Govt-led working group on pension trustee voting barriers to be established

Pensions Minister, Guy Opperman, has endorsed and agreed to the formation of a working group proposed by the Association of Member Nominated Trustees (AMNT) to address barriers to trustees voting.

The working group will be led by the Department for Work and Pensions (DWP) and will aim to develop solutions to overcome issues in this area.

The AMNT’s report - Bringing shareholder voting into the 21st Century - evaluates the barriers preventing different client voting policies from being implemented by fund managers in pooled funds and outlines its recommendations.

In particular, the AMNT said it should look to address the “overly complex” and “archaic” voting infrastructure, underinvestment in the stewardship function in fund management, and the transparency of voting policies and outcomes.

“I want to bring real change on the issue of voting,” Opperman commented. “This report identifies where the real barriers lie and possible solutions.

“I therefore welcome its contribution to this important discussion – and I look forward to working with the AMNT.

“I agree on the recommendation for a working group to develop solutions that will unlock further progress on stewardship and engagement. I am determined we are going to bring about real change on this issue.”

Its report concluded that, although barriers exist in the trustee voting space, they are “not insurmountable”.

The barriers were “mainly down” to fund managers’ unwillingness to accept client voting policies, according to the AMNT, and it urged investment consultants to hold them to account, which could include downgrading the fund manager.

Furthermore, it called on trustees to develop environmental, social, and governance (ESG) policies and use them as a benchmark to hold fund managers to account.

The AMNT stated the voting system needed “urgent reform” by simplifying the voting chain and investing in technology to enable the effective stewardship of pension investments for the long term.

It also urged asset owners to be more proactive in their stewardship approach, but noted that they cannot do so without the support of their fund managers and investment consultants, which has been “sadly lacking” so far.

Short-term recommendations included advising asset owners to develop their own voting policies on ESG issues, benchmarking their fund managers’ voting policies against their own and holding them to account for it accordingly

“If their investment consultants do not support them in this endeavour, they should consider changing advisers”, the AMNT added.

Finally, the association recommended that fund managers report against client voting policies on a “comply or explain” basis, so asset owners can make more informed decisions on the degree of alignment between themselves and their fund managers.

“Fund managers whose policy falls far short of what is needed have refused to accept their clients’ policies, and failed to align their own with that of their clients," AMNT founding co-chair, Janice Turner, said.

"There is now a clash between the asset owners and the fund managers over who should direct the voting policy of the investments. This is an untenable situation that requires immediate attention especially given the new, greater regulatory obligations placed upon trustees.

"Power needs to shift from fund managers to pension funds, and I am confident that the proposed working group can help to make this a reality."

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