Givaudan UK Pension Plan
Annual Implementation Statement for the year ended 31 March 2020
October 2020

1. BackgroundOn 6 June 2019, the Government published the Occupational Pension Schemes (Investment andDisclosure) (Amendment) Regulations (“the Regulations”). The Regulations amongst other things requirethat the Trustees outline how they have ensured that the policies and objectives set out in their Statementof Investment Principles (“SIP”) have been adhered to over the course of each Plan year. This is the first
Implementation Statement the Trustees have prepared and covers the year ended 31 March 2020.

2. Introduction
This document is the Annual Implementation Statement (“Implementation Statement”) prepared by theTrustees of the Givaudan UK Pension Plan (the “Trustees” and “Plan” respectively) covering the Plan
year to 31 March 2020. The purpose of this statement is to:▪

set out the extent to which, in the opinion of the Trustees, the Plan’s Statements of Investment
Principles (“SIPs”) required under section 35 of the Pensions Act 1995, as amended, has been
followed during the year;▪

detail any reviews of the SIPs the Trustees have undertaken, and any changes made to the SIPs
over the year as a result of the reviews; and▪

describe the voting behaviour by, or on behalf of, the Trustees over the year.

A copy of this Implementation Statement will be made available on the following website alongside thePlan’s SIPs: https://www.givaudan.com/media/corporate-publications

3. Review of, and changes to the SIPs
The Plan has two SIPs; one for the DB (and AVC) benefits and one for the DC Section. These SIPs werereviewed and updated during the Plan year, with revised versions being published as at September 2020.
The changes reflected regulation with regards to the Trustees’ policies in relation to:▪

financially material considerations, including Environmental, Social and Governance (ESG)
considerations, and the extent to which these are taken into account in the selection, retention
and realisation of investments;▪

the extent to which (if at all) non-financial factors, including members’ views, are taken into
account in the selection, retention and realisation of investments; and▪

undertaking engagement activities in respect of the investments.

4. Relevant activity during the Plan year ended 31 March 2020
June 2019
Training

New SIP requirements

DB

Reviewed asset transition to new fiduciary arrangementDC

DC default investment strategy review principles and timings – (DC SIP; 4.4):

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•Considered the principles but paused any action, pending a proposal to theCompany about the future of the Section

October 2019

Training

Investment objectives and Competition and Markets Authority review
Introduction to ESG approach
New SIP agreed (between meetings)

DB

AVCs – Considered and voted in favour of Equitable Life’s guarantee exchange
proposal for with-profit funds (DB SIP – AVC Arrangements)
New SIP agreed (between meetings)

DC

Further discussion on the future of the DC Section (DC SIP; 1.9, 2.1, 2.7, 4.1):•

Best interests of members considered

February 2020
“Responsible Investment” and “Understanding your portfolio”

Training•

Delegated portfolio – Setup and key objectives.

•

Components of the portfolio – Hedging, Low-risk bonds strategy andManaged growth strategy.

•

Performance of portfolio since strategy inception up to 31 December 2019.

•

Responsible investment and ESG integration framework.

•

ESG rating system and ratings of fund managers comprising the growthand low-risk strategies.

See above (DB SIP – Environmental, Social and Governance Considerations)
DB

Agreement to DB investment consultant objectives (between meetings)
Review of proposed RPI reform and the impact on the Plan (DB SIP – Investment
Risk Measurement and Management)
Agreement to DC investment consultant objectives (between meetings)

DC

Further discussion on the future of the DC Section (DC SIP; 1.9, 2.1, 2.7, 4.1):•

Bulk transfer due diligence and legal advice reviewed

5. Adherence to the SIPs
Overall the Trustees believe the policies outlined in the SIPs have been adhered to during the Plan year.
The remaining parts of this Implementation Statement set out details of how this has been achieved forthe DB and DC Sections. These details relate to those parts of the SIP which set out the Trustees’
policies, and not those which are statements of fact.

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Defined Benefits (“DB”) Section
Objectives
The Trustees have an objective of maintaining full funding on a self-sufficiency basis. As a result, theinvestment policy is structured to support this objective.
During the Plan year the assets for the DB Section (excluding AVCs) have transitioned to a fiduciary
management arrangement to reduce funding volatility including a significant component of Liability Driven
Investment (LDI). The Trustees have therefore delegated the decisions regarding the composition of theportfolio of assets subject to the investment objective and regularly monitor the performance against thisobjective.
The Trustees have set an overall target investment return objective of 0.5% per annum in excess ofliabilities measured on a Gilts + 0.15% basis. This is monitored on a quarterly basis.
The Trustees have sought advice from the Plan’s professional advisors, including the Scheme Actuary,
the investment consultant and the fiduciary manager throughout the year including at Trustees’ meetings.
The Trustees have received reports from the investment consultant demonstrating the actions taken
under the fiduciary management agreement. This includes views on investment outlook and how thesehave fed into the investment strategy, liquidity and LDI position.
Changes to the SIP over the year to 31 March 2020
The SIP was updated in May 2019 to take account of new regulations which came into effect from
October 2019, requiring the Trustees to include several policies relating to Responsible Investment and
Stewardship. The Trustees consulted with the principal employer when making these changes andobtained written advice from their investment consultant.
The SIP has been reviewed and revised over the course of 2020 to take account of further regulatorychanges. In particular, the Trustees have now set out policies regarding how they incentivise asset
managers to achieve their long-term objectives, their policies on cost transparency and their policies onvoting and stewardship. The most recent SIP, including the changes outlined here, was agreed by theTrustees in September 2020 and is now available online.
Actions
The Trustees outline several key objectives and policies in the SIP. The actions below provide an
explanation of how these objectives have been met and policies adhered to over the course of the year.
The Plan's assets were transferred from Legal and General Investment Limited to Aon Investment
Solutions in June 2019.
The Trustees received investment reports each quarter from the investment managers which detail
information on performance, costs, stewardship and responsible investment. In addition, the Trustees
met with the investment managers to review performance, process and to receive training.
The Trustees report on the risks associated with the Plan's investments annually in the investment risk
disclosure report which accompanies the Report and Accounts. In this report, the Trustees monitor therisks associated with both the Defined Benefit section, focusing on market risk, credit risk, interest raterisk, inflation risk and other risks.
The Trustees' administration team at Aon monitor the cashflow requirements of the Plan on a regularbasis and have authority to disinvest from assets when required to fulfil pension obligations. All the Plan's
assets are invested in daily traded funds so that assets are readily accessible for cashflow purposes.

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The Trustees' stewardship policy
The relevant extract of the SIP covering the Scheme's voting and engagement policies for the reportperiod was as follows:“The Trustees recognise the importance of their role as a steward of capital, promoting corporate
responsibility and ensuring the highest standards of governance. The Trustees recognise that ultimately
this will help to protect the financial interests of the beneficiaries of the Plan.
The Trustees expect the investment managers to use their influence as institutional investors to carry out
the Trustees' rights and duties as a shareholder including voting, engaging when appropriate with
underlying companies to promote good corporate governance, accountability and positive change.
The Trustees expect that the investment managers will provide details of their stewardship policy andactivities on an annual basis. The Trustees will engage with the investment managers where necessary
for more information.”
ESG and Engagement – Aon Investments Limited (AIL) – DB section fund manager
In line with its ESG integration process, AIL have undertaken engagement activity during the first half of2020, some examples of which have been outlined within this report. AIL held 22 ESG deep-divemeetings covering the equity and fixed income managers that are invested in across the delegated funds.
At these meetings, AIL were able to analyse and discuss the voting and engagement activities
undertaken during calendar year 2019, highlighting where they require more information to meet client
requirements.
This is in addition to many more engagements that the same managers will have had with Aon's
Investment Manager Research team. Each of the fiduciary team's meetings has allowed the team to gain
deeper insight into the Responsible Investment approaches of the underlying managers and to discuss
portfolio positioning from an ESG perspective.
All equity managers meet AIL's minimum standards for ESG integration, achieving an ESG rating of 2 orhigher.
AIL use their resources, influence and expertise to deliver positive outcomes that would otherwise be outof reach for most through their engagement with managers, which reduces the time clients must spend on
ESG Governance. For example, AIL felt GQG and Longview lacked their peers in relation to engagement
on ESG issues and reporting of contentious votes. These are important in understanding how effectively
ESG risks and opportunities are being discussed with investee companies and the ways in which
managers will use their voting power to influence ESG issues.
It is important that this information is relayed to clients and a stewardship report has been publishedillustrating actions with respect to investments over 2019. This provides an insight snapshot of key
engagements that they have undertaken during the first half of the year focusing on the managers'
responsible investment activities through 2019.
The ESG ratings for underlying managers are explained below:•••

ESG Rating 4: The Fund Management Team demonstrates high awareness of all known andpotentially financially material ESG risks in the investment strategy and, at present, has
incorporated appropriate processes to identify, evaluate and potentially mitigate these risks
across the entire portfolio.
ESG Rating 3: The Fund Management Team demonstrates an above average awareness ofpotential ESG risks in the investment strategy and has taken essential steps to identify, evaluate
and potentially mitigate these risks.
ESG Rating 2: The Fund Management Team is aware of potential ESG risks in the investment
strategy and has taken some steps to identify, evaluate and potentially mitigate these risks.
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•

ESG Rating 1: The Fund Management Team appears unaware or unconcerned with ESG risks in
the investment strategy and has not taken any material steps to address ESG considerations in
the portfolio.

Voting – Equity Managers
Over the year, the Plan was invested in the Managed Growth Strategy Equity Fund, through the fiduciaryarrangement with AIL.
The Trustees acknowledge that several managers were unable to provide data on significant votes. The
Trustees consider a significant vote broadly as a vote which the respective manager deems to besignificant to the Plan or a vote where more than 15% of votes were cast against management. The
Trustees note that AIL will be asking these managers to track and provide such information moving
forward. In addition, AIL will continue to work with managers to encourage disclosure of more detailed
rationale when providing voting and engagement examples where necessary.
LGIM Multi Factor Fund (LGIM)
Summary Voting Statistics
Percentage of companies engaged with% resolutions voted% of resolutions voted against management% resolutions abstained

2019
21%
98.5%
14.9%
1.5%

Q1 2020
N/A
99.1%
14.5%
0.8%

Q2 2020
N/A
100%
18.5%
0.0%

Voting Policy
LGIM use ISS as a proxy advisor for voting on this fund. LGIM regularly monitor the proxy voting services
through quarterly due diligence meetings to ensure execution is in line with their voting policy. LGIM
receive an electronic alert for rejected votes which require further action. LGIM are audited annually andreceive an assessment report on their voting activities.
LGIM are currently in the process of building a tool to pool specific engagement and voting data at a
strategy level and will align this and their definition of a significant vote with PLSA guidelines. LGIM
strengthened its voting policy in 2020 to state that they will no longer vote against misaligned pensions for
directors. Weekly voting meetings are recorded and audited annually within the team, with all votes
having a rationale behind them.
LGIM provided several examples of significant votes. LGIM voted against a shareholder proposal for Rio
Tinto, a mining company, where the proposal was to set out a transition plan and publish targets alignedwith the Paris agreement. LGIM considered the resolution to be too prescriptive under current technology
limitations for the sector and has been pushing the company to tackle this issue through further
engagement.
LGIM supported and was a co-filer in the shareholder proposal put forward by Climate Action 100+ for BP
to publish a strategy consistent with the Paris Agreement, including capital expenditure and targets. Thiswas supported by over 99% of shareholders at the company's AGM, and support from the board wasachieved.

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BlackRock Emerging Markets Passive Equity Fund (BlackRock)
Summary Voting Statistics% resolutions voted% of resolutions voted against management% resolutions abstained

2019
95.4%
8.5%
4.0%

Q1 2020
98.6%
9.2%
4.8%

Q2 2020
96.5%
8.3%
2.3%

Voting Policy
BlackRock state that it "votes (or refrains from voting) proxies for each Fund for which we have voting
authority based on our evaluation of the best long-term economic interests of shareholders, in theexercise of our independent business judgment, and without regard to the relationship of the issuer of theproxy (or any shareholder proponent or dissident shareholder) to the Fund, the Fund’s affiliates (if any),
BlackRock or BlackRock’s affiliates, or BlackRock employees". Blackrock votes in accordance withguidelines for each relevant market, which are reviewed regularly and changed in line with developments
within those markets.
Blackrock’s voting decisions are informed by internally developed proxy voting guidelines, their pre-voteengagements, research, and the situational factors for each underlying company. Voting guidelines arereviewed annually and are updated as necessary to reflect changes in market standards, evolving
governance practice and insights gained from engagement over the prior year.
BlackRock ordinarily refrain from abstaining from both management and shareholder proposals, unlessabstaining is the valid vote option (in accordance with company by-laws) to signal concern tomanagement, there is a lack of disclosure regarding the proposal voted, or an abstention is the only way
to implement their voting.
One example of a situation where BlackRock voted against management was with regards to the Airportof Thailand Public Co. Ld in January 2020. BlackRock voted against the election of Manu Mekmok andSarawut Benjakul as directors under the rationale that they are "non-independent directors on
inadequately independent boards".
In another instance in March 2020, BlackRock voted against the management of Akbank TAS in theelection of directors and approval of director remuneration due to a lack of information being disclosed.
Engagement – Equity Managers
LGIM
A common misconception within the investment industry is that passive management removes aninvestor's ability to influence the companies held within the portfolio, compared to an active manager witha more concentrated portfolio of companies they know very well. Despite this, the passive manager Legal& General Investment Management (LGIM), held in the Managed Growth Strategy, has become anindustry leader in stewardship activities for index tracking funds and is arguably setting best practice forother managers to follow.
Passive managers' difficulties lie in the fact that their funds invest in hundreds and sometimes thousandsof companies across the world, meaning that they do not necessarily have the resource to engage on
granular, company specific issues with each investment they hold. This could therefore result in lesseffective forms of stewardship for this style of investing.
LGIM began working on a solution to this issue by deciding to focus on key engagement themes that they
thought would drive the greatest levels of progress and client value. Holding client forums in 2017provided LGIM with broad engagement themes to focus and prioritise their engagement activity.
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As part of their Climate Impact Pledge, LGIM publish a list each year comprising of companies that are
deemed candidates for exclusion as a result of them not reaching LGIM's sustainability expectations. If
engagements with these companies are unsuccessful, LGIM may divest from the company.
BlackRockBlackRock state that they aim to enhance the long-term value of client assets through their proxy voting
and engagement activities. BlackRock's Investment Stewardship team engage with companies in bothactive and indexed investment strategies, noting the importance of engagement within index-based
strategies where divestment is not an option. BlackRock use engagement as a tool to raise concerns
regarding governance and sustainability issues that may affect the long-term performance of thecompany.
BlackRock are improving their engagement disclosures this year, with the aim to:-Move from annual to quarterly voting data
Give prompt explanations of key voting decisions
Enhance disclosure of company engagement

Engagement – Fixed Income
The Trustees invest a proportion of the Plan's invests in fixed income securities through theirarrangement with Aon Investments Limited in their fund of fund approach.
The Trustees delegate the monitoring of ESG integration and stewardship quality to Aon Investments,
and Aon have confirmed that all managers received at least a 2 out of 4 ESG Ratings which means that
all the fund management teams are aware of potential ESG risks in the investment strategy and hastaken some steps to identify, evaluate and potentially mitigate these risks.
An example of an engagement carried out during the reporting year by AIL was with a US based fixedincome manager that lacked a Responsible Investment policy, a metric for scoring securities on ESG
criteria nor public commitments to invest responsibly. Following AIL engagement with the manager onthese issues, they quickly took action by hiring an ESG consultant, who has since assisted them withformalising a process for assessing ESG risks and opportunities. Tangible improvements have been
made in working with third parties to analyse ESG risks and making a public commitment to Responsible
Investment by becoming a signatory to the Principles for Responsible Investment - the world's leading
proponent of ESG and a global standard setter for better practice.
While equity managers may have more direct influence on the companies they invest in, fixed Income
managers are also increasingly influential in their ability to encourage positive change. A high-profile
example of this is from Robeco, (one of the Low Risk Bond Strategy managers the Plan invests in) andongoing engagement with Shell. In 2017, Shell announced their aim to reduce the net carbon footprint of
its energy products by around half by 2050. Whilst Robeco was supportive of this step, they were not fully
satisfied and continued to push Shell to set short-term targets. Following a series of engagements over a
two-year period, Robeco and Shell agreed a joint statement committing the company to various actions,
including setting climate targets and linking these targets to executive remuneration. Robeco believes
Shell now leads the sector in terms of their planning and positioning for the energy transition.
The Trustees believe that engagements of this nature are key to reducing ESG risks within the Plan's
portfolio, as well as having the added benefit of contributing to the transition towards a low carbon
economy.

Engagement-Alternatives
The Plan's assets are invested in several alternative strategies through AIL's Managed Growth Strategy.
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The Trustees recognise that the respective investment processes and often illiquid nature of thealternative investments may mean that stewardship is potentially less applicable or may have a lesstangible financial benefit. Nonetheless, the Trustees still expect that all their managers should open a
dialogue to engage with issuers/companies they invest in should they identify concerns that may befinancially material.
The Trustees believe that engagements of this nature are key to reducing ESG risks within the Plan's
portfolio, as well as contributing to the transition towards a low carbon economy.
DB Summary
The Trustees believe that all the Plan's fund managers appear to be exercising their respective voting andengagement abilities in a thoughtful, responsible manner and that the Trustees’ stewardship policy is
being appropriately implemented on their behalf to a large extent.
The Trustees recognise that they have responsibility as a large institutional investor to encourage andpromote high standards of stewardship in relation to the assets that the Plan invests in.
The Trustees will continue to use their influence to drive positive behaviour and change among themanagers they have employed to invest the assets of the Plan, and with other third parties that theTrustees rely on such as their investment advisor. The Trustees will set increasingly higher standards forthese parties in future, and will monitor, assess and ultimately hold them to account to ensure that theassets of the Plan are appropriately invested.
AVCs
Certain members have AVCs invested alongside their DB benefits. These are no longer contributed to but
are deferred until the member’s retirement. The extent to which environmental, social and governanceconsiderations are considered in these policies is left to the discretion of the investment managers.

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Defined Contribution (“DC”) Section
The DC Section is closed to both new members and contributions. Members of this Section have deferredbenefits. The Section invests in several passively managed funds.
Investment Objectives and Options
The Trustees seek to provide members with a range of investment options of appropriate liquidity which
will generate income and capital growth which will provide a fund at retirement with which retirement
income can be secured.
There are four passive funds for a member to select from (one equity fund, two bonds funds and a cashfund). The default is a lifestyle strategy that includes all four funds with changing proportions as
retirement approaches.
The Trustees have sought advice from the Plan’s investment consultant throughout the year including at
Trustees’ meetings.
Strategy review
The Trustees have been reviewing the high-level objectives of the DC Section. This includes more
fundamental questions as to whether members would now be best served by transferring the entire DC
Section to another provider to provide better value for members. Work on this review will conclude in thenext Plan year.
Environmental, Social and Governance (ESG) factors
The Trustees do not consider it appropriate for a passive investment manager to take account ofenvironmental, social and governance considerations in the selection, retention and realisation of
investments. However, it is the Trustees’ policy to give discretion to the passive investment manager topursue a policy of engagement with companies. The extent to which environmental, social andgovernance considerations are considered in this engagement policy is left to the discretion of thepassive investment manager.
As part of the strategy review mentioned above, consideration has been given to the size of the DC
Section and whether monitoring investment managers at this scale would be best served by consolidating
the DC funds into a larger vehicle such as a master trust where such monitoring, including ESG, can bedone at a much stronger economy of scale.
Monitoring
The Trustees monitor the performance of all the investment funds at each Trustees’ meeting via their DC
investment consultant.
Voting and engagement
The Trustees have delegated the day to day voting and engagement activity to its investment manager
subject to review of their engagement credentials.
The manager’s reporting includes information on voting activity carried out. We understand that LGIM is
active in exercising its voting rights. The top two topics on which they voted against or abstained were:••board structure; andremuneration policies.

More information on LGIM’s voting details and policy focuses (including ESG), which we haveconsidered, is available in their Active Ownership report: https://www.lgim.com/landgassets/lgim/_document-library/capabilities/corporate-governance-long.pdf
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In the current Plan year, the Trustees will seek to develop their monitoring of investment manager’s voting
activities if it is decided the Plan will retain the DC Section.

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