NAPF backs UNPRI for UK schemes in new RI guidance

Association also lays down governance recommendations for 2009 voting season.

The UK National Association of Pension Funds (NAPF) has given a boost to the prospective take up of the United Nations Principles for Responsible Investment by UK pension schemes with the launch of a revised guidance paper on responsible investment. In the paper, launched at its annual investor conference in Edinburgh yesterday (March 12), the NAPF, whose members manage about £800bn (€865bn) in assets, gave its first directed support of the PRI by recommending it for schemes that have not yet developed specific responsible investment (RI) policies. In addition, it called for pension fund trustees that have developed an RI policy to incorporate it into their manager selection process and encourage their fund managers to sign up to the PRI and report back on their progress in applying them. The new paper is an update of the NAPF Corporate Social Responsibility guidance, published in 2005, before the PRI formally came into existence. David Paterson, NAPF head of corporate governance, said: “Responsible investing is rightly becoming more fundamental to the investment decisions pension funds are making. Trustees, their managers and the companies in which they invest need to work more closely together to ensure that there is an appropriate focus on longer-term, sustainable returns to shareholders. In this waythey can best serve the interests of members.” Separately, the NAPF called on its 1,200 pension scheme members to tighten their corporate voting policies on issues such as capping base pay for companies executives in line with inflation, linking bonuses to profits and the separation of board chairman and CEO. The recommendations come ahead of this year’s AGM season.
While not actively promoting a voting stance to investors on executive remuneration, the NAPF said its members could be expected to take action on any companies where bonuses are not clearly aligned with profits and said that it didn’t expect bonuses in any company to be greater than in 2007/8. Other recommendations by the pensions lobby group included telling investors to actively consider voting against a company chairman in the event of non-compliance with the UK Combined Code on corporate governance. The NAPF said funds should also look more closely at companies use of auditors for non-audit work and said investors should not generally pay the same company for any further work outside of the audit. It said investors should also challenge unjustified corporate borrowing activities and vote against them should they be deemed to be financially material and without proper limits.
Link to NAPF RI guidance