The UK’s Taskforce on Pension Scheme Voting Implementation (TPSVI) has set out new recommendations that would see the role of trustees strengthened with regards to voting policies.
The taskforce said its three recommendations “look to align greater stewardship and voting policies and help set a path towards more transparency, and investment in line with savers’ interests”.
Chaired by Simon Howard, the former chief executive officer of the UK Sustainable Investment and Finance Association, the TPSVI was set up in December 2020 by Minister for Pensions Guy Opperman to assist with voting system issues.
It will also encourage asset managers to engage with their clients’ preferences about where their money goes.
Currently, the taskforce said, when pension schemes invest in pooled funds, they surrender their rights to vote at the annual general meetings (AGM) of the companies they invest in.
And until now, the vast majority of asset managers, who are in charge of these pooled funds, have not always been prepared to engage with their clients’ voting preferences, it added.
These votes could be on issues such as climate risk management, diversity, or pay.
The three main recommendations put forward by the taskforce are:
- pension scheme trustees should either set a voting policy of their own, or explicitly accept responsibility for those policies exercised on their behalf by their asset managers;
- all asset managers are to offer asset owners the opportunity to set an “expression of wish” as to how votes are exercised on their behalf, regardless of how they invest; and
- the Financial Conduct Authority (FCA) should:
- clarify – for example, via guidance –that there is no breach of fund rules in acting on an expression of wish;
- set expectations of asset managers for better disclosure of voting policies, more granular and comparable reporting of how votes are cast, and more comprehensive explanations for those votes.
“Our recommendations will give asset owners – such as pension schemes – a louder say in voting in pensions,” Howard said.
“There are two principal goals. First; by boosting the owner’s voice and influence over their agents we can ensure that the whole system works to better guide investee companies.
“Second, we will let the people paying into pensions know that their views are being considered, boosting the support pensions saving will receive. Both are necessary for better pension outcomes,” he added.
In a statement, Opperman said: “I see no reason why trustees shouldn’t be able to determine their own high-level policies – on areas such as climate risk management, diversity, or pay – and find an asset manager to implement it.”
He said he would study the taskforce findings closely and respond at the earliest possible opportunity.
The full TPSVI rereport can be found here.