Railpen, the £35bn (€41bn) investment manager for the UK’s railways pensions schemes, has identified one-share, one-vote arrangements as one of its engagement and voting priorities for 2022.
Announcing its 2022 voting policy this week, the pension investor said next year it would “collaborate with others to intensify its voting and engagement activity with public and private companies, as well as other participants in the pre-IPO market, to encourage the shift to a one-share, one-vote arrangement”.
Caroline Escott, senior investment manager at Railpen, told IPE the engagement with pre-IPO companies and IPO advisers would be to emphasise institutional investors’ long-term outlook and the importance of equal voting rights to capital allocators.
In e-mailed comments, she said Railpen had undertaken extensive research on dual-class share structures and had identified misperceptions from company founders around institutional investors’ motivation and approach as a key barrier to equal voting rights.
Railpen also saw other impediments in policymakers and regulators who are keen to encourage as many IPOs as possible in their jurisdictions, in spite of the cost to long-term investors and their beneficiaries; and a lack of buy-in and consideration by IPO advisers of what investors consider to be good governance practices.
In the UK, the regulator’s listing rules have recently been changed to allow companies with dual class share structures to join the premium segment of the London Stock Exchange, subject to certain conditions.
“As we laid out in our consultation response it’s unfortunate that, despite including some welcome corporate governance safeguards, the UK has taken steps to limit the ability for investors to hold UK companies to account at the same time it is asking investors to step up on stewardship.”
However, she said that the problem was global, like Railpen’s investment mandate, so the investor was looking beyond the UK for its campaign to encourage the shift to one-share, one-vote arrangements.
In addition to engagement with pre-IPO companies and advisers, Railpen is also planning to continue with its efforts to influence policy. At a later stage, Escott said, the investor will also be looking to engage with some post-IPO companies and other market participants who can influence company founders.
Companies’ approach to employee engagement and their decarbonisation efforts are also areas of focus for Railpen.
On the former, in its voting policy it said it would consider supporting the appointment of workforce directors on the boards of portfolio companies. It said it would next year work with others to outline investor expectations of what would constitute a meaningful approach to workforce directors in the US and the UK.
On the topic of climate change, the voting policy this year outlines Railpen’s approach to routine voting on climate issues as well as ‘Say on Climate’ resolutions.
“We will assess a portfolio company’s climate risk and net zero alignment status and will not be afraid to use our vote to express support or sanction for a company’s approach and activities,” said Michael Marshall, head of sustainable ownership.
Railpen is aiming to reduce financed emissions to net zero by 2050, using the Net Zero Investment Framework developed under the auspices of the Institutional Investors Group for Climate Change as a blueprint.