A UK government-led asset management group has identified setting up a dedicated council of pension schemes as one of 20 moves to boost stewardship and responsible investment in the UK.
The Asset Management Taskforce also said UK pension schemes should be required to explain how their stewardship policies and activities are in the members’ best interests.
Another proposal was that bondholders should make full use of the rights available to them to live up to their stewardship responsibilities, and that more emphasis be placed on stewardship in private markets.
The Asset Management Taskforce was established in 2017 to encourage greater dialogue between the government, the asset management industry, and the Financial Conduct Authority.
Last year, John Glen, economic secretary to the Treasury and chair of the Taskforce, asked it to establish stewardship and stakeholder working groups to make proposals for how stewardship and responsible investment could be strengthened in the UK. Today’s report sets out those proposals.
“The UK’s stewardship standards are internationally respected and contribute to our standing as a leading global asset management centre,” said Glen.
“These recommendations will encourage more effective stewardship right across the investment chain and help the asset management sector continue to support sustainable activity as we build back better and greener.”
The taskforce set out 20 proposals in total, grouping them in three categories: stewardship behaviours, stewardship for clients and savers, and an economy-wide approach to stewardship.
The recommendation for a council of UK pension schemes, both public and private, is part of the second category.
According to the taskforce, the council would be jointly established by government ministries by June 2021 with a view “to promote and facilitate high standards of stewardship of pension assets”.
All UK occupational pension schemes would be encouraged to join, in particular larger schemes, and members of the council should either be signatories of the UK Stewardship Code or have publicly committed to signing it within two years of joining the council.
The Investment Association (IA), which is supporting the Taskforce, and the Pensions and Lifetime Savings Association (PLSA) have already committed to establish a new working group exploring how to embed a focus on stewardship in the relationship between asset owners and investment managers.
Commenting on today’s report, Richard Butcher, chair of the PLSA, said the PLSA wanted to help schemes demonstrate how they were meeting their responsibilities and exercising their rights as shareholders and creditors.
“The vast majority of pension schemes take very seriously their duty to act as responsible stewards of the £2.2trn of retirement savings they manage on behalf of their members,” he said.
“We look forward to working with the Treasury, the IA and other stakeholders to push forward these recommendations as well as representing pension schemes on the proposed asset owner council to promote and facilitate good stewardship by all asset owners.”
Elsewhere in the report the Taskforce suggests there should be “a body of senior market participants from across the asset owner and investment manager community who can be used as a sounding board for the strategic direction of stewardship”.
“We recommend that the Asset Management Taskforce and other multi-stakeholder groups be used to fill this role,” it said.
It said this body would be in addition to the regulatory group in charge of the UK corporate governance and stewardship codes – the Financial Reporting Council is transitioning to the Audit, Reporting and Governance Authority, to be put on statutory footing.
Other recommendations made by the Asset Management Taskforce include strengthening escalation of stewardship, widening adoption of the new UK Stewardship Code beyond investment managers to all buy-side service providers, and improving companies’ reporting and disclosures.
Keith Skeoch, chair of the Taskforce’s stewardship working group and chair of the IA, said: “We need to seize this moment to ensure stewardship is further embedded at the heart of the investment process, so that we can create long-term sustainable value that benefits businesses, communities and the environment.”
Catherine Howarth, chair of the stakeholder working group and chief executive officer of ShareAction, said: “Wise and determined stewardship by institutional investors will help the UK to recover at pace from the current crisis. It will also strengthen the UK’s ability to handle future threats to our prosperity, such as climate change and biodiversity loss.
“We hope to see swift adoption of the 20 recommendations in this report, thereby cementing the UK’s existing strong reputation for stewardship of assets.”
The full recommendations report can be found here.