Comment: A trustee spat over business cards and stationery shows the reality of pension decision-making

It’s often said that asset owners are the anchors of the investment chain and that if the trillions that are needed for the low carbon transition are to materialise then they are going to have to be at the centre of the action.

Many are of course, and regardless of whether enough is being done, and fast enough, it’s clear that there are increasingly meaningful allocations to low carbon investments.

The overseers of the asset owners, in the UK at least, are the trustees. A somewhat maligned bunch, they are in my experience very conscientious and concerned for the welfare of their beneficiaries.

But they are in an anomalous position. Someone unfamiliar with the system might presume that trustees hold the power in their relationship with their suppliers – the asset managers.

For the largest asset owners this is no doubt the case, though trustees of smaller pension funds will relate their frustrations with their asset managers for being unable or unwilling to meet their demands, such as for them to integrate ESG or break down their voting information.

The Red Lines Voting campaign was an attempt to improve this situation, but asset managers largely ignored it. Par for the course in a sector where the client often comes last.

One gets the image of slick finance types venturing forth from London to the provincial towns where many local authority schemes are based – breaching the psychological barrier of the M25, the capital’s orbital motorway.

They then meet the un-paid trustees, who typically are not finance experts, but who are trying to do their best for the assets they are responsible for.

A flavour of how such a meeting might progress is provided by the minutes of one provincial fund. I won’t name the fund, so I will spare their blushes; but this is verbatim from the document and shows the level of debate that can take place round the trustee table:“A Board Member raised a query relating to stationery and business cards for the use of Board members. It was noted that business cards had been previously discussed and were not considered to be necessary or cost effective and any letters would be sent out on the Council’s letterhead in the Chairman’s name.

“The Board agreed to discuss the issue at their next pre-meeting and would raise with officers should it be necessary.”

“Business cards had been previously discussed and were not considered to be necessary”

So this is a repeat item on the panel that is responsible for billions in assets and the retirement well-being of thousands of people. And what’s a pre-meeting? This is clearly some sort of running battle amongst the trustees and it shows the pettiness that can occur sometimes.

There’s a business etiquette problem here, for starters. When the fund manager and institutional marketing person get out of their gold-plated helicopter and proffer their business cards, the trustee can’t reciprocate. One down, before the meeting has even started.

It’s a sad indictment of the decision-making structure and culture that underpins – in part – the entire financial system. How are we going to ‘shift the trillions’ without the right headed paper?
More seriously, how will this structure be able to formulate mandates that will make asset managers sit up and have their “Eureka” moment?

Policy makers keen to green the system often point to the role of pension funds in the transition, with their vast pools of capital — oblivious to the reality of how pension funds actually have to operate.
All sides of this debate have to face reality about how the system actually works and acknowledge the weakness of some of the links in the investment chain.