The Association of Member Nominated Trustees (AMNT) has issued a formal complaint to the Financial Conduct Authority over the failure of asset managers to allow pension scheme trustees to choose which companies they invest in.
In particular the AMNT complained that asset managers do not allow pension scheme trustees to operate a stewardship policy for the environmental, social and governance (ESG) of the companies in which they invest in via fund managers.
The industry body has called on the FCA to propose solutions to this issue before the implementation of the government’s new investment regulations which come into force from October 2019.
The AMNT stated: "In our view if the current market failure is not rectified in time then fund managers will be preventing pension schemes from complying with the regulations."
From October 2019 pension schemes – both defined benefit and defined contribution - with more than 100 members will be forced to disclose the risks of their investments, including the ones arising from ESG considerations.
According to the new rules, published by the Department for Work & Pensions (DWP) on September 11, trustees of DB and DC plans will have to state their policy on taking account of "financially material" considerations, including ESG factors, such as climate change.
As part of its formal complaint the AMNT has today (May 30) released its review into the voting policies and practices of fund managers across the UK, Europe, and the US.
The AMNT compared public voting policies on issues such as climate change, ethnic diversity and executive pay of 42 asset managers between February and May 2018.
Regarding climate change, it found that four out of the 42 managers did not publicly disclose their voting policy and 20 did not refer to climate change at all.
Three managers who referred to climate change had no voting guidelines, therefore failed to set out how they would vote at an AGM.
In its report the AMNT said: "It is of immense concern to AMNT that more than half of those that disclosed a voting policy did not have a climate change-related voting policy or guideline.
"It seriously calls into question the degree to which fund managers take these matters seriously, or, at a minimum, execute these policies in a consistent manner as possible across companies."
The report also found that of those that publicly disclosed a voting policy (38) regarding ethnic diversity, nearly 75 per cent of fund managers made no specific mention of ethnicity with regard to board diversity.
With regards to excessive pay, few asset managers (approximately 25 per cent of those that published their policy) had a voting guideline on tackling excessive remuneration in some form.
The AMNT is therefore calling for the FCA to implement minimum standards when it comes to asset managers’ voting policies.
According to the AMNT, these standards should include public disclosure of all voting policies and guidelines.
It is also calling for voting records to be presented in an easily interpretable and accessible way and for increased transparency and accountability with regard to the content of voting policies.
The AMNT stated: "We are requesting that the FCA take urgent steps to investigate this market failure and propose remedies that will enable pension scheme trustees to develop their own stewardship policies and their fund managers to accept them including within pooled funds and operate them on a comply or explain basis."
Guy Opperman, minister for pensions and financial inclusion, said: "It’s utterly unacceptable that most pension fund managers don’t have published policies and practices to combat climate change, and public commitments to tackle excessive pay and promote gender and ethnic diversity are all too rare.
"Being vague or secretive with the trustees and savers they represent is out of order. These obstructive fund managers need to take action now as effective and responsible shareholders."
amy.austin@ft.com
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