Asset managers are resisting attempts to improve standards at listed UK companies, pushing back against pension fund trustees’ moves to strengthen corporate governance.
Theresa May, prime minister, shone a spotlight on corporate governance earlier this month, promising sweeping changes to boards and pay in an attempt to encourage responsible capitalism.
Pension funds, however, say that asset managers are thwarting an initiative launched last year by the Association of Member Nominated Trustees, the trade body of pension fund representatives, to influence the companies they invest in.
The AMNT developed the so-called red line voting programme, which sets out standards around environmental, social and corporate governance issues, after a 2014 recommendation from the Law Commission.
Janice Turner, co-chair of the AMNT, said: “We have quite a few pension schemes that want to adopt [the initiative] but fund managers have been very resistant to them adopting it.
“This is an absolutely huge problem.”
The commission said that pension fund trustees should take account of environmental, social and governance issues in their investment decisions when these are financially material.
Jonathan Hoare from ShareAction, a charity that campaigns for responsible investing, said it was “troubling” that asset managers were pushing back against the red lines programme.
“Government policy should enable and encourage active voting by investors, particularly by trustees and retail investors,” he said. “The whole investment system would function more effectively if this was the case.”
Pension funds, which can adopt all or some of the red lines, rely on the asset managers to implement their views on ESG issues when voting at company meetings.
Several asset managers contacted for this article, however, said that voting the way that pension funds want is logistically challenging and potentially expensive if the scheme’s money is invested alongside other investors’ assets in so-called pooled funds.
In cases like this, asset managers will typically vote one way on behalf of all the investors in the fund.
Laurent Ramsey, chief executive of Pictet Asset Management, said that its pooled vehicles abided by the rule of managing assets on behalf of a pool of clients collectively.
“Voting is an act of management and it is, therefore, done uniformly for all clients invested in pooled vehicles so far — so, no split votes on pooled funds,” he said.
“So far we have had very little, if any, request to do so from our client base.”
In light of the Law Commission’s review, Ms Turner said: “It is simply unacceptable for trustees to be put in a position that much of the funds they oversee are in pooled funds, but they can have no influence on the vote.”
Asset managers are more likely to allow large institutional investors a say over their votes in pooled funds than smaller pension funds, according to trustees.
Bill Trythall, a trustee at the Universities Superannuation Scheme, said that the £50bn pension fund had made it a condition of investing in some pooled funds that asset managers would vote in accordance with its instructions.