The Investor Coalition for Equal Votes (ICEV), a group of UK and US pension funds engaging firms on investor voting rights, has added its first asset manager member as it considers escalating engagement with IPO advisers.
Caroline Escott, senior investment manager for active ownership at Railpen, which chairs the ICEV, told Responsible Investor that the group has recently signed its first manager, a global firm she declined to name.
She added that it is in “advanced” talks with other managers about signing up.
The coalition was established last year by Railpen in partnership with a US-based asset owner association, the Council of Institutional Investors. It aims to engage with pre-IPO companies, policymakers and IPO advisers including lawyers and investment banks on preventing the introduction of dual-class share structures.
Escott said that managers have an interest in the topic and will add valuable expertise and relationships to the coalition. But she said the initiative would remain asset owner-led, due to the “very privileged role that we hold at a particular end of the investment chain” and the ability to be more nimble in taking action.
In Railpen’s stewardship report, the fund noted that some progress has been made, with a positive response from the investment community and some advisers. One firm it has engaged with also committed to list with a single-class share structure.
However, Railpen said it was “disappointed” that only one firm had committed to do so and that there had been a lack of response to some meeting requests.
“We’ve made some good progress and a good start,” Escott said. “We were always aware that – given the nature of the entrenched interests and the number of actors that are involved in this across the financial markets piece – it was going to be a multi-year, multi-phase piece of work.”
“We are speaking to the adviser community and we’ve actually had some good interactions with them and we know that they are talking to their IPO clients about the Investor Coalition, which is very positive.”
However, she noted that the coalition still had a lot of hard work ahead of it.
“We also know that it’s a really tricky time for IPOs at the moment, and a lot of the pre-IPO companies are watching and waiting and have become a little bit more insular in the interim.”
As an escalation, the coalition is considering writing public letters to those firms it has yet to meet with, and is also looking to target more investment banks in its engagement.
The group has been targeting both exchanges and index providers, and wrote a letter to S&P Dow Jones Indices after it allowed firms with multiple-class share structures into the S&P Composite 1500 in April this year. Escott said that index providers represented a growing and more important target for the coalition this year.
Turning to public markets, the coalition is looking at public companies with established dual-class share structures, but Escott said there were no fruitful targets for the time being.
“We’re speaking to companies at a stage in the lifecycle where they are still open to being influenced, where the die has not yet been cast,” she said. “This is a multi-year program of work and we are focused group. We need to try to prioritise our efforts for the time being on where we think it can be most impactful.”
However, members continue to engage companies with existing multiple-class share structures including Meta and Alphabet. Railpen for instance pre-declared its opposition to two directors at Alphabet this year over failure to engage on governance issues including its share structure.
The coalition has grown significantly since its inception last year, when it launched with around $1 trillion in assets. The group now has around $2 trillion represented. Nest and Railpen are its only UK members, while in the US it counts both New York City and State pension funds and funds from Minnesota, Ohio, Washington and Los Angeles among its membership, as well as Wespath.
Perhaps the most unusual member, however, is Florida’s State Board of Administration, which was restricted from considering “the ideological agenda of the ESG movement” in its investment decisions by governor Ron DeSantis last year.
Asked about the difficulty of engaging on ESG issues in the US, Escott said that investor voting rights are “one of those issues where it feels everyone can agree from the investor side of things”.
“It’s a really fundamental governance issue that underlies investors’ ability to be heard on every ESG or business strategy issue out there.”
“The debate is at a critical juncture,” she added. “We hope that now the era of easy money is over, companies will be willing to signal an openness to working in partnership with their investors through a one share one vote arrangement. We recognise that, at the same time the market is moving, policymakers are moving as well and I hope that the investor community will speak in in defense of robust investor protections and high standards.”