Implementation Statement

Covance CRU – year to 31 October 2022

Implementation Statement

The Trustees of the Covance Clinical Research Unit Limited Pension Scheme (the ‘Trustees’ and the ‘Scheme’ respectively) have prepared this implementation statement in compliance with the governance standards introduced under The Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019.

Its purpose is to describe the actions taken over the past year and to demonstrate how the Trustees have followed the policy on voting, stewardship and engagement as set out in the Scheme's Statement of Investment Principles (the 'SIP'), dated June 2022. This statement covers the period to 31 October 2022.

The Scheme’s assets are held in pooled investment funds (via the Mobius Life investment platform) and the day-to-day management of these investments (including the responsibility for voting and engaging with companies) is delegated to the fund managers of the pooled investment funds (the ‘Fund Managers’).

Following the acquisition of BMO’s EMEA Asset Management business by Columbia Threadneedle in 2021, as of 1 July 2022 the enlarged business operates under the Columbia Threadneedle Investments brand.

The Fund Managers of the pooled investment funds are Legal & General Investment Management (‘LGIM’), Capital International Management Company Sàrl (‘Capital Group’), Schroder Investment Management Limited (‘Schroders’) and Columbia Threadneedle Investments (‘CT’).

As Trustees of the Scheme's assets, we are responsible for the selection and retention of the funds accessed via Mobius. Reviewing the voting and engagement activities, for which we include details below, is an important exercise to help us ensure they remain appropriate and are consistent with the Fund Managers' stated policies in this regard.

We are satisfied with the voting and engagement activities of the Fund Managers, and in particular, that they are using their position as stakeholder to engage constructively with investee companies; however, we will engage with the Fund Managers should we have any concerns about the voting and/or engagement activities carried out on our behalf.

The Trustees had no cause to challenge the Fund Managers’ voting and/or engagement activities during the period from 1 January 2022 to 31 October 2022.

Changes to investment strategy

In November 2021, the Trustees implemented a new investment strategy and agreed to update the funding level triggers (and trigger governance framework) to reflect the new strategic asset allocation.

During the period from 1 January 2022 to 31 October 2022, the Trustees made a number of changes to the investment strategy which are explained further below:

  • In May 2022, the Trustees agreed to manually activate the first funding level trigger to reduce the Scheme's investment risk following an improvement in the Scheme's funding level. An additional four funding level triggers were activated during August and September. The Trustees then agreed to suspend the triggers pending a review.
  • In June 2022, the Trustees agreed to implement a new allocation to structured equity with Schroders. The purpose of this investment is to reduce the equity market volatility experienced by the Scheme.
  • In July 2022, the Trustees agreed to reset the funding level triggers and update the Scheme’s Trigger Governance Framework (‘TGF’) so that once a trigger is reached and growth assets sold, the proceeds are invested in the CT Credit-Linked Real Dynamic LDI Fund, the CT Nominal Dynamic LDI Fund and the LGIM Short Dated Sterling Corporate Bond Index Fund. The Trustees agreed that the CT Credit-Linked Real Dynamic LDI Fund therefore replaced the CT Real Dynamic LDI Fund for a number of reasons which were beneficial for the Scheme.

All of the changes to the investment strategy detailed above were based on advice received from the appointed investment consultant.

Voting and engagement

Details on voting and engagement activities provided by LGIM, Capital Group, Schroders and CT are set out below. In order to produce this statement we have asked the Fund Managers a series of questions on their policies, actions and for examples relating to their voting and engagement activities. We have then reviewed these and selected the most relevant comments for the purpose of this statement. The Fund Managers report on this on a quarterly basis, therefore the information provided covers the year to 30 September 2022 unless otherwise stated.

LGIM and Capital Group have provided information relating to the Global Equity Market Weights (30:70) Index Fund - 75% GBP Currency Hedged and Emerging Markets Total Opportunities Fund respectively, as these fund holds equities for which they have voting rights. The LGIM Short Dated Sterling Corporate Bond Index Fund does not hold equities and given that these investments do not confer voting rights, there was no voting carried out in relation to this fund.

The Schroders structured equity product invests in equity derivatives and therefore does not hold physical equities and given that these investments do not confer voting rights, there was no voting carried out in relation to this fund.

The CT Dynamic LDI Funds (including the equity-linked and credit-linked funds) do not hold physical equities and given that these investments do not confer voting rights, there was no voting carried out in relation to these funds. However, CT does undertake engagement activities with counterparty banks on relevant issues, where applicable, and we have included examples below. CT report on this on a bi-annual basis, therefore the information provided covers the year to 30 June 2022.

LGIM - voting and engagement activities

The following commentary is based on the information that LGIM have provided in response to our questions and illustrates how they co-ordinate their voting and engagement activities with companies.

'LGIM's voting and engagement activities are driven by ESG professionals and their assessment of the requirements in these areas seeks to achieve the best outcome for all our clients. Our voting policies are reviewed annually and take into account feedback from our clients.

Every year, LGIM holds a stakeholder roundtable event where clients and other stakeholders (civil society, academia, the private sector and fellow investors) are invited to express their views directly to the members of the Investment Stewardship team. The views expressed by attendees during this event form a key consideration as we continue to develop our voting and engagement policies and define strategic priorities in the years ahead. We also take into account client feedback received at regular meetings and/ or ad-hoc comments or enquiries.

All decisions are made by LGIM's Investment Stewardship team and in accordance with our relevant Corporate Governance & Responsible Investment and Conflicts of Interest policy documents which are reviewed annually. Each member of the team is allocated a specific sector globally so that the voting is undertaken by the same individuals who engage with the relevant company. This ensures our stewardship approach flows smoothly throughout the engagement and voting process and that engagement is fully integrated into the vote decision process, therefore sending consistent messaging to companies.

LGIM's Investment Stewardship team uses ISS's 'ProxyExchange' electronic voting platform to electronically vote clients' shares. All voting decisions are made by LGIM and we do not outsource any part of the strategic decisions. Our use of ISS recommendations is purely to augment our own research and proprietary ESG assessment tools. The Investment Stewardship team also uses the research reports of Institutional Voting Information Services (IVIS) to supplement the research reports that we receive from ISS for UK companies when making specific voting decisions.

To ensure our proxy provider votes in accordance with our position on ESG, we have put in place a custom voting policy with specific voting instructions. These instructions apply to all markets globally and seek to uphold what we consider are minimum best practice standards which we believe all companies globally should observe, irrespective of local regulation or practice.

We retain the ability in all markets to override any vote decisions, which are based on our custom voting policy. This may happen where engagement with a specific company has provided additional information (for example from direct engagement, or explanation in the annual report) that allows us to apply a qualitative overlay to our voting judgement. We have strict monitoring controls to ensure our votes are fully and effectively executed in accordance with our voting policies by our service provider. This includes a regular manual check of the votes input into the platform, and an electronic alert service to inform us of rejected votes which require further action.

We also believe public transparency of our vote activity is critical for our clients and interested parties to hold us to account. In determining significant votes, LGIM's Investment Stewardship team takes into account the criteria provided by the Pensions & Lifetime Savings Association consultation (PLSA).'

LGIM Global Equity Market Weights (30:70) Index Fund – 75% GBP Currency Hedged

LGIM voted on 75,194 resolutions. Votes: For 80%, Against 18%, Abstained <2%. There were 626 engagements over the year in relation to this fund.

The Trustees have reviewed LGIM’s voting activity and have noted in particular the following vote for this fund:


Date: 28/04/2022

Resolution: Approve Climate Progress Report

Vote: Against

‘LGIM expects companies to introduce credible transition plans, consistent with the Paris goals of limiting the global average temperature increase to 1.5°C.While we note the progress the company has made in strengthening its medium-term emissions reduction targets to 50% by 2035, we remain concerned over the company's activities around thermal coal and lobbying, which we deem inconsistent with the required ambition to stay within the 1.5°C trajectory.

LGIM will continue to engage with our investee companies, publicly advocate our position on this issue and monitor company and market-level progress.’

Capital Group - voting and engagement activities

The following commentary is based on the information that Capital Group have provided in response to our questions and illustrates how they co-ordinate their voting and engagement activities with companies.

'Capital Group do not follow proxy advisors' recommendations. Each proxy ballot is reviewed by the Governance and Proxy (GAP) team at Capital Group who facilitate the proxy voting process. They rely primarily on their own proprietary research in evaluating companies although, to provide supplementary analysis of resolutions at shareholder meetings, they will often review proxy research from third party vendors.

We prefer to engage with companies privately – given our size, fundamental research-based approach to investing and global footprint, we find that constructive engagement is most effective when we directly tackle key issues with companies and their boards.

We typically collaborate with other asset managers through our industry memberships on initiatives to improve the framework for universal investors. For example, the UK Investor Forum - which we are founding members of - helps collective engagement. Through such organisations, we can have a collective impact in certain situations where we believe this will achieve better outcomes for our clients.'

Capital Group Emerging Markets Total Opportunities Fund

Capital Group voted on 1,623 resolutions. Votes: For 92%, Against 5%, Abstained 3%. There were 41 engagements over the year in relation to this fund.

The Trustees have reviewed Capital Group’s voting activity and have noted in particular the following vote for this fund:

ENN Energy Holdings Limited

Date: 18/05/2022

Resolution: Adopt new share option scheme

Vote: Against

Stock option grants to outside directors are in conflict with their role as shareholder representatives.

The Trustees have reviewed Capital Group’s engagement activity and have noted in particular the following example for this fund:


"Braskem was indirectly implicated, via its parent company Odebrecht SA, in Brazil's anti-corruption investigations known as "Lava Jato", or "Operation Carwash", which exposed some corporate governance shortcomings. Fixed income investment analyst Sarah Leshner Carvalho had frequent and ongoing conversations with Braskem's management team about corporate governance - and specifically the wrongdoings uncovered in the Lava Jato investigation. Our fixed income business had no exposure to the company until 2019 and evidence of governance improvement was key to Sarah's work prior to investing. Measures taken by Braskem included replacing and strengthening the board, introducing a compliance committee and training staff and board members. In addition to its corporate governance shortcomings, Braskem was alleged to have caused environmental damage in the state of Alagoas, where it operated salt mines. Capital Group engaged with the company, alongside other stakeholders, to raise awareness of the financial implications. Following discussions, Braskem pledged a significant sum over two years to relocate 1,500 people, to close the salt wells and create a protection area. Sarah stated that only through regular engagement with Braskem's management team and interactions with other stakeholders did she gain comfort regarding both the governance issues that surfaced during the Lava Jato scandal and the environmental risk in Alagoas."

CT - engagement activities

The following commentary is based on the information that CT have provided in response to our questions and illustrates how they co-ordinate their engagement activities with companies. These examples provide evidence that they areengaging actively with the companies they invest in on behalf of the Scheme.

'We take responsible investment seriously. The identification of financially material environmental, social and governance (ESG) issues forms part of our investment process, helping us to manage risk and support long-term returns. Beyond the management of opportunity and risk, we also see responsible investing and broader investment stewardship activities as part of our duty as an investor acting in the best interest of our clients, and as a participant in the global financial system.

LDI portfolios are very different to traditional equity or bond portfolios and so our engagement programme primarily focuses on trading counterparties and clearing members. This engagement work is structured both in terms of prioritisation (both in terms of companies to whom we have the greatest exposure and to companies whom we feel have the greatest ESG deficiencies) and in terms of progress monitoring against predefined milestones.'

CT Dynamic LDI Funds

These funds contain investments that provide exposure to long dated interest rates / inflation. They do not hold any physical equity investments and are therefore not eligible to vote. However, CT does still engage with counterparty banks on relevant issues.

There were 40 engagements over the second half of 2021 and 16 engagements over the first half of 2022 in relation to all CT LDI portfolios.

They have provided the following examples:


"Committed to decarbonize its credit and investment portfolios by 2050, or earlier, according to scientific scenarios and targets of the Paris Climate Agreement. Joining the Net-Zero Banking Alliance also shows clear climate leadership. We have engaged the company on their environmental and climate risk management practices for their lending portfolio in the past."


"Committed to achieve net-zero greenhouse gas financed emissions by 2050, and to align its power generation portfolio with the Paris Agreement by 2030. As part of this commitment, Santander will also develop and publish decarbonisation targets for other material sectors, including oil & gas, transport and mining & metals. The implementation of these commitments will enhance the bank's response to climate change risks in its lending, advisory and investment activities."


“HSBC's new Energy Policy includes reference to a stronger coal exit policy, a dedicated client engagement program as well as limitations of financing for new large dams, new nuclear power projects, new greenfield oil sands projects, or new offshore oil and gas in the Artic. We have been engaging on clear limitations for its energy financing for a while and give its energy portfolio these commitments are sizeable.”