The UK’s Financial Conduct Authority has launched a consultation on how asset managers should report their voting decisions at company annual general meetings (AGMs).
An advisory group set up by the regulator in November is calling for feedback on its proposals, published yesterday. The 31-strong body includes representatives from BlackRock, Legal & General Investment Management (LGIM), Railpen, Scottish Widows, State Street and the Principles for Responsible Investment.
The FCA’s director of ESG and former head of stewardship at LGIM, Sacha Sadan, said in an introduction to the new discussion paper that there was a lack of comparability and clarity in the way asset managers disclose their voting decisions.
This “can mean that asset owners do not have a clear picture of how asset managers are exercising the critical right to vote on their behalf,” he added, arguing that a voluntary, standardised template would address this issue.
The proposals suggest that managers should submit basic information about meetings at which they voted, as well as some further details about the topic, but that a balance must be struck between asset owners’ desire for granular information and the reporting burden on managers.
The report said that “asset owners were not currently receiving sufficient information regarding the reason that asset managers had cast votes a particular way”.
This is especially pertinent as investors begin to escalate their engagement activities at companies where they’re concerned about progress on sustainability issues – often by voting against board members or pay packages.
A number of big companies, including Shell and BP, saw lower levels of support for some executives at this year’s AGMs, in a show of dissent over their climate strategies. While some investors were public about this motivation, others weren’t – making it difficult to analyse the results or compare decisions.
The FCA’s advisors recommend “free-form narrative rationales”, meaning that asset managers will be obliged to provide a “bespoke explanation” for their voting decisions instead of being given a prescriptive template.
Voting rationales would be required for all shareholder resolutions, and all environmental and social proposals put forward by the company itself. It would also apply in instances in which a manager rejects or abstains from non-sustainability proposals from the company; and to any votes relating to changes in company strategy, M&A or other special business.
Asset owners are keen to see this information disclosed on a public registry, so they can compare managers more easily.
The consultation is open until 21 September.