Watchdog should push pension funds toward Stewardship Code – UKSIF
EUROPE - UKSIF has urged the UK Pensions Regulator to encourage pension funds to sign the Stewardship Code, saying that too few asset owners had taken note of its principles.
Speaking in response to the Financial Reporting Council's consultation on changes to the code, the UK sustainable investment group said it welcomed moves to reinforce its principles without making "fundamental" changes at a time when it still needed to settle down.
Chief executive Penny Shepherd said the code needed to go further to encourage asset owners to demand responsible investment from providers.
"The Stewardship Code can only do so much, and it is therefore vital that the Pensions Regulator become involved in supporting pension funds to pursue the high-quality stewardship that is essential for long-term protection of beneficiaries' assets," she said.
The group's consultation added that it was pleased to see the changes reflected the fact that interest in adopting the Stewardship Code had been weaker than expected.
"The Code's success will depend on genuine demand from pension funds and other asset owners, which create commercial drivers for high-quality implementation," the submission said.
"It has been a recurring theme amongst the feedback from our asset manager members that it is easier to justify effective implementation of the Stewardship Code if there is a commercial incentive to do so from their asset owner clients."
UKSIF also welcomed the replacement of the term 'institutional investor' within the code, instead replacing it with the more specific 'asset manager' and 'asset owner'.
In its own submission, the Investment Management Association (IMA) said some of its members had raised concerns about the code's application overseas.
In its submission, the group said it would be "impractical" for each country to expect its guidelines be applied to domestic and overseas holdings.
"It would be confusing and onerous if each code had its own disclosure and reporting requirements," it said.
"There are also concerns that the different regulatory and legal frameworks internationally may impact engagement and the information investors are permitted to disclose."
The IMA added that while these concerns were not shared across its entire membership, others would nonetheless like to see "mutual recognition" of the differing codes drawn up by countries.