On the go: The Occupational Pensions Stewardship Council has released a report arguing for communication between schemes and fund managers on their voting intentions, and outlining the communication that schemes should undertake to make their requirements known to funds.
The OSPC, a pensions industry body coordinated by the Department for Work and Pensions, has called for timely industry action to ensure voting is utilised more widely to deliver better outcomes.
The report, released June 23, stated that it expects asset managers to work to “ensure better and more open, honest communication with clients about voting”, with the hope of leading to managers “being open to, and facilitating, voting on specific resolutions according to the client’s expressed view”.
The OPSC explained the ‘expression of wish’ framework, where asset owners tell asset managers their wishes or needs. 62 per cent of respondents said they extend voting priorities to pooled funds. 18 asset managers (49 per cent) claimed they will enable clients to share their voting policy.
Maria Nazarova-Doyle, Scottish Widows head of pension investment and responsible investments, said: “Clients having more say in voting is an option that should be available not only to large schemes with segregated mandates but to all asset owners who wish to exercise their views and beliefs on behalf of their beneficiaries.
“This does not mean schemes should be voting on every single issue, but can take a form of voting guidelines that are accepted by asset managers as expression of wish.”
Managers and schemes should then discuss said wishes. The OPSC stated that it expects that "managers carve out some time during client meetings to talk about a handful of significant votes which are coming up”.
The report’s authors said they were disappointed in the response of around one third of asset managers (13) who said they were not open to forward-looking discussions with clients on voting, while six asset managers said they were exploring the possibility.
It also said 8 asset managers (22 per cent) believed there was low client demand in this area.
Moreover, 41 per cent of the respondents said they would leave it to the client to identify misalignments between asset manager policies and their own. 35 per cent said they would report misalignments if requested.
The process is concluded by the ‘Act’ stage, potentially allowing “the client to override votes and/or create functionality for the asset owner to directly implement their policy”.
For segregated mandates, half of those managers surveyed allowed clients to implement their own voting policies, yet only 5 per cent allowed this in pooled funds.
In segregated funds where asset owners control the voting, asset managers typically allow for overriding.
The OPSC recommended that when views between manager and owner differ “significantly and consistently” over time, the asset owners should look to direct voting themselves or find a new asset manager more aligned with their views.
Nazarova-Doyle added: “Stewardship, including engagement and voting, has the power to make a huge difference in the real world, be it on environmental issues, issues of social justice, workers’ rights and many more. There are some asset managers already ahead in this area and I would not be surprised if those funds start to gain more business because of this extra level of transparency.”
In December 2021 the minister for pensions Guy Opperman wrote to asset managers urging them to comply with recent stewardship recommendations. From this, further legislation was introduced to improve pension scheme influence. As Pensions Expert reported in June, pension schemes will be able to use the asset manager tender process to challenge prospective managers.
