UK Pensions Minister Guy Opperman has backed a campaign by pension trustee body the AMNT calling for greater transparency in the way asset managers vote on ESG issues like climate change, gender and ethnic diversity.
The AMNT, the Association of Member Nominated Trustees, has made a formal complaint to the Financial Conduct Authority (FCA) regulator on the issue and has released a detailed review into the voting policies and practices of fund managers across the UK, Europe and the US.
The AMNT, which focuses on how fund managers vote at pooled funds (which represent almost half the assets under management in the UK), found that only a few fund managers had what it described as ‘best practice’ public voting policies and guidelines on the topics.
The move has Opperman’s support. In a statement released by the AMNT, he said: “It’s utterly unacceptable that most pension fund managers don’t have published policies and practices to combat climate change, and public commitments to tackle excessive pay and promote gender and ethnic diversity are all too rare.
“Being vague or secretive with the trustees and savers they represent is out of order. These obstructive fund managers need to take action now as effective and responsible shareholders.”
The research was prompted by what the AMNT sees as “the continued unwillingness” of fund managers to accept client-directed voting in pooled funds, especially the AMNT’s Red Line Voting policies launched at the end of 2015.
The AMNT says insufficient transparency “hinders consumer choice” – a nod to the FCA’s remit to protect consumers.
AMNT Campaign Manager Leanne Clements, the former Responsible Investment Manager at the Pension Protection Fund and other UK pension funds, said the AMNT first met with the FCA a year ago and has a further meeting scheduled with it in about six weeks’ time to discuss the report.Clements added the AMNT would now look to liaise with the Pensions and Lifetime Savings Association (PLSA) and the Investment Association, the main pensions and fund management bodies, on the issue.
A key issue for the AMNT is that asset owner clients of fund managers can’t hold fund managers to account about how they vote ahead of time and that managers’ voting policies are typically not public.
It wrote to 42 managers – 10 of which failed to respond. Of those that did, many referred to “operational complexities” (i.e. where overriding a vote is done manually) or legal considerations around who owns the voting rights in a pooled fund. Client demand was also an issue.
“These obstructive fund managers need to take action now as effective and responsible shareholders” – Guy Opperman
The AMNT said several fund managers “simply refused to accept client instructions” on Red Line voting “as a matter of principle”, adding that it finds it “astonishing” that parts of the voting process are still manual – indicating a lack of investment in the voting system. The AMNT told the FCA that the “market failure” may mean fund managers will be preventing pension schemes from complying with new regulations around stewardship.
On climate change, for example, of those that publicly disclosed a voting policy (38), over half the fund managers did not have a climate change-related voting policy or guideline.
AMNT’s sponsors include Dimensional Fund Advisors, the $576bn firm where Nobel laureates Eugene Fama and Myron Scholes have board positions.