Railpen has increased its stewardship efforts in response to what it views as a growing “race to the bottom” among companies and policymakers on financially material issues, including climate change, workforce practices, and shareholder rights.

In its 2024 Stewardship Report, Railpen outlined progress across its key priorities, active ownership, environmental, social and governance (ESG) integration, and climate, while stressing the importance of addressing system-wide risks.

The report forms part of Railpen's ongoing commitment to the 2020 UK Stewardship Code.

In particular, the report highlighted Railpen’s efforts to increase industry-wide stewardship on system-wide risks by working on the report ‘Cybersecurity Risk & Resilience: Guidance for Investors’ in collaboration with Royal London Asset Management.

This report aimed to help the industry better understand the financial materiality and threat landscape of cybersecurity risk and provide guidance for investors as they engage with portfolio companies.

Railpen head of investment stewardship, Caroline Escott, said that generating the required returns to secure its members’ future is “challenging” and to succeed, it needs to use all the levers available – including stewardship – to drive long-term value creation at the company and market level.

“We are not afraid to act where we think the latest industry or market development may damage member outcomes,” she continued.

“This includes advocating against the ‘race to the bottom’ we are seeing from companies and policymakers on what evidence shows are financially material issues, including diversity, equity and inclusion, climate change and shareholder rights.”

Additionally, the report showed that Railpen worked with the Chartered Institute of Personnel and Development (CIPD) and the Pensions and Lifetime Savings Association (PLSA) in 2024 to write to the chief executives of the FTSE 350 companies with guidance on how to produce meaningful reporting on their workforce.

Railpen, the CIPD and the High Pay Centre will be following up on this and previous work in 2025 to assess companies’ disclosure practices and make recommendations to policymakers as they debate the UK Employment Rights Bill.

The report also showed that Railpen built on its previous work in 2024, including advocating against changes to the UK listing rules, specifically the introduction of dual-class share structures.

The report highlighted that last year, in response to the Financial Conduct Authority’s 2024 proposals removing previously suggested shareholder safeguards, Railpen worked with other pension schemes through the Investor Coalition for Equal Votes to develop a joint position.

It also supported asset owners and industry bodies in preparing their responses, including analysis of the potential cost impact on investors and beneficiaries.

Railpen also focused on improving audit quality in 2024 by collaborating with Governance Perspectives Ltd. in 2024 to produce the 'Acting on Audit' report, which outlined key factors influencing audit quality and accountability, and provided recommendations to improve transparency and engagement for policymakers, investors, and companies.

The 2024 Stewardship Report also showed that Railpen updated its 2025 Global Voting Policy in 2024 to reflect changes in UK listing rules and the adoption of the European Union Listing Act, with a focus on maintaining shareholder rights.

The policy now includes criteria for voting against companies that plan to re-register or move to locations with weaker investor protections.

Additionally, Railpen’s 2025 Global Voting Policy includes stronger positions on audit issues, with plans to hold companies more accountable for errors or negligence and to promote graduated reporting.  

The 2024 Stewardship Report also outlined case studies of company engagements on sustainability and governance, highlighting the use of tools such as annual general meeting questions, co-filing resolutions, and engagement on exclusions.

The report stated that at the time of writing, policymakers in several jurisdictions are rolling back what Railpen considers to be important regulatory initiatives on everything from diversity, equity and inclusion to climate change and shareholder rights.

In response, Escott explained that there is a misconception that good governance and sustainable business practices limit economic growth, but said Railpen’s approach will continue to be grounded in the evidence that integrating and acting upon, material ESG issues is an important contributor to good outcomes for members.

Adding to this, Railpen director of investment risk and sustainable ownership, Michael Marshall, said: “At Railpen, we and the trustee have long believed that stewardship on financially material issues is a core part of our fiduciary duty.

“We follow the evidence that companies with good corporate governance practices and engaged shareholders are more likely to achieve the superior long-term financial performance that members of the railways pension schemes need.”

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