UK asset owners join London CIV’s call for wider adoption of pass-through voting

Scottish Widows, Merseyside Pension Fund, Environment Agency, Smart Pension, EQ Investors, Tribe Impact Capital and Superannuation Arrangements of the University of London (SAUL), and Guy's & St Thomas' Foundation were among the signatories of an open letter to all asset managers, urging them to give investor greater influence on stewardship.

Inflection point

The signatories argued that the 2023 AGM season represented an inflection point with investors witnessing decreased asset management support for shareholder resolutions, despite the United Nations and the IPCC calling for a rapid acceleration of the energy transition.

“The trend of declining support for shareholder proposals on critical issues like climate change is at odds with the global mandate for more decisive environmental action” they warned.

Signatories to the letter believe that “continued anti-ESG rhetoric has now made it impossible for global asset managers to fairly represent the opposing views of their investors.”

Consequently, they urge a wider adoption of pass-through voting.

The open letter follows an investigation by the UK Asset Owner Roundtable in October this year, which highlighted widespread misalignment between UK asset owners and managers, particularly on stewardship around climate issues.

London CIV, the initiator of this letter has already some experience with pass through voting with at least one of its partner funds having adopted pass through voting in September this year.

Georgia Stewart, CEO for split-through voting provider Tumelo believes that the UK’s local government pension schemes, which have to manage varying stewardship priorities for different partner funds are one potential area of growing demand for split through voting.

“Pension funds have started to look more closely at the investment managers they work with and have noticed divergent voting among them. Some managers actively engage in voting, while others abstain, especially in the context of net-zero votes. If you are committed to a net zero stewardship approach, addressing these discrepancies becomes essential,” she told Net Zero Investor earlier this year.

Early adopters

One early adopter of pass-through voting is Scottish Widows, which has worked closely with BlackRock on the managers’ implementation of split through voting, as Shipra Gupta, investments stewardship lead at Scottish Widows explained.

“We have been at the forefront of making pass-through voting to clients a reality, via our participation in TPSVI and OPSC, calling on asset managers to give their clients a greater and direct say in how their investments are voted on. As such we were early adopters of BlackRock’s Voting Choice provision and then also worked with SSGA to follow suit.”

“The reason we have supported this initiative by London CIV is that having implemented pass through voting for our own investments, we have first-hand seen the benefits of it, both in terms of making better use of our shareholder rights in line with our fiduciary responsibilities, but also in having some concrete data points to challenge our investment managers in doing better with their own in-house voting decisions given their size in companies shareholder registries. And we want other clients like us to get the same benefits and more asset managers to give their clients the optionality” she added.

Also read:

The rise of split voting: is the onus now on asset owners?