Pension funds in the UK are becoming increasingly active in factoring in stewardship when they select investment managers or consultants, according to the National Association of Pension Funds (NAPF).
In a recent survey, the association also found that 94% of pension funds did recognise they had stewardship responsibilities.
Will Pomroy, the NAPF’s corporate governance policy lead, said: “A decade on from our first engagement survey, there is now clear recognition environmental, social and governance risks can have a material impact on pension fund investments.”
These matters have to be managed through ongoing engagement with companies and the exercising of voting rights, he said.
He added that recognition by the funds had been translated into the selection of asset managers.
Back in 2004, when the association carried out the first engagement survey, the NAPF said just one-third of responding schemes considered stewardship activity when selecting investment managers or consultants.
That proportion has now grown to 80%.
“From one-third to 80% considering the stewardship approaches of asset managers in a decade is a real step-change, with significant implications,” said Pomroy.
When asked how they screened asset managers, 60% of pension funds said they actively questioned prospective managers about their stewardship approach, according to the poll.
The survey also showed that, once they had selected their managers, pension funds were increasingly vigilant of their managers’ stewardship activities.
The survey also showed they were spending more time reviewing reporting, giving more attention to the votes cast and asking more questions more regularly.
However, there were also signs more could be done, the NAPF said, as only 53% of pension fund respondents said they felt institutional investors played an active-enough role as stewards of investee companies over the past year.
Apart from this, only 55% said they believed engagement with investee companies had added value to their fund, or prevented loss of value.
The survey took in responses from 50 pension funds among the NAPF’s membership, with combined assets under management of £419bn (€530bn).