AMNT has welcomed the amendment to the Digital Markets, Competition and Consumers Bill by Baroness Wheatcroft, which calls for mandatory, transparent vote reporting from fund managers. This would be of great assistance to AMNT’s campaign for trustees to be able to direct their own voting policy.
The AMNT has long campaigned on this issue. After all, the pension schemes and trustees representing them are the client.
They pay and employ fund managers to do a job. And they are asking for a basic but important right – to direct votes as shareholders on issues of importance to the members of their scheme. It doesn’t seem much to ask for – but it has been a struggle to get the majority of the fund management industry to listen.
However, this could be about to change because of legislation currently passing through the House of Lords. Let me explain.
AMNT is publicly backing legislation to make standardised vote reporting by asset managers to pension schemes mandatory.
An amendment to the Bill by Baroness Wheatcroft and also backed by voting and stewardship fintech firm Tumelo, would give the FCA a legally binding duty to make rules requiring investment managers and insurers to give 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.
Existing FCA rules do not achieve this. Legally required reporting is annual and does not cover any prescribed reporting period, is not standardised, and is at firm level, not fund level – so a pension fund cannot distinguish between a few hundred votes cast on their behalf and many thousands of votes on other companies in which they are not invested.
Finally, it is only “comply or explain” allowing managers and insurers to opt out of the whole process altogether.
Whilst the FCA consulted on standardised reporting in the summer 2023, they only proposed a voluntary approach – and the FCA have yet to respond to their consultation. We do not think this is far enough – and neither does Baroness Wheatcroft or Tumelo.
In essence, this amendment would be helpful to pension schemes as most employ several fund managers and the response to requests for information varies greatly from manager to manager and by time period covered.
Baroness Wheatcroft, who is a non-party aligned peer in the House of Lords and vastly experienced editor and journalist, hit the nail on the head when she said: “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.”
That is totally in line with our thinking – and the very thing that many fund managers have not been doing for their pension fund clients who invest in pooled funds.
Georgia Stewart, CEO of Tumelo, echoed this position when she said: “This amendment will reinforce the ongoing work of the FCA’s vote reporting working group.
Mandatory, public vote reporting will help to craft a transparent fund management industry; facilitate quality conversations between fund managers and their clients; and enable good decision-making by pension funds who manage money on behalf of long-term savers.”
The amendment was debated in the House of Lords on Wednesday 7 February. As reported in Hansard, Lord Offord, responding for the government suggested “that we speak to the treasury and write to the noble Baroness on a number of her questions, in particular to draw on the comparisons with the US, with which we are so close on so many things, to understand what its experience is and where we are in comparison.”
Lord Tim Clement-Jones stated: “A really interesting and important question is: how on earth can the US, with its relatively unregulated systems compared to ours and its culture of not regulating on a federal basis, do it on a compulsory basis when we have not?”
The Conservative Lord Lucas added: “Our capital has become very concentrated in institutional hands. Decisions are taken by a cadre of fund managers, of whom I used to be one—well-paid people who thoroughly approve of people in industries being well paid, particularly senior managers.
“What is the motivation for people running a company to do more than please their fund managers? They do not have to have the interest of the individual owners at the end of this. In the end, this results in bad decisions being taken on the allocation of capital and on the flow of money within a corporation. These will not be in the interests of paying the pensions of the people whose money is invested in these companies.
“Capitalism will not survive unless we institute a structure that allows the people providing the money to have a real and active interest in what is going on with the money they have invested.”
Whatever happens next, the AMNT will not let this issue disappear. We will be following progress avidly and will continue to raise our voice on this subject. We believe it is only right and fair that pension scheme members have their wishes respected when it comes to voting on vital ESG issues including diversity and climate change.
The excuse that it is “too difficult” for fund managers to undertake this process for those many millions whose investments are handled through pooled funds is no longer viable.
Janice Turner is co-chair of the Association of Member Nominated Trustees (AMNT)
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