Responsible investment and stewardship report summary

Signatory to the UK Stewardship Code

We're delighted to announce the publication of our second Stewardship Report since becoming a signatory to the UK Stewardship Code.

The Code is a set of voluntary principles that aims to improve the quality of stewardship practices by asset owners, managers and service providers. To become a Signatory, organisations must clearly demonstrate that they have exercised effective stewardship over the previous 12 months through good governance and active engagement which has helped to generate long-term positive impacts for the economy, the environment, and/or society.

Signatory status is a key step in our commitment to be one of the top 25% of responsible businesses in the UK by 2025. And we're committed to playing our part in strengthening stewardship practices across the industry.

2023 responsible investment and stewardship report summary

This is our second responsible investment and stewardship report. It provides concrete examples of how we're committed to helping our advisers and their client's scheme members grow their savings over the long-term and contribute to a more sustainable world.

The full report includes detailed sections on these topics:

Our sustainability and stewardship approach
The ways in which scheme members' interests inform decisions
How governance guides effective stewardship
The integration of environmental, social and governance (ESG) factors across asset classes
Oversight of fund managers, voting and engagement approaches, and efforts made to address systemic risks
How we collaborate with industry bodies to advocate for change

Stewardship is our way of creating long-term value for our customers, and key to helping them live their best lives. As proud signatories to the UK Stewardship Code, I'm pleased to introduce our second annual stewardship report, charting our progress during 2023, and setting our course for 2024. We've used the process of preparing this report to reflect on who we are, on the duties we owe to our customers and how those duties define our approach to the stewardship of the assets that we manage.

Mike Holliday-Williams, CEO

2024 will be the year where we strengthen our focus on sustainability as a systemic risk, where we define the key interventions that need to be made and where we build collaborations that can help us transition to a sustainable, resilient and more stable economic system.

Lorna Blyth, Managing Director, Investment Propositions, Aegon UK

2023 report highlights

This year we strengthened our expectations for managers, regarding collaboration, engagement themes and transparency in a number of ways:

We introduced new criteria for those operating within fixed income.
Our annual manager monitoring assessment evaluated the 38 managers in scope of our responsible investment and stewardship policies on their performance across responsible investment governance, climate, industry advocacy, voting and engagement and human rights.
We strengthened our approach to voting by testing our 'expression of wish' voting guidelines with our top three managers, analysing our alignment and using this information to deepen engagement and challenge where necessary.

We improved our approach to managing climate risk by further embedding it in our risk management framework and expanding our approved risk scenarios to include 'climate tipping point' and 'climate backlash'.
We rolled out our climate road map across the business, clearly signposting the steps we must take to achieve our commitment to reach net zero across our default fund range by 2050^.1
We published a biodiversity white paper providing insights to pension providers on the need to focus on nature and biodiversity related risks along with guidance on how to mitigate these in their investment portfolios.

¹Measured using carbon footprint across our range of default funds. Individual fund targets don’t apply. 2030 target applies to scope 1 and 2 emissions from listed equities (shares) and corporate fixed income (bonds) only.

We reviewed one of our largest default funds asking potential managers to demonstrate their approach to climate considerations and net-zero alignment.
Over half (£23.4 billion) of assets in our defined contribution (DC) default solutions apply screening or are optimised for ESG factors (as at 31 December 2023).
We launched a new fund range for Aegon Master Trust, designed with reference to the Investment Association's Responsible Investment Framework. 23 of the 25² funds in the range now integrate ESG to some extent in their investment process.

² These figures exclude the three Aegon BlackRock LifePath funds available in the Aegon Master Trust fund range.

We introduced responsible investment-related competencies within our Board Skills Matrix.
We appointed a new responsible investment analyst to support the wider integration of responsible investments through proposition reviews and to help evolve our ESG integration framework.
Our inaugural Stewardship Report, published May 2023, achieved signatory status from the Financial Reporting Council.

We became a founding signatory of the Mansion House Compact, a voluntary initiative between the largest nine DC pension firms in the UK to allocate at least 5% of DC default funds to unlisted equities by 2030.
We responded to a number of consultations focused on sustainable finance and the interests of pensions and savings customers.
We used our voice to push for greater climate policy certainty, for example by being a signatory of a UKSIF letter to the Prime Minister to signal our support for ambitious climate policy

We accelerated our diversity, equity and inclusion strategy.
We became proud signatories to the Woman in Finance Charter and the Race at Work Charter.
We featured in the Business in the Community's (BITC) 2023 Race at Work Charter Survey report as a best practice example of a company building allyship support.
We continued efforts to help ensure we have a positive impact on our urban biodiversity and ecosystems. We introduced beehives and bird houses, wildflower areas and insect hotels

We developed our nature and biodiversity action plan and simplified and tested our responsible investment customer messaging in response to our annual customer feedback programme.
We updated fund factsheets to incorporate clearer language detailing the responsible investment credentials for 25 key default funds.
Aegon and Pension Geeks created Pension Geeks TV, a digital platform that supports financial wellbeing and education, with pilot events reaching an audience of over 3,500 customers.