Russell Investments

A letter from our President andChief Investment Officer

Kate El-Hillow

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2023 milestones and highlights

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What comes next – looking ahead

Sustainable solutions

ESG Integration

Climate risk management

Active ownership

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Transparency and reporting

Training and development

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1. Russell Investments – Who we are✓✓✓

1.1 Our purpose

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1.2 Culture

1.3 Values

1.4 Investment philosophy

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Outcome-orientated investing
Open architecture

Investment discipline
Effective risk management
Dynamic portfolio management
Specialisation leads to investment decisions at the point of greatest insight

Independent review and control support a strong investment process
Responsible investment

1.5 Our responsible investing framework

Exhibit 1: Responsible investing beliefs

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1.6 Our history of innovation

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2. Russell Investments – Who we serve✓✓✓

2.1 Our clients and assets under management

Exhibit 2: Assets under management split by retail vs institutional

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Exhibit 3: Institutional assets breakdown by client type and asset class

Exhibit 4: Assets under management split by internally and externally managed

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Exhibit 5: Retail assets broken down by asset class (£bn)

Exhibit 6: Assets under management split by geographies (£bn)

2.2 Client communications•••

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Institutional client communication

Training

Quarterly performance reports

Equity level ESG report

Active ownership disclosures

Stewardship policies and procedures

Annual implementation statement

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Retail end-consumer communication

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2.3 Client training and development

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2.4 Taking account of client preferences✓✓✓

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2.5 Climate aware solutions•••

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Case study – Sustainable fund launches in 2023

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Case study – Net Zero Dashboard

Exhibit 7: Snapshot of sample net zero dashboard

OutcomeRussell Investments

2.6 Addressing client needs in practice

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Case study – Bi-annual UK defined benefits market insights study

Exhibit 9: Respondents’ targets to reach net zero

OutcomeRussell Investments

Case study – Development of Sustainable Global Equity Solution

OutcomeRussell Investments

Case study – Focused ESG strategy for an APAC OCIO client

OutcomeCase study – Development of internal dashboard to meet US client requests

OutcomeRussell Investments

Case study – Private market development

OutcomeCase study – Granular ESG reporting

Outcome

Exhibit 10: Evolution of quarterly client reporting

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3. Governance of stewardship✓✓✓

3.1 Global governance structure

Exhibit 11: Global governance committees

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3.2 Investment governance structure

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Exhibit 12: Investment Strategy Committee

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Exhibit 13: Active Ownership Committee structure

3.3 Responsible investing governance structure

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Exhibit 14: GTM Responsible Investing Council structure

Exhibit 15: Investment Division Responsible Investing Council structure

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3.4 Resourcing stewardship

Exhibit 16: Total number of investment professionals
TOTAL NUMBER OFINVESTMENT
PROFESSIONALS

Total Investment
Professionals

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NUMBER OF
INVESTMENT
PROFESSIONALS WITH
CFAS

NUMBER OF
INVESTMENT
PROFESSIONALS WITH
PHDS

AVERAGE RUSSELL
INVESTMENTS YEARS’TENUREAVERAGE INDUSTRYYEARS’ EXPERIENCE

320

155911.1

Case study – Rotational proxy analyst programme

Outcome

3.5 Alignment of incentives to integrate stewardship

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4. ESG Integration and ResponsibleInvesting✓✓✓

4.1 Our integrated approach to stewardship and investment

Exhibit 17: Responsible Investing in practice

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Belief 1 – ESG factors can impact security prices

Exhibit 18: ESG sub scores

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Case study – Manager change to enhance ESG integration in theGlobal Credit Fund

Outcome•••Russell Investments

Case study – ESG module development for portfolio analytics

OutcomeCase study – Enhanced oversight within an emerging market fundOutcomeRussell Investments•••Belief 2 - A deep understanding of ESG factors is value adding

Case study – Enhancing physical climate risk modeling capabilities

OutcomeRussell Investments•••Belief 3 - Active ownership is an effective tool for improving investment outcomes

Belief 4 - Embedding ESG into the firm’s culture improves likelihood of prolonged success

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4.2 Our risk management programme
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4.3 Addressing market-wide and systemic risks: climate change
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RISK OR OPPORTUNITY IDENTIFIED

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DESCRIPTION

EXAMPLES OF ASSESSMENT TOOLSMOST RELEVANT TIMEHORIZON

SECN

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4.4 Our approach to monitoring service providers✓✓✓••Russell Investments

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Case study – Annual manager ESG due diligence questionnaire

OutcomeManager Resourcing

Manager Responsible Investing Commitments and Net Zero

Sustainability Products

Sustainability Integration

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Case study – Annual manager ESG due diligence questionnaire
Active Ownership

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Case study – A 2023 operational due diligence review

OutcomeRussell Investments

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Case study – An unnamed vendor review in 2023

OutcomeRussell Investments✓✓✓

5.1 Our engagement approach

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••✓
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I IVERSITY AN
NAT RE CAPITA
PR
RAMME

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MAN CAPITAMANA EMENTMAN RITS

MATERIA RIS S
EN A EMENT
APAN

Case study – Repositioning our leadership within Climate Action 100+Outcome••••

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1.
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4.
5.

Exhibit 25: Engagement focus areas

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Case study – Improving ESG disclosure at a small cap company

OutcomeRussell Investments

Case study – Mitigating potential human rights violations

Outcome✓✓✓Russell Investments

Exhibit 26: Tracking engagement progress

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Exhibit 27: Escalation strategies

Case study – Escalation to sub-adviser due to poor governance practices at acontrolled company

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Case study – Fixed Income engagement on natural capital management

OutcomeCase study – Fixed Income engagement on natural and humancapitalOutcomeRussell Investments

•Good Governance:•

Limited Partner Advisory Committee (LPAC) seats:•Voting:

Case study – Private Equity partnership governance engagement

OutcomeRussell Investments

Case study – Re-electing independent directors

OutcomeCase study – Private Equity Fund Extension

OutcomeRussell Investments

Environmental

61%

Social13%

Governance17%

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ESG Disclosure

UNGC

8%

1%

Exhibit 28: Engagement channels - active engagement

Exhibit 29: Engagement channels – influence through third-party collaborations

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Exhibit 30: Percentage of engagement by sector

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Exhibit 31: Engagement distribution by region

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Exhibit 32: Breakdown of engagement outcomes

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Case study – Encouraging the development of a strategic transition plan

OutcomeRussell Investments

Case study – Managing natural resources risk in the supply chain

OutcomeRussell Investments

Case study – Improving Health and Safety Practices

OutcomeRussell Investments

Case study – Japanese Board Diversity and Executive DEI

OutcomeRussell Investments

Case study – Ensuring appropriate governance structures are in place

OutcomeRussell Investments

Case study – Compensation accountability

OutcomeRussell Investments

5.2 Proxy voting✓✓
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Case study – Annual Proxy guidelines review

Outcome

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Russell Investments•••••Exhibit 33: Russell Investments votes on referred items•••

Russell Investments••Exhibit 34: 2023 proxy voting activity

1,344

3,791

12,588Proposals voted

Shareholder
proposals

Votes against
providerVotes against
management

97%

95%

1%

4%

13%

Of eligible
meetings

Of eligible
proposals

Of total voting
activity

Of proposals voted

Of proposals voted

9,747

98,267

Meetings voted

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Exhibit 35: Voting activity per topic
1% 4%

1%

13%

16%

5%
7%

53%

Exhibit 36: Votes by issue
5%

95%
14%

86%

15%

85%

10%

90%

19%

81%

5%

95%

13%

87%

6%

94%

23%

77%

28%

72%
44%

56%

Against Management

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With Management

Exhibit 37: Russell Investments voting behaviour

95%

5%

87%

1% 12%

84%

16%

93%

7%

79%

21%
95%

5%

87%
22%

1%

26%

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77%
1%

41%

13%

72%
1%

58%

Exhibit 38: Proxy voting distribution by region

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Exhibit 39: Votes on climate-related shareholder proposals

1%

28%

71%

Exhibit 40: Russell Investments votes on “say on climate” proposals

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Case study – Management Say-on-Climate proposal vs. shareholder
proposal requesting transition targets at major energy company

OutcomeRussell Investments

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Exhibit 41: Vote on human capital-related proposals

Political Spendingor Lobbying

56%

44%

Human Rights

65%

35%

Racial Equity Audit/Report

62%

38%

Human CapitalManagement
Labour Practices
and Disclosures

55%

45%
100%

AgainstRussell Investments

For

Case study – Voting on human-capital and reputational risks relating to labour
controversy

OutcomeCase study – Voting against Say-on-Pay following an unsuccessful engagement

OutcomeRussell Investments

6.1 Conflicts of interest policy✓✓✓

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Exhibit 41: Examples of conflicts and control procedures
CONFLICT
Employees might be able to benefit from awareness of confidential trading activity
undertaken by Russell Investments (e.g., personal account dealing in a security thatforms part of a transition event or is traded by the direct investing team (dealingahead/ front-running).

Employees could be induced to enter into contracts with third parties, to the detrimentof a segregated or fiduciary management client, or funds (where Russell Investments
acts as an Adviser/ Investment Manager or distributor).
Employees might induce a client, distributor, money manager, or other service provider
into doing business with Russell Investments where this is not in the best interest ofother clients or funds.

Poor product design could adversely affect end clients; or lead to problems withmarket integrity by enabling the firm to mitigate and/or dispose of its own risks or
exposure to the underlying assets of the product where the firm already holds theunderlying assets on own account.

Russell Investments segregated, fiduciary management or other large clients investingin Russell Investments’ funds (‘target funds’) may result in significant influence on theinvestment strategy of the target fund (i.e., so that the strategy is more align ed to theinvesting client(s) or in the case of proposed significant redemptions, making a change
to the investment strategy to keep clients within the target fund).

Financial incentivisation/reward of portfolio managers may lead to inappropriate
investment risks being taken (relative to the investment objective and policies) toprotect employee compensation.

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CONTROL PROCEDURES

Outside interests

Active ownership

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Exhibit 41: Examples of conflicts and control procedures
CONFLICTCONTROL PROCEDURES

The inappropriate selection or retention of managers for commercial reasons.
For example, appointing a money manager in return for AUM investment.

Unfairly allocating high-ranked managers across certain clients or fundcomplexes, using up their spare capacity and inappropriately disadvantaging
another client or fund complex.

Recommending frequent money manager changes to a client in order toincrease revenue for Russell Investments.

Case study – Conflict of interest arising from use of affiliates for trading andexecution services

OutcomeRussell Investments

Case study – Information barriers to protect clients

OutcomCase study – Individual conflict controls

OutcomeRussell Investments

6.2 Diversity and inclusion✓✓✓••••••••

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6.3 Policy advocacy and collaborations✓✓✓

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Case study – Collaborative consultations and advocacy

Outcome6.4 Reviewing policies and processes✓✓✓

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Case study – Internal responsible investing audit

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7.1 The UK Stewardship Code
PRINCIPLEREQUIREMENTS

Principle 1

Signatories’ purpose, investment beliefs, strategy, and culture enable stewardship that creates long-term value
for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.

Principle 2

Signatories’ governance, resources and incentives support stewardship.

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Principle 3

Signatories manage conflicts of interest to put the best interests of clients and beneficiaries first.

Principle 4

Signatories identify and respond to market-wide and systemic risks to promote a well-functioning financialsystem.

Principle 5Signatories review their policies, assure their processes and assess the effectiveness of their activities.

Principle 6

Signatories take account of client and beneficiary needs and communicate the activities and outcomes of theirstewardship and investment to them.

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Principle 7

Signatories systematically integrate stewardship and investment, including material environmental, social andgovernance issues and climate change, to fulfil their responsibilities.

Principle 8

Signatories monitor and hold to account managers and/or service providers

Principle 9Signatories engage with issuers to maintain or enhance the value of assets

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Principle 10

Signatories, where necessary, participate in collaborative engagement to influence issuers.

Principle 11Signatories, where necessary, escalate stewardship activities to influence issuers.

Principle 12

Signatories actively exercise their rights and responsibilities

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7.2 Japan Principles for Responsible Institutional Investors
PRINCIPLEREQUIREMENTS

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Principle 1
Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

7.3 The New Zealand Stewardship Code
PRINCIPLEREQUIREMENTS

Principle 1
Principle 2

Principle 3
Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

Principle 9

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