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Investment Stewardship: Asset Owner Perspective

By Team Maanch  |  
October 13, 2023  |  
6 minutes read

A conversation with Lauren Peacock

Meet Lauren Peacock, Responsible Investment Manager at Scottish Widows. In our recent chat with her, she sheds light on the unique opportunities and challenges that pension funds face as asset owners.

1. What is your role and how has your career evolved in years?

I pursued an economics degree and  a sustainability masters. During that time, sustainability teams were a rarity, so I began with various internships in related fields to gain experience.

Subsequently, I spent four years at ShareAction. Their emphasis on stewardship and systemic change provided a rich learning environment. My work focused on ESG aspects within the pensions industry, the wealth of knowledge at Share Action was invaluable for my career. And now, having completed nearly three years at Scottish Widows, I have gradually gravitated towards stewardship responsibilities.

2. From the perspective of an asset owner, what do you believe are the key elements of an effective voting policy, particularly for climate issues and achieving net zero emissions?

An effective voting policy for asset owners regarding climate issues and achieving net zero emissions should cover a wide range of aspects, such as shareholder resolutions, support for climate action plans and director votes. Balancing between clear principles and case-by-case decisions is crucial, as each company is unique. The policy’s principles should act as an anchor for discussions, avoiding excessive rigidity. Striking a middle ground is important—principles should be ambitious yet feasible. Strong net zero expectations, aligned strategies, and compensation should be emphasised without delving into exhaustive details that might hinder practicality and progress.

3. How does your organisation approach engagements with the asset managers that you invest with?

Engaging with the asset managers we invest with is a significant aspect of our approach as an asset owner. Despite our size, asset managers possess specialised analysts and sector-specific expertise. We collaborate with them regularly, meeting active managers monthly and passive ones quarterly, with a focus on stewardship. These engagements cover diverse areas like climate change and human rights, aiming for deep dives into effective engagement strategies. We emphasise learning from unsuccessful engagements to refine our approach. Aligning asset managers with our objectives can be challenging due to differing philosophies. The challenge lies in harmonising diverse priorities while recognising that asset managers are chosen for various reasons beyond responsible investment.

4. Regarding climate change and sustainability, what are some unique challenges or considerations that pension funds face as asset owners? How does your organisation address these challenges to ensure responsible and sustainable investments?

Pension funds, as long-term investors, face the challenges of aligning asset managers’ short-term focus with their long-term goals. They possess a distinctive voice that can advocate for strong, sustainable investments on behalf of members. Our organisation recognises this unique position and emphasises engagement and voting as powerful tools to drive change. Collaborative efforts with NGOs and experts further enhance our impact, providing grassroots insights essential for responsible investment. While challenges exist, we see opportunities in leveraging collective influence and partnering with not-for-profit sectors, especially in critical areas like biodiversity.

5. Could you provide examples of how your organisation has engaged with asset managers to align voting decisions, making use of pass-through voting etc? How do you monitor and evaluate the outcomes of these engagements?

Aligning voting decisions with asset managers is a significant effort for us. We’ve enhanced our oversight by actively engaging with our asset managers on voting. We’ve integrated Minerva, a proxy voting research partner, to analyse our top 500 holdings and identify critical votes. This allows us to target impactful decisions, such as those related to human rights and climate issues. Additionally, we have voting overrides in place for our active and passive managers. For our active managers, we can override a set number of votes annually, while we use ISS’s policy for our passive managers.

To monitor and evaluate these engagements, we collect voting data from asset managers, send it to Minerva for analysis, and assess how our votes align with our guidelines. This process offers clear insights into our voting outcomes, providing a black-and-white picture of our impact.

6. Long-term engagement is crucial for pension funds as asset owners. How does your organisation approach the concept of long-term engagement as priorities shift?

Long-term engagement remains a central focus for our organisation. While priorities may shift, the core principles of sustainability endure. We recognise that addressing critical issues such as shifting business models and reforming ways of working requires time and effort. As themes like biodiversity and human rights gain prominence, we expect companies to be already taking action. Our approach involves broadening the scope of material issues, understanding their interconnectedness, and recognising that material topics often intersect. For instance, human rights concerns are often linked to supply chain practices and environmental performance. We view these efforts as part of an ongoing commitment to responsible investment and a means to drive positive change in the long run.

7. What role do you believe pension funds should play in advancing the global transition to a net-zero economy?

The role of pension funds in advancing the global transition to a net-zero economy is multifaceted. While challenges arise in an increasingly crowded climate engagement space, pension funds possess a unique voice. As asset owners, we acknowledge the need for both mirroring and driving the economy. Our voting policies allow us to influence change, such as voting down directors. 

8. In your opinion, what are some current trends or developments in the responsible investment field that pension funds should be aware of? How is your organisation adapting to these trends to stay at the forefront of responsible investment practices?

Biodiversity is a rapidly growing area in the responsible investment field, and there’s a positive momentum around it. Unlike climate engagement, there isn’t always a clear list of laggards in biodiversity. To adapt, we’ve integrated biodiversity discussions into our climate engagement conversations. Given the rise of populism and social isolation, it’s crucial to communicate the positive impacts of climate action on people’s lives. Our organisation sees this as part of our responsibility to educate our millions of members and engage them in the fight against climate change. As a recognized brand in the UK, we recognize our role in contributing to positive change and encouraging collective action for a sustainable future.

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