Air Liquide UK Pension Scheme Annual Implementation Statement

Air Liquide UK Pension

Scheme

Annual Implementation

Statement – Scheme year

ending 5 April 2023

Table of Contents

Section 1: Introduction ............................................................................................................... 3

Section 2: Voting and Engagment ............................................................................................. 3

Section 3: Conclusion ……………………………………………………………………………….. 8

Section 4: Appendix 1: Manager voting policies………………………………………………... 8

1. Introduction

This document is the Annual Implementation Statement (“the statement”) prepared by the Trustee of

the Air Liquide UK Pension Scheme (“the Scheme”) covering the scheme year (“the year”) to 5 April

2023.

The purpose of this statement is to set out:

 Set out how, and the extent to which, in the opinion of the trustees, the Scheme’s engagement

policy (required under regulation 23c of the Occupational Pension Schemes Investment

Regulations 2005) has been followed during the year;

 Describe the voting behaviour by, or on behalf of, trustees (including the most significant votes

cast by trustees or on their behalf) during the year and state any use of services of a proxy voter

during that year.

The Scheme makes use of a wide range of investments; therefore, the principles and policies in the

SIP are intended to be applied in aggregate and proportionately, focussing on areas of maximum

impact.

In order to ensure that investment policies set out in the SIP are undertaken only by persons or

organisations with the skills, information and resources necessary to take them effectively, the

Trustee delegates some responsibilities. In particular, the Trustee has appointed a Fiduciary

Manager, Towers Watson Limited, to manage the Scheme’s DB assets on a discretionary basis. The

Fiduciary Manager’s discretion is subject to guidelines and restrictions set by the Trustee. So far as is

practicable, the Fiduciary Manager considers the policies and principles set out in the Trustee’s SIP.

A copy of this implementation statement has been made available on the following

website: https://air-liquide-pension-scheme-sip-statement.co.uk/

Review of and changes to the SIP

The SIP in place as at the end of the year was dated as at November 2022. We consider that all SIP

policies and principles relevant to this statement were adhered to.

2. Voting and engagement

As set out above, the Trustee has delegated responsibility to the Fiduciary Manager to implement the

Trustee’s agreed investment strategy, including making certain decisions about investments

(including asset allocation and manager selection/deselection) in compliance with Sections 34 and 36

of the Pensions Act.

The Fiduciary Manager is therefore responsible for managing the sustainability of the portfolio and

how Environmental, Social and Governance (“ESG”) factors are allowed for in the portfolio.

The Trustee’s view is that ESG factors can have a significant impact on investment returns,

particularly over the long-term. As a result, the Trustee believes that the incorporation of ESG factors

is in the best long-term financial interests of its members. The Trustee has appointed a Fiduciary

Manager who shares this view and has fully embedded the consideration of ESG factors in its

processes.

The Fiduciary Manager’s process for selecting, monitoring and de-selecting managers explicitly and

formally includes an assessment of a manager’s approach to SI (recognising that the degree to which

these factors are relevant to any given strategy is a function of time horizon, investment style,

philosophy and exposures). Where ESG factors are considered to be particularly influential to

outcomes, the Fiduciary Manager engages with investment managers to improve their processes.

The Fiduciary Manager produces detailed reports on the SI characteristics of the highest-rated

managers (such as those included in the Scheme’s portfolio) on an annual basis. These reports form

part of the Trustee’s ongoing portfolio monitoring. The Trustee last received these reports in August

2022.

Towers Watson Core Diversified Fund and Towers Watson Partners Fund :



These Funds have Article 8 Sustainable Finance Disclosure Regulation designation. This

covers a Fund which promotes, among other characteristics, environmental or social

characteristics, or a combination of those characteristics, provided that the companies in

which the investments are made follow good governance practices, amongst other

requirements.



The Investment Manager intends for the Sub-Funds to achieve at least a 50% reduction in

greenhouse gases by 2030 in its portfolio and continue beyond that time to further reduce

greenhouse gases from the portfolio with an aim of net zero emissions by 2050. Progress is

measured using multiple climate metrics.

Through its investment in the Partners Fund, the Fund also manages risk and considered ESG

integration in its investment processes and strategies through:



UK forestry –The strategy will acquire unused agricultural land in the north of England and

Scotland to plant trees and grow forests, capturing carbon in the process. The intention is to

hold the forests that have been created for three to five years until the trees have established

themselves after which there are various possible exit routes.



Japanese Solar Panels - Invests (through a third party manager) in Japanese renewable

energy with some exposure to other solar energy. Invests in late stage construction and

development of solar, biomass and battery storage in Japan.

Through its investment in the Core Diversified Fund, the Fund also manages risk and considered

ESG integration in its investment processes and strategies through:



A Global Prime Real Estate strategy which has introduced climate filters as an explicit screen

in the investment process following direct engagement with the manager.



Company level engagement and rights attached to investments (including voting):.

The Trustee has delegated responsibility for the selection, retention and realisation of investments to

the Fiduciary Manager, and in turn to the Scheme’s investment managers. The day-to-day integration

of ESG considerations and stewardship activities (including consideration of all relevant matters,

voting and engagement) are delegated to the Scheme’s investment managers.

Through the engagement undertaken by the Fiduciary Manager, the Trustee expects investment

managers to sign up to local Stewardship Codes and to act as responsible stewards of capital as

applicable to their mandates. The Fiduciary Manager considers the investment managers’ policies

and activities in relation to Environmental, Social and Governance (ESG) and stewardship both at the

appointment of a new manager and on an ongoing basis. The Fiduciary Manager engages with

managers to improve their practices and may terminate a manager’s appointment if they fail to

demonstrate an acceptable level of practice in these areas. However, no managers were terminated

on these grounds during the Year.

As at the year end, the Scheme was invested in two in-house multi-asset growth funds, the Towers

Watson Investment Management (TWIM) Core Diversified Fund and the Towers Watson Investment

Management (TWIM) Partners Fund, both managed by the Fiduciary Manager, which have an

allocation to equity holdings in underlying pooled funds. Therefore, voting information was only

requested from the Scheme’s equity managers as here there is a right to vote as an ultimate owner of

a stock. Responses received are provided in the table below. Where managers provided multiple

examples of votes, three of those deemed most significant by the Trustee have been shown below.

The Trustee has endeavoured to select “significant” votes which align with the Trustee’s identified

priorities for voting and engagement – human and labour rights, and climate – where the data has

allowed.

The Scheme’s equity holdings are invested across two pooled funds:

 TWIM Core Diversified Fund – a multi-asset growth fund that takes a holistic approach to

managing ESG risk and opportunity

 TWIM Partners Fund - a multi-asset growth fund that takes a holistic approach to managing

ESG risk and opportunity

Example voting table – Manager

The Trustee delegates the exercise of voting rights to its investment managers. Voting activity is

undertaken in line with the voting policy of the investment manager [please refer Page 8 of this

document - Appendix 1: Manager voting policies]. The Fiduciary Manager has assessed the

investment manager’s voting policy as part of its overall assessment of the investment manager’s

capabilities. The Fiduciary Manager considered the policy to be appropriate, and consistent with the

Trustee’s policies and objectives and ultimately, therefore in the best financial interests of the

members. Additional oversight on the implementation of this policy is provided through the Fiduciary

Manager’s partnership with EOS at Federated Hermes (see below). The Trustee has identified key

ESG risks for the Scheme as climate change action and human and labour rights and therefore

selected votes on these topics as the most significant for the Scheme.

Further information on the voting and engagement activities of the managers is provided in the table

below.

TWIM Core Diversified Fund

Voting activity

Number of

votes eligible

to cast:

42,381

Percentage

of eligible

votes cast:

93.2%

Percentage

of votes with

management:

85.0%

Percentage

of votes

against

management:

15.0%

Percentage

of votes

abstained

from:

0.0%

Most

significant

votes cast

Company SNAM SpA

Size of

holdings

0.22%

Resolution Accept Financial Statements and Statutory Reports

Vote Cast Against - We do not publicly communicate our vote in advance.

Rationale for

voting

decision

Inadequate management of climate-related risks

Outcome of

vote

Pass

Use of proxy

voting

For the CDF, through our equity and listed real asset strategies, we work with

EOS to provide corporate engagement and voting recommendation services to

enhance the efforts of the underlying managers where possible. The underlying

manager must provide an explanation and note their rationale when they choose

to vote differently to the recommendation. The underlying mangers also use ISS

facilitate voting and provide research. Our China equity manager uses Glass

Lewis service where they have created a bespoke policy.

TWIM Partners Fund

Voting activity

Number of

votes eligible

to cast:

25,560

Percentage

of eligible

votes cast:

92.8%

Percentage

of votes with

management:

86.0%

Percentage

of votes

against

management:

13.5%

Percentage

of votes

abstained

from:

0.5%

Most

significant

votes cast

Company Anglo American Plc

Size of

holdings

0.06%

Resolution Approve Climate Change Report

Vote Cast Supported Management

Rationale for

voting

decision

The climate change report sets out clear pathways to carbon

neutral operations by 2040 and the company's ambition to

reduce Scope 3 emissions by 50%, also by 2040.

Outcome of

vote

Pass

Use of proxy

voting

For the Partners Fund, the equity exposure comes from four main areas

- Our global equity portfolio where EOS provides voting recommendation to

enhance engagement and help achieve responsible ownership. EOS’s voting

recommendations are informed by its extensive research and experience in the

area of stewardship as well as its long-term engagement activities with

companies. The underlying managers must provide an explanation and note

their rationale when they choose to vote differently to the recommendation. The

underlying managers in this portfolio use ISS’s ‘ProxyExchange’ electronic

voting platform to facilitate voting.

- Our China equity manager uses Glass Lewis service where they have created

a bespoke policy

- Our emerging markets equity managers use ISS, Glass Lewis, SES and

Broadridge Proxy Edge platforms for information and to facilitate voting

- Our long-short equity managers use ISS to provide corporate research and to

facilitate the voting process."

Industry wide / public policy engagement:

As mentioned in the SIP, the Fiduciary Manager has partnered with EOS at Federated Hermes (EOS)

for a number of years to enhance its stewardship activities. One element of this partnership is

undertaking public policy engagement on behalf of its clients (including the Trustee). This public policy

and market best practice engagement is done with legislators, regulators, industry bodies and other

standard-setters to shape capital markets and the environment in which companies and their

investors operate, a key element of which is risk related to climate change. The Fiduciary Manager

represents client policies/sentiment to EOS via the Client Advisory Council, of which its Head of

Stewardship currently chairs. It applies EOS’ services, from public policy engagement to corporate

voting and engagement, to several of its funds. Some highlights from EOS’ activities over 2022:

 Engaging with 1,138 companies on 4,250 issues and objectives

 Making voting recommendations on 134,188 resolutions at 13,814 meetings, including

recommended votes against 24,461 resolutions

 33 consultation responses or proactive equivalent and 75 discussions with relevant regulators

and stakeholders

 Active participation in many collaborations including Climate Action 100+, Principles for

Responsible Investment (PRI), and UN Guiding Principles Reporting Framework

The Fiduciary Manager is also engaged in a number of industry wide initiatives and collaborative

engagements including:

 Becoming a signatory to the 2020 UK Stewardship Code in the first wave, and subsequently

retaining that status

 Co-founding the Net Zero Investment Consultants Initiative in 2021, with a commitment

across its global Investment business

 Joining the Net Zero Asset Managers Initiative in 2021, committing 100% of its discretionary

assets

 Being a signatory of the Principles for Responsible Investment (PRI) and active member of

their Stewardship Advisory Committee

 Being a member of and contributor to the Institutional Investors Group on Climate Change

(IIGCC), Asian Investors Group on Climate Change (AIGCC), and Australasian Investors

Group on Climate Change (IGCC)

 Co-founding the Investment Consultants Sustainability Working Group

 Continuing to lead collaboration through the Thinking Ahead Institute and WTW Research

Network

 Being a founding member of The Diversity Project

 Being an official supporter of the Transition Pathway Initiative

3. Conclusion

The Trustee considers that all SIP policies and principles were adhered to during the year.

4. Appendix 1: Manager voting policies

TWIM’s voting policy is provided below

Towers Watson Partners Fund’s underlying managers use ISS’s ‘ProxyExchange’ electronic voting

platform to electronically vote clients’ shares. For the Towers Watson Global Equity Focus Fund, in

which the Towers Watson Partners Fund invests, we also use EOS at Federated Hermes for voting

recommendation services (via the ISS platform) to enhance engagement and achieve responsible

ownership. The underlying managers are ultimately responsible for the votes.

As at the year end the Towers Watson Core Diversified Fund held majority of its equity holdings via

the Asset Management Exchange (AMX) platform which uses EOS at Federated Hermes for voting

recommendation services (via the ISS platform) to enhance engagement and achieve responsible

ownership. The underlying managers are ultimately responsible for the votes