The UK pensions minister and a group of pension providers have each written to 44 asset managers to set out their expectations for asset owners to have more say when it comes to voting at company meetings.
In the letter, members – not all – of the Occupational Pensions Scheme Stewardship Council (OPSC) said they expected asset managers “work to ensure better and more open, honest communication with clients about voting”.
They said this may include taking into account clients’ voting policies and flagging areas of misalignment in a timely manner.
“Given the direction of travel, it also means being open to, and facilitating, voting on specific pre-agreed resolutions according to the client’s expressed view,” they added.
The pension funds have asked asset managers to respond to questions such as whether they will enable clients to share a voting policy, whether they will facilitate client-led voting in pooled funds, and whether they will allow clients to override any specific votes.
“Voting and engagement are key enablers for pension funds to influence companies, in which they invest, to do the right thing and drive better outcomes for society, the planet and pension savers,” said Ruston Smith, chair of the Tesco Pension Fund.
“Through the Occupational Pension Scheme Council, pension schemes are coming together to ask asset managers to continue to work even more closely with us by sharing information on voting and encouraging dialogue to create positive change.”
In his letter, pensions minister Guy Opperman said he wanted to hear from asset managers about their plans to bring forward products that do not require trustees to switch to a segregated mandate in order to express a wish on voting.
He also requested them to report back on a recommendation that asset managers and their trade bodies sign up to the principle of answering all reasonable requests on their voting and stewardship activity, and that they ensure links to all current voting policies are contained within their stewardship reports to clients.
Pressure on asset managers over voting, including the issue of client-directed voting in pooled funds, has been mounting.
The letters to asset managers follow the issuance of recommendations by a government-convened Taskforce on Pension Scheme Voting Implementation, which called on asset managers to offer pooled fund investors the opportunity to set an expression of wish regarding voting on the assets in which they invest.
The task force was set up following campaigning by the Association of Member-Nominated Trustees in the wake of it launching its ‘Red Lines’ in 2016, a a voting initiative intended to empower trustees invested in pooled funds to send a strong signal to investee companies on environmental, social and corporate governance (ESG) issues.
“Pension funds should not need to change how they hold their assets to gain a voice”
Diandra Soobiah, head of responsible investment at NEST
The focus on the direction of voting policy in the context of pooled funds has registered some success. Earlier this year BlackRock announced arrangements to allow clients to vote directly in pooled funds, and before that earlier this year DWS and the Asset Management Exchange announced a service that allows pension schemes to express their stewardship preferences in pooled funds.
“I firmly believe the days of trustees leaving everything to asset managers without scrutiny must come to an end,” said the pensions minister.
“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.”
Auto-enrolment master trust NEST was one of the signatories of the pension funds’ letter to asset managers.
“Whilst many of NEST’s investments are in segregated accounts which allow us to set a voting policy and engage with our managers about voting decisions, we believe these options should be available to all,” said Diandra Soobiah, head of responsible investment.
“Pension funds should not need to change how they hold their assets to gain a voice.”
The members of the OPSC that have written to the asset managers are: Brunel Pension Partnership, BAE Systems Pension Schemes, BT Pension Scheme, Creative Pension Trust, Crystal, Cushon Master Trust, HSBC Bank Pension Trust (UK) Limited, London Pension Funds Authority, Lothian Pension Fund, NatWest Group Retirement Savings Plan, NEST, NILGOSC, Pension Protection Fund, Scottish Widows, Smart Pension, Tesco plc Pension Scheme, and The Co-operative Pension Scheme (PACE).
They have asked for responses to their questions by 24 January.