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Think tank to offer trustees new long-term ‘comply or explain’ tools [updated]

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A guide on how to achieve long-term financial returns is to be published this week, including, along with practical guidance, a ‘comply or explain’ procedure for pension fund trustees.

The report, ‘Tomorrow’s Value’, will be launched by UK-based global think tank Tomorrow’s Company and look at providing trustees with appropriate tools for achieving long-term financial returns.

A range of leading figures, in both the pensions and financial worlds, have endorsed the report, including Fiona Reynolds, who leads the UN PRI, and Keith Ambachtsheer from the Centre for Pension Management.

The report is to provide guidance to trustees on how they can practically discuss long-term value investing.

It will also include resources aimed to help them think through how they might take the conversation to the “supply side”.

Tony Manwaring, who heads up Tomorrow’s Company, said the need for the guide was clear given the findings from Professor John Kay’s review into short-termism within equity markets.

“Post-Kay, there has been a lot of focus on how fragmented the system is, the role of intermediaries, lack of transparency and the absence of a line of sight for investors,” he told IPE.

He added that, for too long, there has been a presumption that trustees find long-term investing too complex, and cannot address their role in the system.

“We don’t think this is correct, and the system cannot work without trustees playing the full and proper role,” he said.

Manwaring said a number of trustees recognised some of the strategic decisions made by the board did not originate with the asset owner, as they should, and often in practice came from the supply side.

However, he added that trustees were starting to move away from this, and set mandates looking at more long-term, sustainable investing.

While one aim of the report is to see this trend continue, it will also propose further action by trustee boards.

“We also have a policy proposed in the guide that trustee boards have a ‘comply or explain’ requirement on the mandates they set,” Manwaring said.

“It acknowledges that many trustee boards would like to show consideration to creating value for the long term, but often feel under pressure from suppliers to take a narrower, and short-term, views.

“They are the principals – it is for them to set the mandate and be clear about the basis on which they set that mandate.”

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