UK policy makers are to consider legislation that would make it mandatory for asset managers to disclose their votes at fund level to pension schemes.
The proposals are an amendment to the Digital Markets, Competition and Consumers Bill tabled by Baroness Wheatcroft which is to be discussed in the House of Lords, the UK’s upper house early next week.
If adopted, the new rules would introduce a legally-binding duty on investment managers and insurers to provide occupational pension schemes, personal pension providers and the Local Government Pension Scheme standardised information on all votes relating to their investments within 30 days of receiving the request.
The FCA, the UK’s financial services regulator would be tasked with drafting these new rules.
Current UK reporting standards require asset managers to disclose their voting behaviour annually and at firm level. Managers continue to have the option to opt out of the process through a comply and explain clause.
However, for UK pension funds, who are now required to file TCFD annual reports, it remains challenging to filter out the voting information that applies to funds they have invested in amid thousands of votes for companies which are not in their portfolios.
In tabling the amendment, Baroness Wheatcroft, who has a background in financial journalism, hopes to achieve greater transparency on stewardship.
“Government has regularly said that stewardship – including voting – is essential to good corporate governance and good investor outcomes, as well as wider policy goals such as net zero. To put this principle into action, we need transparent, consistent, comprehensive fund-level voting information for pension providers, so they can hold their managers to account. My amendment will enable trustees and others to make better decisions on behalf of consumers, and make the UK a better place to invest” Baroness Wheatcroft said.
The amendment has received the backing of the Association of Member-Nominated Trustees (AMNT), which represents trustees for more than 700 pension schemes with a combined £1trn in assets under management and of stewardship fintech firm Tumelo.
The proposals come amid growing discontent among UK asset owners over the misalignment on stewardship between managers and owners.
A study commissioned by the UK Asset Owner Roundtable at the end of last year found that there is significant misalignment between managers and owners, particularly on climate stewardship, where asset managers appear to be more reluctant to back climate resolutions put forward by activist shareholders.
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