Responsible Investor

USS shows enterprise in engagement

David Russell, co-head of Responsible Investment at the Universities Superannuation Scheme (USS), the £31bn (€46bn) second largest UK pension fund, explains how its SRI strategy is not just about risk but also reward.

Responible Investor: USS has a very developed system of engagement with companies. How does that operate and how do you measure success within that?
David Russell: USS engages with companies for a number of different reasons. One is to elicit information. A second is to elicit change within the company. A third is to get information that our portfolio managers use in their investment decisions. The results of those different types of engagement are sometimes difficult to judge.
Has the information been used in an investment decision? Well, we can ask the portfolio manager. Has the company changed? This is much more difficult to work out if it is the result of USS’ activities or of general engagement by other investors, NGOs or staff within the company itself. In terms of the access we get to senior management, because USS is relatively big shareholder in this market (UK) we do get very good access to the board, to the CEO, CIO and investor relations. In other markets where our shareholdings may be smaller,

access is not so easy, but we tend to get access to senior management when we need it.
I think that over the last four to five years, the level of awareness of senior management in companies on corporate governance, environmental and social issues and other extra financial issues, has gone up and they are much more aware that long term investors like pension funds are very interested in these issues.
Responible Investor: Do you use class action lawsuits against companies involved in governance failures?
David Russell: USS does use class actions as part of the range of different tools we have for dealing with companies in which we invest. It’s a very useful tool in the US market which is used to dealing with class actions. But we also get access to investor relations and senior staff members where we wish to talk about certain issues. Board access is much more difficult in the US market compared to the UK and that is something we are working on currently.

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