The DS Smith Group Pension Scheme’s recently published Annual Implementation Statement for the Year Ended 30 April 2025 details updates to its Statement of Investment Principles (SIP), its approach to environmental, social, and governance (ESG) factors, and its monitoring of investment managers.
Investment Objectives Remain Consistent for DB Assets
The Trustee’s primary objective for Defined Benefit (DB) assets is to act in the best interest of its members and ensure obligations can be met. Key objectives include protecting accrued rights, limiting contribution rate volatility, and taking controlled risk for incremental excess return. The Scheme targets 105% funding on a gilts +0.5% p.a. basis by 2035. While the SIP was updated in June 2025, these overarching DB investment objectives remained unchanged (page 3, Annual Implementation Statement for the Year Ended 30 April 2025).
DC Section Closure and Policy Adjustments
The Scheme’s Defined Contribution (DC) section was closed on April 10, 2025. Policies related to DC assets and Additional Voluntary Contributions (AVCs) in the September 2024 SIP were in force until this date. The current June 2025 SIP no longer includes these policies (page 1, Annual Implementation Statement for the Year Ended 30 April 2025).
ESG Integration and Stewardship Emphasized
The Trustee’s SIP includes a policy on ESG factors, stewardship, and climate change. A Responsible Investment Total Evaluation (RITE) was conducted in October 2024 to assess ESG integration. The Trustee re-confirmed its focus on having sufficient assets to pay benefits while considering non-financial factors. Mercer’s Sustainability Policy, updated in November 2024, and Stewardship Policy, updated in January 2024, detail their approach to sustainability risks, opportunities, and stewardship practices. The Stewardship Policy now includes nature engagement priorities, and climate and diversity, equity, and inclusion (DEI) voting expectations. Mercer is a member of the Task Force for Nature Related Financial Disclosures (TNFD) working group and a founding signatory of Nature Action 100 (page 5-6, Annual Implementation Statement for the Year Ended 30 April 2025).
Sustainability-Themed Investments in Growth Portfolio
An allocation to Mercer’s Luxembourg domiciled Sustainable Opportunities funds (private markets) is included within the Scheme’s Growth assets. This allocation accounts for approximately 3% of the Growth Portfolio. The annual Impact Report highlights the social and environmental impact generated by these investments (page 7, Annual Implementation Statement for the Year Ended 30 April 2025).
Fiduciary Manager Monitoring and Incentivization
The Trustee receives regular reports from Mercer on manager monitoring, including Mercer’s Manager Research ESG ratings, carbon footprint analysis, and voting and engagement activity. The investment strategy is based on Mercer’s advice, predicated on a de-risking framework aligned with the Trustee’s objectives. Underlying investment managers are set specific targets to ensure the Scheme remains on track for its de-risking framework. Managers not performing as intended will be replaced. The Trustee employs Barnett Waddingham as a third-party evaluator to review Mercer’s alignment with the Trustee’s policies on a quarterly basis (page 9, Annual Implementation Statement for the Year Ended 30 April 2025).
Voting Activity in Mercer Funds Detailed
Voting rights for the Scheme’s DB assets, primarily invested in Mercer Funds, are delegated to third-party investment managers appointed by Mercer. Voting is possible in the Mercer Passive Global Equity CCF and Mercer Multi-Asset Credit funds. Mercer monitors the stewardship activities of these managers. For the Mercer Passive Global Equity CCF, 17,412 out of 19,974 eligible proposals were voted on, with 76% for and 11% against. For the Mercer Multi-Asset Credit Fund, 47 out of 60 eligible proposals were voted on, with 78% for and 0% against (page 14, 18, Annual Implementation Statement for the Year Ended 30 April 2025).
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