UK told to create pensions group on stewardship as Asset Management Taskforce says bonds are next frontier for engagement

The UK Government is mulling the creation of a stewardship-focused Council of UK Pension Schemes on the back of recommendations by its Asset Management Taskforce, released today. 

The 20 recommendations, all centred on improving stewardship in the UK, also include making it easier to table shareholder resolutions, and widening the focus of stewardship from listed equities to other asset classes like bonds. 

The Asset Management Taskforce, set up in 2017 to foster better relations between the UK Government and the investment industry, is chaired by Treasury Secretary John Glen. As well as the Financial Conduct Authority and the Investment Association, the group includes senior executives from BlackRock, Standard Aberdeen, State Street, Standard Life Aberdeen and JP Morgan. NEST is the only asset owner represented.

Last year, the Taskforce set up a Stewardship Working Group – chaired by Keith Skeoch, CEO of Standard Life Aberdeen – and a Stakeholder Working Group – chaired by Catherine Howarth, CEO of ShareAction – to help strengthen stewardship and responsible investment in the UK; and today it made its recommendations in Investing with Purpose: placing stewardship at the heart of sustainable growth.

It calls for wider adoption of the UK Stewardship Code beyond asset managers and asset owners to investment consultants, proxy advisors, index providers, credit rating agencies and data providers.

"Given that just over 30% of assets under management are placed in bonds, the investment industry will ramp-up its work with companies and further develop stewardship practices in this asset class"

The UK is famously the first country to introduce a Stewardship Code in 2010, a model that has been followed globally. But, currently, less than 15 firms that aren’t asset managers or owners are signatories, including EIRIS, Glass Lewis, Hermes EOS, ISS, Minerva, Mercer, PIRC and Willis Towers Watson. 

The Taskforce also recommends that stewardship is better integrated into pension assets, which represent 40% of the assets under management in the UK, asking the government to establish A Council of UK Pension Schemes next year to support such efforts. It calls on UK pensions schemes to be required to explain how their stewardship activities are in the best interest of scheme members. 

The Taskforce says the UK government should review current rules governing shareholders’ ability to table their own resolutions at AGMs, such as examining whether the requirement for 100 shareholders who hold on average £100 of paid up capital, or the 5% threshold places an excessive barrier.

Mirroring global developing on responsible investment, the Taskforce says stewardship must have a broader focus than just listed equities, capturing private markets and fixed income too. 

“Given that just over 30% of assets under management are placed in bonds, the investment industry will ramp-up its work with companies and further develop stewardship practices in this asset class,” members said. 

Last week, the PRI hinted at a similar move, encouraging bondholder signatories to support engagement efforts by Climate Action 100+.

The Taskforce also called for more harmonised corporate reporting standards for sustainability, saying regulators should promote the voluntary adoption of TCFD, SASB and GRI until an international reporting standard is developed. 

John Glen MP, Economic Secretary to the Treasury, said: “The UK’s stewardship standards are internationally respected and contribute to our standing as a leading global asset management centre. These recommendations will encourage more effective stewardship right across the investment chain and help the asset management sector continue to support sustainable activity as we build back better and greener.”