The FCA-convened Vote Reporting Group has launched a consultation on a voluntary reporting template for UK asset managers to communicate their voting activity to clients.
The group was set up last year to consider improvements to vote reporting by asset managers operating in the UK. Its members include representatives from industry bodies, pension funds, asset managers and service providers; with UKSIF, BlackRock, LGIM, Railpen and ShareAction among the members. The Financial Conduct Authority (FCA) provides the secretariat, while other regulators and government departments act as observers.
While there are pockets of excellence and many investors do now disclose voting instructions partially or in their entirety, there is still a lack of consistency on what data points are disclosed, and it is often difficult to access.
In the introduction to the consultation, group chair Deborah Gilshan described voting disclosures as “sporadic”. Sacha Sadan, ESG director at the FCA, said in a second introduction that vote reporting was “inconsistent and often inefficient”.
Asset managers reporting against the template would be required to disclose company recommendations and their own voting instructions for each vote. They would also be asked to describe “the reasoning behind a vote decision, adding important context”, whether the decision is in line with their broader voting policy, and whether the decision was linked to engagement with the issuer in question.
Asset managers will only be asked to explain votes against or abstentions on company resolutions, all shareholder resolutions and other major decisions such as M&A and changes of company strategy. This has been proposed with a view of minimising disclosure costs.
The group noted that concerns over legal and compliance sign-off on voting rationales was a “frequent” area of feedback during its internal discussions, and that it had tried to balance this burden with the benefits of disclosure.
The consultation also moots a public registry for vote reporting templates, an initiative strongly supported by asset owner members. While the information could be provided directly to asset owners, having a central registry would aid transparency and efficiency.
However, the group notes that some members had concerns over the compliance costs of public disclosures and publicly revealing their portfolios.
Proxy voting has proven to be an area of significant discontent for UK asset owners. In 2021 the government-established Taskforce on Pension Scheme Voting Implementation slammed asset managers for offering “very poor client service” on voting, and noted “significant problems with some stakeholder attitudes and the asymmetry of power between pension schemes and their agents”.
In May this year, the UK Asset Owner Roundtable announced a review of voting practices by managers at European oil majors over concerns of a “perceived misalignment”, while the Church of England’s Adam Matthews said votes at Shell’s AGM had exposed a gap “between how fund managers interpret the long-term interests of their pension clients”.
The consultation runs until 21 September.