a reasonable request
given market and regulatory momentum toward cutting carbon emissions.
•

We have established that disclosures on this topic are lagging against peers.

•

The Company states in response to this proposal that it is developing pathways to reduce
its GHG emissions intensity in support of a net-zero future. We believe that shareholder
support for this proposal would serve to further support the Company in its developmentof these pathways and its stated preference to set concrete targets.

•

Russell Investments is a member of the Net Zero Asset Manager initiative and has a goalof net-zero by 2050. Supporting this proposal is aligned with our firm's commitments

OUTCOMES
The resolution received approximately 14% support from shareholders. While this level of
support may not appear material, it represents 46% of the free float given Exxon Mobil’s
ownership of the company. The company has already acknowledged increased regulatory andbusiness risk reaffirming its goal to achieve net zero Scope 1 and 2 greenhouse gas emissions
in the company's oil sands operations by 2050 in support of Canada's commitment to movetoward net zero emissions.

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Voting on human capital management
As part of our increased focus on human capital management, we consider taking action using ourvotes on those companies that we identified as laggards on the topic, either by supporting a relevant
shareholder proposal or holding directors accountable by voting against their election at theshareholder meeting.
At Russell Investments, when assessing shareholder proposals, we pay careful consideration to thefollowing factors:•

Current practices and/or disclosures are deemed to be inadequate.

•

The proposal addresses a peer relative deficiency.

•

The proposal is not duplicating existing practices.

•

The board failed to provide commitment to address the proponent’s concerns.

•

The topic is relevant to the company and sector in which it operates•

If the proposal is overly prescriptive in detailing strategy/operational decisions, we may voteagainst.

During the last reporting year, as shown in the graphic below, we supported most shareholder
proposals related to human capital management; however, we voted against all shareholder
proposals seeking better reporting and practices surrounding labor practices.
Exhibit 21: Votes on human capital related shareholder resolution
Political Spendingor Lobbying

35%

Human Rights

65%

29%

71%

Report on EEO

Human CapitalManagement

100%

16%

84%

Labour Practices
and Disclosures

100%

AgainstFor

Source: Russell Investments.

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Case study: Voting against management
on diversity, equity and inclusion
COMPANY NAME
Tesla Inc.
COUNTRY OF INCORPORATION
United States
MARKET CAP
USD 827.60 bn
SECTOR
Consumer discretionary
MANAGEMENT RECOMMENDATION
AgainstRUSSELL INVESTMENTS VOTEFor
CONTEXT
Tesla, Inc. designs, develops, manufactures, sells, and leases electric vehicles and energy
generation and storage systems, and offers services related to its sustainable energy products.
At the latest shareholder meeting, the company received a shareholder proposal requesting
they produce an annual report assessing the company’s diversity, equity and inclusion efforts.
RUSSELL INVESTMENTS ACTIONSThe Committee voted to support this proposal based on the importance of workforce diversity toboth companies and investors. The Committee felt that additional disclosure concerning thecompany's efforts in this regard and the board's role in overseeing this issue would allow
shareholders to better understand how the company is managing this critical topic. Additionally,
the Committee recognized that the company already provides a fair amount of disclosure on
issues of diversity, equity and inclusion, and therefore the enhanced reporting requested by this
proposal would not prove difficult or burdensome.
OUTCOMES
The proposal was narrowly defeated, with over 40% support. At the time of writing this report,
the company has not made any public communication nor improved disclosures on diversity,
equity and inclusion. Russell Investments will continue to monitor the company response toshareholders concerns and explore ways to bring attention to this issue, particularly in light of
the recent news of a California regulatory agency suing the company for alleged racial
discrimination and harassment.

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Holding the board accountable through voting
Good governance is the starting point for sound management. Russell Investments’ Proxy Voting
Guidelines support governance structures that ensure that management and board members
maintain independence, objectivity, and act in the best interest of shareholders. We also emphasize
the importance of shareholder rights. This is reflected in our voting support of all shareholder
proposals that requested:•

Right to Act by Written Consent•

Independent Board Chairman/Separation of Chair and CEO•

Eliminating Supermajority Provisions•

Declassification of the Board

As explained earlier in this report, the most frequent reason that Russell Investments opposed theelection of a director in 2021 was due to overboarding concerns, followed by board independence
and leadership concerns. Given the more stringent approach to diversity at the board level laid out inour guidelines for 2022, we expect an increase on votes against directors during the 2022 proxyseason.
Exhibit 22: Votes against management on director elections

3%

3%

3%
10%

Board Independence
Overboarding
Attendance81%

Leadership Concerns
Diversity

Source: Russell Investments.

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Case study: Executive compensation
COMPANY NAME
Informa plc
COUNTRY OF INCORPORATION
United Kingdom
MARKET CAP
GBP 8.62bn
SECTOR
Consumer discretionary
MANAGEMENT RECOMMENDATIONFor
RUSSELL INVESTMENTS VOTE
AgainstCONTEXT
Informa PLC is an international event, intelligence and scholarly research company based in
the UK. The Company had intended to conduct a remuneration policy review during FY2020,
following the completion of the chair succession process in order to present it up for shareholder
approval at the 2021 AGM; however, given the impact of the pandemic and the ongoing
uncertainty as to the recovery of the company, the company suspended its triennial
remuneration policy review. As such, the committee proposed a roll-over policy at the 2020
AGM, with no material changes. However, approximately 35.13% of shareholders voted against
the remuneration policy at the 2020 AGM. Before the AGM, media reports10 highlighted thatseveral high-profile institutional investors raised concerns over the company’s target-free bonus
scheme and lack of investor engagement.
RUSSELL INVESTMENTS ACTIONS
Russell Investments voted against the report given the concerns with the adjustments•
made to the variable incentive awards.
•

Additionally, we felt the company’s compensation committee failed to adequately address
the concerns raised by shareholders or outline actions taken because of the previous
significant dissent. For this reason, we voted against the re-election of all members of thecommittee.

OUTCOMES
On 3 June 2021 Informa announced that the vote on their remuneration report failed to passwith 61.74% shareholders’ opposition. Consequently, the Company will initiate a new
consultation with shareholders on its next approach to remuneration, including on a new
Remuneration Policy. Furthermore, the re-election of the chair of the compensation committee,
Steven Davidson, received the lowest level of support on director elections among the FTSE
100 companies (53.4% in favor).

10

https://www.ft.com/content/bcd4b8ed-f2af-40d5-b757-28c6dc2c4f06

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Case study: Proxy contest
COMPANY NAME
Exxon Mobil Corp
COUNTRY OF INCORPORATION
United States
MARKET CAP
USD 320.91bn
SECTOR
EnergyMANAGEMENT RECOMMENDATION
AgainstRUSSELL INVESTMENTS VOTEFor
CONTEXTThe Company is engaged in the exploration, production, trade, transportation, and sale of crude
oil and natural gas as well as the manufacture, transportation, and sale of petroleum products,
petrochemicals, and a range of specialty products. The 2021 annual shareholders meeting of
Exxon Mobil Corp. included a contested election of directors proposed by Engine No. 1, an
investment firm that owns just 0.2% of Exxon’s outstanding common stock. Exxon expanded
the size of its board and nominated 12 director candidates for approval at the annual
shareholders meeting. In contest, Engine No. 1 nominated four alternative candidates with thegoal of pushing the energy giant to reduce its carbon footprint.
RUSSELL INVESTMENTS ACTIONS
Ahead of the vote, Russell Investments reached out to its sub-adviser for additional input•
and insight into the contested vote.
•

We voted to support two of the four activist candidates nominated to the board. We
withheld our vote for the other two dissident candidates on the basis that the goal ofadding new skills and background to the board to support the company's strategy on
emissions and carbon capture capabilities would be met with two candidates.

OUTCOMES
The result of this proxy contest was unprecedented. The support from Exxon’s biggest
institutional investors culminated in a successful activist campaign: three alternative director
candidates won election to the board of Exxon.

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Policy advocacy andcollaborations

Sustainable investment advocacy
groupsRussell Investments
takes an active role insustainability andresponsible investing
through involvement inoutside organizations
promoting sustainable
operating and investment
practices. In the spring of
2021, Russell Investments
joined the Net Zero AssetManagers Initiative, a groupof international asset
managers committed tosupporting the goal of netzero greenhouse gas
emissions by 2050 orsooner.

Russell Investments takes an active role in sustainability and responsible
investing through involvement in outside organizations promoting
sustainable operating and investment practices. Memberships in theseorganizations and investor groups broaden our scope of influence beyond
our sub-advisers and the companies in which we invest. We have been asignatory of the United Nations-supported Principles for Responsible
Investment (PRI) since 2009 and have adopted the PRI’s six principles forresponsible investing, including those that relate to collaborative
engagement. In addition to being a signatory of the PRI, we are either
signatories or members of the following advocacy groups.

Institutional Investors Groupon Climate Chance(IIGCC)Task Force on Climate
Related Financial
Disclosures

Institutional Investors Groupon Climate Chance(IIGCC)

Carbon Disclosure Project(CDP)

Investment Association (IA)Transition Pathway Initiative(TPI)

Investment Company
Institute (ICI)

Securities Industry and
Financial Markets
Association (SIFMA)

Responsible Investment
Association Australasia(RIAA)

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Climate change and net zero commitment
Net Zero Asset Managers Initiative
In the spring of 2021, Russell Investments joined the Net Zero Asset Managers Initiative, a group ofinternational asset managers committed to supporting the goal of net-zero greenhouse gas
emissions by 2050 or sooner. Launched in late 2020, this initiative is endorsed by the Investor
Agenda with founding partners including the Institutional Investors Group on Climate Change(IIGCC), Ceres, a sustainability advocacy organization, and the Principles for Responsible
Investment (PRI). As a participant in this initiative and depending on regulatory considerations,
Russell Investments has committed to work in partnership with its clients on goals, consistent with
an ambition to reach net-zero emissions by 2050 or sooner across all its assets under management.
To accelerate these efforts, in 2021, Russell Investments has added roles to its responsible
investing team and established a global taskforce to develop a net-zero emissions transition plan.
This taskforce will set interim targets in collaboration with clients globally and build upon establishedpractices such as the firm’s comprehensive manager research process, which already features ESG
evaluations for managers. The taskforce will also focus on leveraging the firm’s robust active
ownership program that includes natural capital management and climate change resilience as key
engagement objectives. Taskforce members will collaborate with other firms aligned with the Net
Zero Asset Managers Initiative to help develop best practice industry frameworks.

IIGCC
The IIGCC is the European membership body for investor collaboration on climate change. IIGCC's
mission is to mobilize capital for the low carbon transition and to ensure resilience to the impacts ofa changing climate by collaborating with business, policymakers, and fellow investors. We havebeen a member of IIGCC since 2015 and actively collaborate and participate at industry events andseminars. We also actively contribute to consultations when there is an opportunity to do so.

Climate Action 100+
Climate Action 100+ is an investor initiative launched in 2017 to ensure the world's largest corporate
greenhouse gas emitters take necessary action on climate change. We joined the Climate Action
100+ initiative in early 2020 and have directly engaged with a select number of companies on
climate transition through the regional entities.
As active members of the Climate Action 100+ initiative and in line with our Net Zero Carbon
Emission Goal, we have been engaging with companies to ensure the world’s largest corporate
greenhouse gas emitters take necessary action on climate change. To this end, during 2021 wehave shown support for all Climate Action 100+ flagged proxy voting resolutions, which is a clear
expression of preference on issues directly related to the initiative’s goals.

UK Stewardship CodeOn the 10th of March 2022, Russell Investments was listed by the Financial Reporting Council(FRC) as a signatory to the UK Stewardship Code 2020. The Stewardship Code ‘Code’ sets highstandards for participants in the financial services industry to demonstrate their stewardshippractices.
The UK Stewardship Code 2020 took effect on 1st of January 2020 followed a substantial revision of
the 2012 version. The revised version is a set of 12 ‘apply and explain’ principles. Applicants for
signatory status are required to submit an annual Stewardship Report that demonstrates how they
have applied the principles over the preceding 12 months, reporting on activities undertaken andoutcomes achieved. The 12 Principles cover many aspects of effective stewardship such as:
Purpose, Strategy and Culture; Stewardship, Investment and ESG Integration and Exercising Rights
and Responsibilities. The Code now covers all asset classes globally and asks managers todemonstrate their effectiveness as a fiduciary and their consideration of material ESG issues ininvestment decision making, among other new requirements.

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Diversity, equity and inclusion
As a global company, we recognize the benefit of different sources of insight and knowledge; to thisend diversity, equity and inclusion is integral to our long-term growth strategy. At Russell
Investments, we consider diversity, equity and inclusion via multiple lenses (i.e., gender, ethnicity
and sexual orientation). To advance our efforts we have established a Diversity, Equity andInclusion (DE&I) Council whose purpose is to increase diversity and inclusion among employees.
During 2021, we joined the Institutional Investing Diversity Cooperative (IIDC)11 aiming to promote
greater diversity in the institutional asset management industry by advocating for access to data thatwould capture multiple dimensions of diversity. Members meet regularly to discuss key initiatives
and specific action items that can encourage asset managers to offer more robust andcomprehensive diversity data.
The IIDC was set up at the start of 2021 and contains firms responsible for the stewardship ofassets held by institutions in retirement plans, employee health funds, endowments, foundations,operating funds, and capital reserves, among others. The IIDC continues to focus on traditional
asset manager diversity data collection as a top 2022 priority and is also expanding its efforts toalternative asset managers.

Principles for Responsible Investment (PRI)
As a globally recognized proponent of responsible investing, the PRI provides resources and bestpractices for investors incorporating ESG considerations into their investment and ownershipdecisions. As a signatory to the PRI since 2009, Russell Investments has a long-standing
relationship with the organization and has completed the annual PRI assessment every year since
2013.
Russell Investments is committed to embedding the PRI’s six principles where consistent with our
fiduciary responsibilities. In our latest submission, we received an A/ A+ rating in all assessment
modules reported on.
Russell Investments has made great strides over the years in incorporating the PRI principles into
our processes including manager research, portfolio management, and proxy voting andengagement. In addition, we develop and deploy proprietary ESG-specific investment capabilities
such as our decarbonization and ESG tilting methodologies.
We believe that our ongoing commitment to the PRI principles is one of the best ways that we candemonstrate to our clients and peers alike our dedication to responsible investing.
We will continue to focus on the implementation of PRI’s six principles to best support our clientsand society in responsible and sustainable investing.

Blog posts
We provide a range of training and development opportunities for our client base to ensure that ourclients are kept abreast of key industry developments. Our annual training schedule is informed
through feedback received from client surveys, as well as topics chosen by our in-house experts.
We also provide timely insights and thought leadership content through our blog and regular
LinkedIn updates. During 2021, Russell Investments published 17 blog posts relevant to ESG andresponsible investing. These posts were written by investment professionals across various regions
and teams, reflective of our broad range of services and diverse client base. For the reporting period
under review, Russell Investments published blogs that address responsible investing for Private
Markets12, Commodities13, Infrastructure14 and Fixed Income15. Other topics included the G7 summit
and COP26, as well as five posts directly engaging with climate change risks. All of Russell
Investments’ ESG and Responsible Investing blog posts are publicly available on our website16.
11

https://www.iidcoop.org/
https://russellinvestments.com/us/blog/private-markets-responsible-investing
https://russellinvestments.com/us/blog/esg-investing-commodities-outlook
14
https://russellinvestments.com/us/blog/infrastructure-decarbonization-sustainability
15
https://russellinvestments.com/us/blog/2021-esg-considerations-in-fixed-income
16
https://russellinvestments.com/us/blog?topicIds=7d4b2c85-34be-475d-b142-e02c914bfa8d
12
13

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