UK – Active ownership strategies not only have the potential to provide superior risk-adjusted returns for pensions and asset owners, but they are also in the interest of investment managers, companies and society at large, the UK Sustainable Investment and Finance Association (UKSIF) has said.
Welcoming today's inaugural UK Ownership Day, UKSIF chairman and executive director at the Pension Protection Fund (PPF) Martin Clarke told IPE that responsible investment had been "in the spotlight" since the onset of the global financial crisis.
"There has been criticism directed at asset owners and their agents in financial markets, accusing them of being asleep at the wheel before and during the crisis," he said. "Equity owners in particular are positioned at the most vulnerable part of the corporate balance sheet."
Through Ownership Day, UKSIF hopes to publicise the benefits of active asset ownership as widely as possible.
It said it aimed to encourage the use of shareholder rights, such as the right to vote at a company's annual general meeting, to improve the long-term value of companies.
Ownership Day not only addresses those that participate as institutions in this space but aims to reach out to the ultimate beneficiaries, whether retail investors or pension fund members.
Clarke said: "We would like the asset owners to ask whether their investment managers practice active ownership, whether they vote on company resolutions and whether they engage with companies about their long-term business strategies and environmental, social and governance (ESG) risks.
"All too often, the emphasis in the debate seems to be on the justifications for undertaking active ownership as if the default option is not to do any voting or engagement on important issues.
"As part-owners of the business, we have a say in running that business, and this can be an important way of leveraging influence to improve the business going forward as well as part of an asset owner's risk-mitigation strategy.
"So, why not do it? Why do we choose to ignore this particular approach?"
One of PPF's criteria for the appointment of an external manager is its ability to manage ESG risk. The lifeboat fund has assessed every single manager of the nearly 30 it has hired.
Collaboration with other similarly minded investors was another way to address ownership issues, particularly for smaller and passive investors that cannot themselves build the infrastructure necessary for engagement, or hire an agent.
"In my opinion, arguments about lack of scale need not be the excuse for not achieving a good outcome for your beneficiaries," said Clarke.
Meanwhile, new research from YouGov released to mark Ownership Day found that 47% of British people with savings or investments managed by a third party wanted their investment managers to be more transparent about how votes were cast on their behalf.
One in three, 33%, wanted their investment manager to provide more access to voting information, whereas 14% wanted their investment manager to pro-actively inform them of how votes are cast on their behalf.
The YouGov survey also found strong public opinion that the most important three issues for shareholders to raise with UK companies at their AGMs this year were ensuring that executive pay, including bonuses, was not excessive (54%); that companies pay their fair share of UK tax (48%); and that companies' supply chains did not contain human rights abuses that could damage the reputation of the company (35%).
Penny Shepherd, chief executive at UKSIF and coordinator of Ownership Day, said the research suggested the issue of tax avoidance was now, alongside executive pay and human rights concerns, "one of the top three" issues the public wanted to see addressed this AGM season.
"It is clear many want to see a continuation of last year's Shareholder Spring, with investment managers being active owners on these issues, not absentee landlords."
She said active ownership was "ultimately about creating financial value" by providing investors with "superior" returns over the long term.
The full interview with Martin Clarke can be found in IPE's April issue.