Engagement Policy Implementation Statement for the Year Ended 05 April 2023

Sandvik Pension Plan 2001 (“the Plan”)
1. INTRODUCTION
This Engagement Policy Implementation Statement (the Statement) sets out the Trustees’ assessment of how, and the extent to which, they havefollowed their engagement policy and their policy with regard to the exercise of rights (including voting rights) attaching to the Plan’s investments during
the one-year period to 05 April 2023 (the “Plan Year”). The Trustees’ policies are set out in their Statement of Investment Principles (SIP) dated March
2021. A copy of the Trustees’ SIP is available online: https://www.home.sandvik/en/about-us/sustainable-business/compliance/country-specificreports/uk-pension-plan/.
This Statement has been produced in accordance with the Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification)
Regulations 2018 and the Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019 along with guidance publishedby the Department of Work and Pensions.
The Trustees invest the assets of the Plan in a fiduciary arrangement with Mercer Limited (Mercer). Under this arrangement Mercer are appointed asa discretionary investment manager and day-today management of the Plan’s assets is by investment in a range of specialist pooled funds (the Mercer
Funds). Management of the assets of each Mercer Fund is undertaken by a Mercer affiliate, Mercer Global Investments Europe Limited (MGIE) andMercer Alternatives AG (Mercer AG).
MGIE are responsible for the appointment and monitoring of suitably diversified portfolio of specialist third party investment managers for each Mercer
Fund’s assets.
The publicly available Sustainability Policy sets out how Mercer addresses sustainability risks and opportunities and considers Environmental, Social
and Corporate Governance (ESG) factors in decision making across the investment process. The Stewardship Policy provides more detail on Mercer’s
beliefs and implementation on stewardship specifically. Under these arrangements, the Trustees accept that they do not have the ability to directly
determine the engagement or voting policies or arrangements of the managers of the Mercer Funds. However, the Trustees have made Mercer awarethat they expect MGIE to manage assets in a manner, as far as is practicably possible, that is consistent with the Trustees’ engagement policy and theirpolicy with regard to the exercise of rights attaching to the Plan’s investments. Mercer’s Client Engagement Survey aims to facilitate this by assessing
the level of alignment between Mercer’s engagement priority areas and those of the Trustees, while highlighting additional areas of focus which areimportant to the Trustees. The Trustees review regular reports from Mercer with regard to the engagement and voting undertaken on their behalf inorder to consider whether the policies are being properly implemented.
In addition to the Mercer assets, the Trustees hold a small allocation to a property trust managed by Lothbury Investment Management Limited(“Lothbury”). Given the small allocation to this fund, and considering the asset class invested in by it has limited scope for investor engagement, thisdocument does not consider this allocation further.

1Section 2 of this Statement sets out the Trustees’ engagement policy and assesses the extent to which it has been followed over the Plan Year.
Section 3 sets out the Trustees’ policy with regard to the exercising of rights (including voting rights) attaching to the Plan’s investments and considers
how, and the extent to which, this policy has been followed during the Plan Year. This Section also provides detail on voting activity undertaken by thePlan’s third party investment managers during the Plan Year.
Taking the analysis included in Sections 2 to 3 together, it is the Trustees’ belief that their policies with regard to engagement and theexercise of rights attaching to investments has been successfully followed during the Plan Year.

2. TRUSTEES’ POLICY ON ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) ISSUES, INCLUDING
CLIMATE CHANGE
Policy Summary
Mercer and the Trustees believe stewardship plays an important role in managing sustainability risks and other ESG factors, and helps the realisationof long-term value by providing investors with an opportunity to enhance the value of companies and markets consistent with long-term investor
timeframes. Consequently, an approach that integrates effective stewardship is in the best interests of the Plan. The Trustees also recognise that longterm sustainability issues, particularly climate change, present risks and opportunities, including non-financial performance that require the Trustees’
explicit consideration.
It is the Trustees’ policy that the third party investment managers appointed by Mercer, via MGIE and Mercer AG, report in line with established bestpractice such as the UK Stewardship Code 2021, to which Mercer is a signatory, including public disclosure of compliance via an external website,when managing the Plan’s assets. Further, in appointing the third party asset managers, the Trustees expect MGIE and Mercer AG to select managers
where it believes the managers will engage directly with issuers in order to improve their financial and non-financial performances over the medium tolong term. To monitor the third party investment managers’ compliance with this expectation, the Trustees consider regular reports from Mercer that
include an assessment of each third party manager’s engagement activity.
Should the Trustees consider that Mercer, MGIE, Mercer AG or the third party asset managers, have failed to align their own engagement policies withthose of the Trustees, the Trustees will notify Mercer and consider disinvesting some or all of the assets held in the Mercer Funds and/or seek torenegotiate commercial terms with Mercer.

2

How the Policy has been implemented over the Plan YearThe following work was undertaken during the year relating to the Trustees’ policy on ESG factors, stewardship and climate change.
Policy Updates
The Trustees consider how ESG, climate change
and stewardship is integrated within Mercer’s,
Mercer AG and MGIE’s, investment processes andthose of the underlying asset managers in themonitoring process. Mercer, Mercer AG and MGIE,
provide reporting to the Trustees on a regular basis.
The Mercer Sustainability Policy is reviewed
regularly. In March 2021 there was an update inrelation to the Sustainable Finance Disclosure
Regulation (SFDR) implementation. In August2022 the policy update reflected enhancements tothe approach to climate change modelling andtransition modelling, additional detail on how thepolicy is implemented, monitored and governed
and, as part of the commitment to promote
diversity, finalising MGIE’s signatory status to the
UK chapter of the 30% Club.
In line with the requirements of the EU Shareholder
Rights Directive II, Mercer have implemented astandalone Stewardship Policy to specificallyaddress the requirements of the directive. This
Policy was also updated in August 2022 to reflectenhancements made to Mercer’s stewardshipapproach including an introduction of Engagement
Dashboards and Trackers, an enhanced UN Global
Compact engagement and escalation process anda Client engagement survey.
UN Principles of Responsible Investing scores for2021 (based on 2020 activity) were issued over Q3

Climate Change Reporting and Carbon Foot- ESG Rating Review
printing
Where available, ESG ratings assigned by Mercer
Mercer and the Trustees believe climate change are included in the investment performance reports
poses a systemic risk and recognise that limiting produced by Mercer on a quarterly basis andglobal average temperature increases this century reviewed by the Trustees. ESG ratings are
to “well below two degrees Celsius”, as per the reviewed by MGIE during quarterly monitoring2015 Paris Agreement, is aligned with the best processes, with a more comprehensive review
economic outcome for long-term diversified performed annually - which seeks evidence ofinvestors.
positive momentum on ESG integration andcompares the Mercer funds overall ESG rating with
Mercer supports this end goal and is committed to the appropriate universe of strategies in Mercer’s
achieving net-zero absolute carbon emissions by Global Investment Manager Database (GIMD).
2050 for UK, European and Asian clients with Engagements are prioritised with managers wherediscretionary portfolios, and for the majority of its their strategy’s ESG rating is behind that of theirmulti-client, multi-asset funds domiciled in Ireland. peer universe.
To achieve this, Mercer plans to reduce portfolio
relative carbon emissions by at least 45% from As at 31 December 2022, in the Annual
2019 baseline levels by 2030. This decision was Sustainability Report provided by Mercer, thesupported by insights gained from Mercer’s Trustees noted over 20% of Mercer’s funds have
Investing in a Time of Climate Change (2015 and seen an improved ESG rating over the year and the2019) reports, Mercer’s Analytics for Climate vast majority have a rating ahead of the wider
Transition (ACT) tool and advice framework, and universe. Due to the nature of certain strategies,
through undertaking climate scenario analysis and they do not have an ESG rating (i.e. are N rated)
stress testing modelling. The Plan invests it’s liquid and are therefore excluded from this review.
growth assets, which make up c. 20% of the Plan’s Please see Mercer’s Guide to ESG Ratings for
total assets, in such a discretionary portfolio.
more
information https://www.mercer.com/ourthinking/mercer-esg-ratings.html
Mercer’s approach to managing climate changerisks is consistent with the framework
recommended by the Financial Stability Board’s
Task Force on Climate related Financial
Disclosures (TCFD), including the Mercer
Investment Solutions Europe - Investment3

2022. Mercer were awarded top marks for over-thearching Investment and Stewardship Policy
section, underpinned by strong individual asset
class results.

Approach to Climate Change 2022 Status Report.
As at 31 December 2022 Mercer are on track toreach our long-term net zero portfolio carbon
emissions target. There has been a notable 16%
reduction over the 3 years since 2019 baseline
levels, resulting in the 45% baseline-relative
reduction by 2030 being within range.

Approach to Exclusions

Sustainability-themed investments

As an overarching principle, Mercer, Mercer AG
and MGIE prefer an approach of positive
engagement rather than negative divestment.
However Mercer, Mercer AG and MGIE recognisesthat there are a number of cases in which investors
deem it unacceptable to profit from certain areas
and therefore exclusions will be appropriate.

An allocation to Sustainable Equities andSustainable Opportunities (private markets) is
included within the Plans portfolio of Growth assets,with the strategic allocation to Sustainable Equities
now accounting for c.3.4% of the Growth Portfolio.

Controversial weapons are excluded from active
equity and fixed income funds, and passive equity
funds. In addition tobacco companies (based onrevenue) are excluded from active equity and fixedincome funds. The Mercer sustainability-themed
funds have additional exclusions, for example
covering gambling, alcohol, adult entertainment
and fossil fuels.
Mercer expanded exclusions to further promote
environmental and social characteristics across the
majority of the multi-client building block funds overthe second half of 2022, in line with EU SFDR
Article 8 classification, as well as aligning Mercer’s
existing active and passive exclusions across theirfund range.

Diversity

From 31 December 2020, gender diversity statistics
have also been included in the quarterly reportingfor the Mercer equity funds and this is being built
into a broader Mercer Investment Solutions
International policy on Diversity, Equity andInclusion, sitting alongside Mercer’s establishedA detailed standalone report sustainability Diversity Charter.
monitoring report is produced for the active
Sustainable Global Equity fund on an annual basis, Mercer consider broader forms of diversity inincluding a more granular breakdown of the fund decision-making, but currently report on genderagainst ESG metrics, for example the UN diversity. As at 31 December 2022, 36% of the Key
Sustainability Development Goals.
Decision Makers (KDM’s) within Mercer IS teamare non-male, and Mercer’s long term target is
The actively managed Mercer Sustainable Global 50%.
Equity Fund includes an impact investing strategy
employing fundamental analysis to target Within the Fixed Income universe the average fundcompanies that aim to achieve a positive has 8% non-male KDM’s and within the EMEA
Environmental and Social Impact. The strategy is Active Equity universe the average is 12%. Figures
diversified across multiple themes including health relating to Mercer Fixed Income and Active Equity
and sanitation, affordable housing, education and Funds are currently slightly ahead at 9% and 13%.
cyber security.
In Q3 2022 MGIE was confirmed as a signatory of
the UK Chapter of the 30% Club.

In addition, Mercer and MGIE monitors for highseverity breaches of the UN Global Compact

4

(UNGC) Principles that relate to human rights,
labour, environmental and corruption issues.

3. TRUSTEES’ POLICY ON EXERCISE OF RIGHTS (INCLUDING VOTING RIGHTS) ATTACHING TO PLAN
INVESTMENTS
PolicyThe Trustees’ policy is to delegate responsibility for the exercising of rights (including voting rights) attaching to the Plan’s investments to the third party
investment managers appointed by Mercer on the Trustees’ behalf.
This is because any voting rights that do apply with respect to the underlying investments attached to the Mercer Funds are, ultimately, delegated tothe third party investment managers appointed by MGIE and Mercer AG. In delegating these rights, MGIE and Mercer AG accepts that managers are
typically best placed to exercise voting rights and prioritise particular engagement topics by security, given they are expected to have detailed knowledgeof both the governance and the operations of the companies and issuers they invest in. However, Mercer has a pivotal role in monitoring theirstewardship activities and promoting more effective stewardship practices, including ensuring attention is given to more strategic themes and topics.
As such, proxy voting responsibility is given to listed equity investment managers with an expectation that all shares are to be voted in a timely mannerand a manner deemed most likely to protect and enhance long-term value. Mercer, Mercer AG and MGIE carefully evaluates each sub-investment
manager’s capability in ESG engagement and proxy voting, as part of the selection process to ensure it is representing Mercer’s commitment to good
governance, integration of sustainability considerations. Managers are expected to take account of current best practice such as the UK Stewardship
Code 2021, to which Mercer is a signatory. As such the Trustees do not use the direct services of a proxy voter.
Voting: As part of the monitoring of managers’ approaches to voting, MGIE and Mercer AG assesses how managers are voting against management
and seeks to obtain the rationale behind voting activities, particularly in cases where split votes may occur (where managers vote in different ways forthe same proposal). MGIE and Mercer AG portfolio managers will use these results to inform their engagements with managers on their voting activities.
Set out below is a summary of voting activity for the year to 31 March 2023 for a range of Mercer Funds that the Plan’s assets are invested in. This may
include information in relation to funds that the Plan’s assets were no longer invested in at the year end. The statistics set out in the table below are
drawn from the Glass Lewis voting system (via Mercer’s custodian). Typically, votes exercised against management can indicate a thoughtful and active
approach. This is particularly visible where votes have been exercised to escalate engagement objectives. The expectation is for all shares to be voted.

5

Fund

Total Proposals
Eligible
Proposals
Proposals
Voted On

Vote Decision

For/Against Mgmt

For

AgainstAbstainNo
ActionOther

For

AgainstMercer Global Listed Infrastructure Fund

535

497

81%

11%

7%

1%

0%

85%

15%

Mercer Global Small Cap Equity Fund

6,342

6,201

91%

6%

1%

2%

0%

92%

8%

Mercer Low Volatility Equity Fund

8,239

8,083

91%

7%

0%

1%

0%

92%

8%

Mercer Multi-Asset Credit Fund (1)

11

11

91%

9%

0%

0%

0%

91%

9%

Mercer Passive Global REITS UCITS CCF

3,117

2,982

79%

16%

0%

4%

0%

79%

21%

Mercer Sustainable Global Equity Fund

6,130

6,001

86%

11%

1%

1%

0%

88%

12%

MGI Emerging Markets Equity Fund

7,793

7,527

82%

14%

3%

0%

0%

84%

16%

MGI Eurozone Equity Fund

4,721

4,610

85%

12%

2%

0%

0%

86%

14%

MGI UK Equity Fund

1,082

1,081

99%

1%

0%

0%

0%

99%

1%

Mercer China Equity Fund

547

544

94%

6%

1%

0%

0%

94%

6%

(1) Voting Activity figures for the Mercer Multi-Asset Credit fund relate to a small number of equity holdings within the fund’s underlying segregated mandates. Please note this does

not include voting activity from any underlying pooled strategies within the fund over the period– “Eligible Proposals” reflect all proposals of which managers were eligible to vote on over the period– “Proposals Voted On” reflect the proposals managers have voted on over the period (including votes For and Against, and any frequency votes encompassed in the “Other”
category)”– “No Action” reflects instances where managers have not actioned a vote. MGIE may follow up with managers to understand the reasoning behind these decisions, and to assess
the systems managers have in place to ensure voting rights are being used meaningfully– “Other” refers to proposals in which the decision is frequency related (e.g. 1 year or 3 year votes regarding the frequency of future say-on-pay).
Voting data not provided for the Synthetic Equity funds held by the Plan given the nature of the equity exposure carries no voting rights.

Significant Votes: The Trustees have based the definition of significant votes on Mercer’s Beliefs, Materiality and Impact (BMI) Framework. Reported
below are the most significant proposals over the period. Significant proposals are determined using the following criteria:
1. The proposal topic relates to an Engagement Priority (climate change, human/labour rights, and diversity). This is classified in the “Proposal
Description” column below, referenced as Environmental, Social, and Governance respectively.
2. The most significant proposals reported below relate to the three companies with the largest weight in each fund (relative to other companies in thefull list of significant proposals).

6

Most Significant Votes
Fund

Mercer Global Listed
Infrastructure Fund

Mercer Global Small
Cap Equity Fund

Proposal Description

Company

Environmental: Shareholder Proposal Regarding MediumTerm Targets For Scope 3 GHG Emissions

Dominion
Energy Inc

Holding
Weight in
Mercer Fund(%) (2)5%

Meeting Date

Environmental: Shareholder Proposal Regarding Report on
Stranded Asset Risk

Against

16%

For

75%

Environmental: Approval of Net Zero Transition Report

SSE Plc.

3%

21-Jul-22

For

98%

Environmental: Advisory vote on Climate Transition Plan

Centrica plc<1%

7-Jun-22

For

79%

Against34%

Against

32%

For

23%

For

19%

For

18%

Environmental: Shareholder Proposal Regarding Lobbying
Activity Alignment with the Paris Agreement

Tesla Inc

<1%

4-Aug-22

Social: Shareholder Proposal Regarding Human Rights
Impact Assessment Report
Environmental: Shareholder Proposal Regarding Lobbying
Activity Alignment with the Paris Agreement

Alphabet Inc

2%

1-Jun-22

Environmental: Shareholder Proposal Regarding Report on
Physical Risks of Climate Change
Canadian
Pacific Kansas
City Limited

1%

27-Apr-22

For

87%

Microsoft
Corporation

3%

13-Dec-22

Against11%

Environmental: Approval of Climate Change Ambitions andTargets

Carmila<1%12-May-22

For

98%

Environmental: Approval of Climate Transition andBiodiversity Preservation

Icade

<1%

22-Apr-22

For

99%

Environmental: Opinion on Ambition to Fight Climate Change

Mercialys<1%28-Apr-22

Against79%

Environmental: Advisory Vote on Approach to Climate
ChangeSocial: Shareholder Proposal Regarding Report on Hiring
Practices

Mercer Passive Global
REITS UCITS CCF

Vote Outcome(% Shareholder
Support)11-May-22

Social: Shareholder Proposal Regarding Policy on Freedomof Association

Mercer Low Volatility
Equity FundManager
Vote
Decision7

Social: Shareholder Proposal Regarding Human Rights
Impact Assessment Report
Environmental: Shareholder Proposal Regarding Lobbying
Activity Alignment with the Paris Agreement
Mercer Sustainable
Global Equity Fund

Alphabet Inc

23%

For

19%

For

18%

AmericanWater Works
Co. Inc.

1%

11-May-22

Mixed

88%

Microsoft
Corporation

3%

13-Dec-22

Mixed

11%

Environmental: Approval of Climate Strategy, Targets andProgress 2022

Barclays plc

1%

4-May-22

For

80%

Environmental: Opinion on Climate Transition Strategy

Engie

1%

21-Apr-22

For

86%

TotalEnergies
SE

2%

25-May-22

For

84%

Rio Tinto plc

4%8-Apr-22

Against

82%

For

83%

Against12%

Social: Shareholder Proposal Regarding Report on Hiring
Practices

Environmental: Opinion on 2022 Sustainability and Climate
Progress Report
Environmental: Approval of Climate Action Plan
MGI UK Equity Fund

1-Jun-22

Environmental: Shareholder Proposal Regarding Report on
Physical Risks of Climate Change

Environmental: Shareholder Proposal Regarding Report on
GHG Targets and Alignment with Paris Agreement

MGI Eurozone Equity
Fund

2%

For

Environmental: Endorsement of Pathway to Net Zero
Environmental: Shareholder Proposal Regarding Fossil FuelFinancingStandard
Chartered plc

2%

4-May-22(1) “Mixed” refers to occasions were underlying managers have voted differently for the same proposal. Vote decisions of this nature are monitored and fed into the wider engagement
process with managers. In this case, two managers voted “For” and two managers voted “Against” the proposal.
(2) Approximate size of the holding in the Fund as at the date of the vote. Size at the end of the relevant quarter.
Note: Given the low number of votes no significant votes were made within the Multi-Asset Credit Fund over the year. In addition, there were no proposals meeting significance definition
over the period for Emerging Markets Equity or China Equity. This is within expectation given that the tabling of ESG items at meetings is much less common in these regions whencompared to developed markets, where there is more regulatory pressure and shareholder interest.

8