Twelve UK pension funds have signed up to the UK’s new Stewardship Code, a set of seven voluntary principles which aim to formalise investor responsibility.
The asset owner signatories are: British Airways Pensions, Environment Agency Active Pension Fund, Equitable Life, Lothian Pension Fund, Merseyside Pension Fund, Northern Ireland Local Government Officers’ Superannuation Committee, Pension Protection Fund, Railpen, The BBC Pension Trust, the BT Pension Scheme, USS and the West Midlands Pension Fund.
Out of the 68 institutions which have signed up, 48 are asset managers and eight are service providers. Mercer is the only investment consultant that has signed up. For full list of singatories, please go to the FRC’s dedicated web page)
There are letters of support from international investors such as CalPERS and the Australian Council of Super Investors. But investors such as Dutch giants ABP and PGGM and the Norwegian Government Pension Fund are, initially, absent.
“A critical mass of investors is coming through and this is a very important first step”, said Baroness Hogg, the chairman of the Financial Reporting Council which oversees the Code.
However, she wanted to see the numbers increase and “a better integration of governance and investment processes”.
Business Secretary Vince Cable added: “I would encourage more investors to pledge their support and adhere to these best practice principles.”
The FRC has disclosed which institutions have supported the code to enable the market to judge the level of commitment and to provide a “basis for discussion”.Penny Shepherd, chief executive of UKSIF, UK Sustainable Investment and Finance, said she was “quite surprised by the lack of asset owners signed up to this very important initiative”.
“We need every part of the chain to be sending signals. I would urge consultants and others to sign up to send signals to their asset owners.”
The asset manager signatories include a fair slice of the biggest names in the industry. The service providers represented are the ABI’s Institutional Voting Information Service (IVIS), European Corporate Governance Service, Governance for Owners, Hermes Equity Ownership Services and proxy voting agencies ISS Governance Services, Manifest Information Services and PIRC. Mercer is the only investment consultant to sign up so far.
Will Oulton, Mercer’s head of Responsible Investment in Europe, said The Code is “one of the issues clients are currently asking about”. “For our RI clients it is currently the most asked for issue amongst not only UK but some European clients.”
“The code is an example which we hope will inspire imitation in other markets,” said Anne Simpson, CalPERS’ Senior Portfolio Manager for Corporate Governance.
The FRC itself is currently facing a substantial review as part of the government’s plans to reform “quangos” – non-departmental government bodies. A separate issue is the potential incorporation of the UK Listing Authority – the arm of the Financial Services Authority which deals with stock exchange listings – into the FRC, which has been widely opposed. But organisations such as PIRC say they would welcome the move. A consultation on this closed yesterday.