Association of Member Nominated Trustees – Industry view
Janice Turner is co-chair of the Association of Member Nominated Trustees (AMNT)
POWER MUST SHIFT FROM FUND MANAGERS TO PENSION FUNDS. THIS CURRENT SITUATION IS UNTENABLE
It is a little-known fact that nearly half the assets invested in the UK are in pooled investments managed by fund managers. This equates to a staggering £3.8trn and includes a substantial amount of pension fund assets. The pension funds, not the fund managers, own these assets. So, you might think that trustees of the pension funds would have some say on how their assets are used to influence the companies in which they are invested. Particularly on crucial issues such as ESG. In the vast majority of cases you would be wrong.
There is now a clash between the asset owners and the fund managers over who should direct the voting policy of the investments held in pooled funds. This is an untenable situation that requires immediate attention especially given the new, greater regulatory obligations placed upon trustees.
As background, the AMNT introduced a new approach to responsible investing in 2015 called Red Line Voting. This enables
trustees to play a proper stewardship role with regard to the companies in which they invest – including pension schemes investing via pooled funds – to meet their fiduciary duties. It does this by allowing pension schemes to set environmental, social and governance (ESG) voting poli- cies at “best practice” level¹. This is in line with recent guidance from The Pensions Regulator and the Law Commission. Prior to the launch of Red Line Voting, we sought advice from fund managers and organisations right across the financial services industry and the voting chain. Additionally, we received advice on cli- mate change voting policy from the Car- bon Disclosure Project. I was therefore shocked when reports came in from trus- tees that their fund managers were refus- ing to accept their voting policy, even on a comply or explain basis. To move the situation forward, AMNT commissioned a report from Professor Iain Clacher² to evaluate the obstacles to allowing trustees’ voting policies to be implemented by fund managers in pooled fund arrangements.
The report came to three main conclusions: First, the barriers presented to split voting in pooled funds are not insurmountable, especially as some fund managers have already been doing this for some clients. Put simply, asset owners’ policies could be implemented by fund managers if there was the will to do so. Second, whilst a lack of will represents a key driver for inertia in addressing the issue, long-term under-investment in the voting system means that it is no longer fit for purpose. It needs urgent reform. A
simplification of the voting chain and investment in technology to enable the effective stewardship of pension fund investments for the long run is required. Third, whilst asset owners themselves need to be more proactive in their stew- ardship approach, they cannot do so with- out the support of their investment con- sultants. So far, this has been sadly lacking. Investment consultants should hold fund managers to account for their unwillingness to accept client voting poli- cies. This could potentially include down- grading the fund manager.
The report recommends the creation of an industry working group, led by the Department for Work and Pensions. I am delighted to say that Guy Opperman MP, the Minister for Pensions and Financial Inclusion, has endorsed this recommen- dation. While welcoming our report he did not mince his words: “I am deter- mined we are going to bring about real change on this issue,” he said. Finally, I do understand that fund manag- ers may be struggling to meet the demand on client reporting requirements given increased regulation, but I hope that this report will be a wake-up call. Their busi- ness models must change – and invest- ment must be made –to accommodate the new reality. Power must shift from fund managers to pension funds. I am confident that the proposed working group can help to make this a reality.
1)
http://redlinevoting.org/what-is-red-line-voting/ 2) Bringing shareholder voting into the 21st Century. An examination of the barriers to effective steward- ship and how to overcome them.
https://amnt.org/report-2020/
Design and production Portfolio Verlag
Printed in the UK by Stephens & George
Subscription rates UK £222 (9 issues), Single issue price: £27.50 Overseas €270 (9 issues), Single issue price: €33.50
Enquiries +44 (0)20 7822 8522
j.waterson@portfolio-institutional.co.uk
© Copyright portfolio Verlagsgesellschaft mbH. All rights reserved. No part of this publication may be reproduced in any form without the prior permission of the publisher. Although the publishers have made every effort to ensure the accuracy of the information contained in this publication, neither portfolio Verlagsgesellschaft mbH or any contributing author can accept any legal responsibility whatsoever for any consequences that may arise from errors or omissions contained in the publication
ISSN: 2045-3833 Issue 98 | November 2020 | portfolio institutional | 13
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52
