On the go: The Department for Work and Pensions has launched a new working group to examine ways to give investors in pooled fund products greater influence in voting shares and securities owned on their behalf.
The launch follows a November promise by pensions and financial inclusion minister Guy Opperman, who said he was “determined” to empower smaller schemes in their efforts to engage on sustainability issues.
With intermediated securities like those held in pooled funds, asset managers rather than asset owners are usually named on share certificates and other documents.
This limits schemes’ legal right to engage with companies, although a Law Commission consultation last year set out to investigate the issues further and is now in the policy development phase.
The working group will aim to solve these issues, and will be chaired by Simon Howard, the former chief executive of the UK Sustainable Investment and Finance Association. Sarah Wilson, CEO of Minerva Analytics, will be the vice-chair.
Its three objectives are to address present obstacles on voting, persuade asset managers to do more to accommodate client views on particular issues, and to recommend regulatory and non-regulatory measures to achieve these aims.
Mr Opperman said: “I firmly believe the days of trustees leaving everything to asset managers without scrutiny must come to an end. We need to do more to improve pension schemes’ and asset managers’ stewardship and engagement with companies to ensure they are fit for purpose in the 21st century.
“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.”
A new report, written for the Association of Member Nominated Trustees by Iain Clacher, professor of pensions and finance at Leeds University Business School, finds that barriers to greater individual scheme engagement, such as cost and technology, exist but are not insurmountable, with the main reason for inaction being manager reticence.
Managers, for their part, have previously argued that their power to influence companies is diluted when they are forced to split funds into distinct stewardship stances.
