On the go: The Association of Member Nominated Trustees has called for regulatory action from the Financial Conduct Authority after a review found that a majority of fund managers “promise no meaningful action” in their climate change voting policies.
Forty per cent of the fund managers in the review either did not disclose their voting policy on any environmental, social and governance issue, reference climate change in their voting policy at all, or did not meet the AMNT’s threshold for a “reasonable” standard of action.
The AMNT’s study compared the climate change policies contained in its own Red Line Voting policy for trustees with those of 30 fund managers.
Following the findings, the AMNT is calling on the asset management community to re-evaluate their voting policy and guidelines on climate change in advance of the 2022 proxy voting season.
The trustee body said that fund managers should “consider whether their voting policy and guidelines are sufficiently clear and robust when compared with AMNT’s Red Line climate change policies and, if not, make appropriate revisions”.
The AMNT has also called on trustees to adopt their own voting policy and insist that it is respected, and to use it to hold fund managers to account.
The review also found that from the 18 fund managers that had a voting guideline, nearly 40 per cent of them only had a guideline concerning shareholder resolutions — something the AMNT said is a “particular concern”, as so few of these are put forward on climate change at company annual meetings.
Only eight of the 30 fund managers reviewed said that they would target directors for insufficient disclosure or action taken on climate change, and just four fund managers — Aviva, BlackRock, Federated Hermes and Legal & General Investment Management — had voting policies and guidelines that met the AMNT’s standards.
The trustee body said that given the FCA’s own priorities regarding addressing “insufficient evidence of active stewardship in advancing environmental and social goals”, it is recommending regulatory action to remedy what it believes is market failure.
Janice Turner, founding co-chair at AMNT, said: “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.”
Turner said that 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”.
“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,” she added.
In June, the AMNT updated its red line voting policies on the back of regulatory changes, and now expects companies to report in relation to the Task Force on Climate-related Financial Disclosures recommendations.
