Pension savers with Legal & General Investment Management have identified remuneration as one of their top priorities when it comes to shareholder voting.
4,400 members of eight LGIM defined contribution schemes were given the chance to cast advisory votes on resolutions filed at portfolio companies as part of a trial with fintech Tumelo. Over the course of the project, which took place from September 2020 to mid-2021, the members cast almost 13,000 between them.
The voting decisions themselves were not made public, so it is unclear whether beneficiaries opted to support or oppose proposals; but those mentioning pay and climate change received the highest engagement.
Other top topics included packaging, pollution and the Paris Agreement.
LGIM and Aviva Investors have both partnered with Tumelo on the project, which seeks to shine a light on end clients’ sustainability preferences.
“This has opened up a new way for individuals to feel truly consulted about the detailed ways their retirement funds will shape corporate activity and society at large”, said Stuart Murphy, co-Head of Defined Contributions at LGIM. “At a time when DC pensions need more voluntary contributions, more understanding and in general more interest from members – we’re excited about the future as we roll this out further”.
A spokesperson for Aviva said that there had so far been some differences in priorities across its different pension schemes, but that environmental issues and topics relating to equality appeared to be "universally important".
"[Pension savers'] opinions are collected through the platform, anonymised, and sent back to the fund manager, which incorporates them into its decision-making framework. The real-world impact is then reported back to members once the AGM has passed," explained the spokesperson.
Beneficiary engagement is becoming a hot topic among fiduciary investors and regulators. In 2018, market participants on the EU’s influential High Level Expert Group on Sustainable Finance recommended that the European Commission amend a number of rules, including MIFID, to take into account client sustainability preferences.
The group said that all participants in the investment chain should “proactively seek to understand the sustainability interests and preferences of their clients, members or beneficiaries”, and updated EU rules to this effect came into force earlier this year.
Research from NGO ShareAction last year shows that while resolutions on diversity and human rights disclosure secured more than 50% of votes on average, this fell to 43% for requests for companies to disclose their pay gaps.
The report advised asset owners to “monitor their asset managers’ proxy voting decisions on ESG resolutions and on ordinary resolutions, at companies that have shown persistent inaction on climate change and social issues such as pay”.
In its 2020 voting and engagement report, Aviva said that it had voted against 43% of pay-related resolutions, including against 62% of resolutions in the US. In 2020, the firm supported Royal Dutch Shell’s pay report for the first time since 2011 after it introduced energy transition targets to remuneration and decreased the cap on long-term incentive payments by a quarter following engagement.
In June, LGIM voted against both the remuneration report and entire remuneration committee at UK publisher Informa after it failed to address shareholder concerns over its remuneration plans.
Social issues were also well represented in the top 10 priorities for Tumelo respondents, with human and animal rights appearing in the third spot, and resolutions which included the words “racial” and “diversity” taking eight and ninth respectively.
Tumelo was founded in 2018 by three Cambridge graduates, and allows pension holders to see the companies held in their portfolio and cast advisory votes on resolutions. Pension fund managers are then able to see how their scheme members have voted, and can take their opinions into consideration when deciding how to vote.
The fintech firm received a £1m investment in July from Jeremy Coller, founder of the FAIRR Initiative, with other investors including the musician Peter Gabriel and Charles Eve, former Head of EMEA Compliance at Goldman Sachs.