A report, authored by Professor Iain Clacher reaches three main conclusions:
First, the barriers presented to split voting in pooled funds are not insurmountable, especially as some fund managers have already been doing this for some clients. Put simply, asset owners’ policies could be implemented by fund managers if there was the will to do so.
Second, whilst a lack of will represents a key driver for inertia in addressing the issue, long-term underinvestment in the voting system means that it is no longer fit for purpose. The voting system needs urgent reform. There needs to be a simplification of the voting chain and investment in technology to enable the effective stewardship of pension fund investments for the long run.
Third, asset owners need to be more proactive in their stewardship approach, but they cannot do so without the support of their fund managers and investment consultants. So far, this has been sadly lacking. Key short-term recommendations include advising asset owners to develop their own voting polices on ESG issues they deem to be financially material, as well as benchmark their fund managers’ voting policies against their own, and hold them to account for it accordingly.
If their investment consultants do not support them in this endeavour, they should consider changing advisors. And finally, fund managers should at a minimum report against client voting policies on a comply or explain basis, so that asset owners can make more informed decisions regarding the degree of alignment between themselves and their fund managers. Scheme specific reporting requirements will be central in achieving this.Press release: Bringing shareholder voting into the 21st Century – The Association of Member Nominated Trustees