UK pensions minister Guy Opperman has announced the creation of a taskforce that will develop solutions to support trustee-directed voting in pooled investment funds.
The move could bring an end to a longstanding impasse between UK pension fund trustees and asset managers who have resisted implementing client policies on voting in pooled funds, despite high-profile advocacy and engagement on the topic by UK trustee body, the Association of Member Nominated Trustees (AMNT).
In a speech to AMNT members today at an event celebrating the organisation’s 10th anniversary, Opperman also named Simon Howard, who recently retired as the head of the UK Sustainable Investment Forum, as the chair of the group; and Sarah Wilson, CEO and co-founder of Minerva Analytics as Vice Chair.
According to the minister, the Taskforce on Pension Scheme Voting Implementation (TPSVI) will focus on addressing obstacles faced by trustees when implementing in-house voting policies in pooled investments, increasing the number of asset managers who are willing to engage with client voting preferences, and providing recommendations on regulatory and non-regulatory measures to support trustee-directed voting.
‘I invite you to tell your advisers that you will be switching to asset managers who will honour your voting policy, unless similar flexibility is granted at pace by your current manager’ – UK pensions minister Guy Opperman
It will also develop resources to support pension schemes to devise their own in-house voting policies, in addition to proposing a standardised format for the disclosure of voting activities by asset managers.
The taskforce will include members of the AMNT and will be supported by the government’s Department for Work and Pensions (DWP), but will operate as an independent advisory body.
Opperman said: “When trustees invest, too often they are asked to select funds with often vague or noncommittal voting policies and historic voting records which are inconsistent and sometimes incomplete. I see no reason why trustees shouldn’t be able to devise a high-quality voting policy and find an asset manager willing to implement that policy.
“I accept that the market will provide innovative solutions, but if we are to make it happen, trustees must use their buying power now. I invite you to tell your advisers that you will be switching to asset managers who will honour your voting policy, unless similar flexibility is granted at pace by your current manager.”
The creation of TPSVI follows from AMNT’s recent study on barriers to effective stewardship, which recommended the creation of such a working group to “address the overly complex and archaic voting infrastructure”.
Commenting on the announcement, AMNT Co-Chair Janice Turner said she was “proud” that the organisation’s campaigning had “helped to alert the Minister to the problem”.
“The current situation, where Trustees are disenfranchised as fund managers ignore their wishes and frequently take weak or contrary positions cannot continue. It is not right, it is not fair and it is in conflict with the regulatory requirements placed upon trustees,” she said.
Responding to the announcement, Mike Clark, founder of UK-based ESG consultant Ario Advisory said: “The Minister’s announcement of the taskforce is very welcome. Investment managers have some excellent individuals working on stewardship, but one must ask if their C-suites has starved them of resources to develop what they do. Now these firms, together with the actors across the system, can and will crack this problem, once and for all.”
For pension schemes without an in-house voting policy, the AMNT has developed a standardised set of voting instructions on ESG issues such as executive pay and climate change which trustees can provide to their asset managers under its 2015 Red Line Voting initiative.
But, according to AMNT’s Turner, all major fund managers have so far “flatly refused” to implement the Red Line voting instructions despite most managers having “weak or non-existent” voting policies of their own in areas such as climate change.
AMNT is currently the only UK pensions trade association which represents pension scheme members and their representatives, accounting for pension assets of around £1trn (€1.1trn) or a third of the UK occupational pensions sector.