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Voting system 'no longer fit for purpose'
The report, 'Bringing shareholder voting into the 21st century', comes to three main conclusions.
It maintains that the barriers presented to split voting in pooled funds are not insurmountable, as some fund managers have already been doing this for some clients, and that asset owners' policies could be implemented by fund managers "if there was the will to do so".
It adds that alongside a lack of will, long-term underinvestment in the voting system means that it is now "no longer fit for purpose" and "needs urgent reform". The AMNT wants to see a simplification of the voting chain and investment in technology "to enable the effective stewardship of pension fund investments for the long-run".
While the AMNT seems to admit that there is also some inertia on the side of asset owners, it says they cannot be more proactive without the support of their fund managers and investment consultants, adding that "so far, this has been sadly lacking".
Power needs to shift from fund managers to pension funds
The association recommends creating an industry working group led by the Department for Work and Pensions, to develop solutions to the barriers identified in its report.
Pensions minister Guy Opperman has endorsed this recommendation. The remit of the working group should be to address the "overly complex and archaic voting infrastructure; underinvestment in the stewardship function in fund management; and transparency of voting policies and outcomes".
Janice Turner, founding co-chair of the AMNT, 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.”
Key short term recommendations include advising asset owners to develop their own voting polices on ESG issues they deem to be financially material, as well as benchmark their fund managers’ voting policies against their own and hold them to account for it.
The AMNT also identifies consultants as part of the problem, saying that "if their investment consultants do not support them in this endeavour, they should consider changing advisors".
Consultants, it says, should hold fund managers to account for their voting policies, which could include downgrading them.
The AMNT also wants to see fund managers report against client voting policies on a comply or explain basis, so that asset owners can make more informed decisions regarding the degree of alignment, noting that scheme specific reporting requirements will be central in achieving this.