Lack of 'meaningful' climate voting policies prompts concern

Poor disclosure levels and generic statements on climate change voting policies are “hindering market competition” and the ability for trustees to make effective investment decisions, the Association of Member Nominated Trustees (AMNT) has warned.

Research from the AMNT found that 40 per cent of fund managers do not disclose their voting policy on any environmental, social or governance (ESG) issue, do not reference climate change in their voting policy at all, or referenced climate change but did not meet AMNT’s Red Line voting policies on climate.

In addition to this, the survey found that of the 18 fund managers that had a voting guideline, nearly 40 per cent of them only had a voting guideline concerning shareholder resolutions.

The AMNT identified this as a "particular concern", warning that "hardly any" shareholder resolutions are put forward on climate change.

The survey also found that only eight of the 30 fund managers reviewed would target directors for insufficient disclosure or action taken on climate change.

Even amongst those that did have a voting guideline, AMNT raised concerns over the use of “imprecise terminology”, such as “insufficient disclosure or risk oversight”, “may withhold support” or “we will consider voting against”.

The association suggested that fund managers have previously justified the poor disclosure and vague statements used within voting guidelines on the basis that they wished to maintain flexibility on their voting actions.

However, AMNT rejected this argument in light of the fact that some fund managers are able to set out clear statements, suggesting that it is possible to take a more robust stance on the issue, yet the “majority” choose not to.

In light of the findings, the association has urged the fund management community to re-evaluate their voting policy and guidelines on climate change in advance of the 2022 proxy voting season.

It also suggested that they consider whether their voting policy and guidelines are sufficiently clear and robust when compared to AMNT’s Red Line climate change policies and, if not, make appropriate revisions.

In addition to this, AMNT has called on fund managers to accept the recent recommendations of the Taskforce on Pension Scheme Voting Implementation, calling on the fund management industry to allow pension schemes an ‘expression of wish’.

AMNT founding co-chair, Janice Turner, said: "Given how high climate change is on the regulatory agenda in the UK, it is very surprising that only four fund managers had a voting policy and guideline that met AMNT’s criteria.

"It is clear that this issue requires urgent action, especially by the FCA as it relates to not only poor disclosure hindering market competition and the ability of trustees to make effective investment decisions, but also whether fund managers are doing what is necessary to tackle climate change in their approach to voting.

"It is crucial that fund managers are fully transparent on their voting policy and guidelines on climate change.

“A trustee should not be left in the dark as to how their fund manager intends to vote, especially if trustees are expected to hold their fund managers to account through benchmarking their own stewardship policies against that of their fund managers.

“It is a massive understatement to say that there is a public interest in fund managers’ voting policies and guidelines: humanity has an interest.

“AMNT’s Red Line Voting policies include stringent criteria on climate change. We urge fund managers to allow their trustee clients to adopt them and have the votes associated with their investments cast in accordance with them.”

Four fund managers, however, were found to have voting policies and guidelines that met all five of AMNT’s policies, these were: Aviva, Blackrock, Federated Hermes and Legal & General Investment Management.

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