Pension investors must address the “unsustainable” voting record of their pooled holdings by drafting clear voting instructions for asset managers, according to a UK trustee body.
The Association of Member Nominated Trustees estimated that around £2.5trn (€3.4trn) of assets managed in the UK were held within pooled funds.
Its founding co-chair Janice Turner argued that such structures left investors “unable to set the agenda”.
“This is unsustainable and an issue that has to be addressed in the interest of investors, pension savers and anyone for that matter with investments in pooled funds,” she said.
To allow pension investors to pursue an active voting policy, the AMNT said it drafted a series of voting instructions to be passed on to asset managers.
The voting instructions, or “red lines”, were drafted in the wake of the UK Law Commission’s report on fiduciary duties, which set out that trustees should take into account environmental and social matters where these had a financially material impact.
Covering environmental, social and corporate governance matters, the instructions call for companies to establish environmental sustainability committees, disclose carbon emission reductions targets and boost workforce diversity.
They would also see investors vote against any remuneration package where any director is paid more than 100 times the company’s average pay.
Bill Tryhall, an AMNT committee member, said the organisation supported the challenges the UK government set for companies in improving board diversity and acknowledged “widespread” concerns about the level of executive pay.
Noting the multiple of 100 chosen to trigger a vote, Tryhall added: “We recognise that many will say this is too high, but the aim of AMNT is to achieve the greatest consensus.”
Despite the broad focus on governance and social concerns, AMNT said it recognised climate change was the “biggest issue” facing asset owners.
The report was launched as asset owners, including France’s ERAPF and Norway’s KLP, urged companies to commit to using only renewable energy.
The consortium of 20 investors worth £352bn, which also included the UK’s Strathclyde Pension Fund, said companies should pledge publicly to switch to renewables, a pledge already backed by Google and BMW Group.
Philippe Desfossés, chief executive of ERAFP, said he was “very pleased” to be supporting the RE100 initiative, launched by responsible investment charity ShareAction.
He added: “The promotion of energy is critical to the decarbonisation of the global economy.”
Desfossés has repeatedly stressed the importance of energy efficiency as key to reducing carbon output, citing better energy grid connectivity as an area worth exploring.