The Taskforce on Pension Scheme Voting Implementation has launched a brief stakeholder survey to gather views about practical improvements that can be made to shareholder voting.

The Pensions and Lifetime Savings Association published guidance in October to help pension fund trustees demonstrate how they are acting as effective stewards of their assets, as the pressure to do so has been increasing for trustees.

The TPSVI was launched in December 2020 by pensions minister Guy Opperman with the objective of creating “safer, better and greener pension schemes”. To achieve this, trustees will have to be active stewards of members’ assets devising voting policies and engaging with managers.

Moreover, the TPSVI is researching whether voting in pooled funds can be adjusted to give pension funds more say in what decisions are being made. They will report back with their findings in the autumn, but it has been suggested that shareholder voting should be changed.

Not everyone agrees that pension funds need to have more influence, however. “I would have sympathy for those well-resourced and considered managers who are reluctant to hand over what they would see as an important part of their investment process,” says Natalie Winterfrost, director at professional trustee firm Law Debenture.

However, Sarah Wilson, deputy chair of the TPSVI, says that the taskforce has “regrettably come across some shock instances of asset managers not willing or able to give their clients the information they need for them to be compliant”.

While there will be some well-resourced asset managers who may not be in favour of shifting the voting, Wilson says some managers have only started putting environmental, social and governance issues at the top of their priority list these past few months, at the eleventh hour. “Some asset owners have been asking for some of these things to be happening for years,” she says. 

Last month, LawDeb held its 15th annual pensions debate. Within this, the motion that “effective stewardship is more influential in tackling ESG issues than what you invest in” was argued. There was a strong feeling that positive change for good can be better effected by engaging with the companies held within a pension portfolio than choosing to sell companies with weak ESG credentials to allocate capital to ‘good’ companies.

“Interestingly, we also did find that potential speakers we spoke to, they wanted to be arguing for that notion and not arguing for capital allocation, despite being fund managers,” Winterfrost says.

“I wouldn’t want pensions schemes to feel pressurised to take back voting rights where they were comfortable with the asset manager’s policy,” says Winterfrost.

But Wilson argues that the “fresh regulation” shouldn’t be what gets people to reassess and sort through issues. “This is about letting everybody have sensible conversations. This is empowering asset owners to actually be involved and engaged,” she says.

While some schemes already have voting policies, could cost considerations stop others from doing the same? “For many schemes, if they’re not happy with their incumbent manager’s stewardship, then selecting a new manager with strong policies around stewardship is very likely to be more cost effective than a ‘do-it-yourself' kind of approach,” says Winterfrost.

Living in a world of Covid-19 and COP26, investors and managers may be forced to adapt. Wilson says she would like to hear from managers in this survey and understand why they were “not listening to their clients” and what has changed, with the aim to “put asset owners in the driver's seat”.

“If the outcome of the consultation is just to give trustees more choice into how they are going to implement their voting policies, then in balance, I’d have to be in favour,” says Winterfrost.

Wilson believes: “This is a really great opportunity for the UK investment schemes to actually set the standard for the whole world on how it would be possible to work with clients to do good stewardship, integrate ESG and climate change issues. It could really improve the quality of dialogue.”