The European Commission, the executive arm of the European Union, has criticised big European pension funds’ low level of membership of the United Nations Principles for Responsible Investment.
The Commission has pointed out that “only very few” of the biggest pension funds and asset management companies are signatories to the UNPRI – “membership of which implies some level of engagement”.
It says just 28 of the 100 biggest European pension funds (including Switzerland and Norway) are signatories. Sweden has six signatories, Denmark five, the Netherlands and the UK four each, Finland three while Ireland, Belgium and France each just have one.
The comments come in a working document supporting the Commission’s proposals on corporate governance that were released last week. There are a range of proposals up for consultation, such as mandatory disclosure of voting and adherence to codes of practice.
The Commission says incentive arrangementsbetween funds and asset managers are often short-term, creating a “mismatch” of interests.
Going forward, it has suggested that confusion among shareholders about EU and national rules on ‘acting in concert’, seen as preventing collaborative investor engagement, could be tackled with revisions to legislation.
It said: “The matter could be considered in the context of the ongoing review of the Transparency Directive and the report on the Takeover Bids Directive due in 2010, including the interrelationship between the Takeover Bids Directive and the Acquisitions Directive.”
The EU cited research suggesting that even fund managers with a responsible investment approach seem to value the time they spend with company directors for the investment information they get, rather than promoting better corporate governance.
It said: “The financial crisis has shown that shareholders have not been vocal on a number of key issues, such as remuneration policy, strategy and risk appetite.” Link to EU working document