A group of 11 UK pension funds with combined assets of £180bn (€210.1bn) have written to the Financial Reporting Council expressing their support for the new Stewardship Code.
They have welcomed the FRC’s initiative and the Code’s potential to enhance the quality of engagement between institutional investors and companies.
They welcomed the intention to keep the Code under review and address issues such as stock-lending and pooled accounts.
The funds said they hoped the “next stage of development” should cover other asset classes beyond public equities and address the absence of an independent monitoring mechanism to assess investors’ adherence to the principles.
The pension funds include: RAILPEN Investments, Universities Superannuation Scheme, BT Pension Scheme Management, BBC Pension Fund, Environment Agency Pension Fund, Lothian Pension Fund, Local Authority Pension Fund Forum, Merseyside Pension Fund, Northern Ireland Local Government Officers’ Superannuation Committee, Strathclyde Pension Fund and the West Midland Pension Fund.
The funds acknowledged their role as asset owners in ensuring their fund managers adhere to the principles of the Code and provide them with therelevant information to assess managers’ commitment to the Code.
“The Code is welcome and has the potential to enhance stewardship through effective engagement but it will only be successful if investors take it seriously and that very much includes asset owners,” said Frank Curtiss, Railpen’s Head of Corporate Governance.
He added that the Code and the proposed Financial Services Authority’s compliance regime would give pension funds a “valuable manager selection and monitoring tool” to help in the quest for long term value. He said: “This is good for our end beneficiaries and our investee companies and I encourage pension funds and other asset owners to rise to the challenge.”
“The onus is now on institutional investors to respond positively and constructively to the Code if we want to avoid any further regulation in this area,” added Daniel Summerfield, Co-Head of Responsible Investment at the Universities Superannuation Scheme.
The Stewardship Code was published in July and aims to enhance the quality of engagement between institutional investors and companies; it’s seen as complementary to the UK Corporate Governance Code and will be applied on a “comply or explain” basis.