Smart Pension, one of the UK’s leading workplace pension providers, has signed an open letter urgently calling for more asset managers to offer pass-through voting on pooled funds. Collectively representing pension schemes, endowments and wealth managers stewarding approximately £250bn assets under management, signatories seek the ability to direct how proxy votes are executed, proportional to their ownership.
By signing the letter, Smart Pension has come together with eight other signatories who are committed to achieving proxy voting. The initiative is led by London CIV Local Government Pension Scheme. Other signatories include: Scottish Widows, Merseyside Pension Fund, the Environment Agency, EQ Investors, Tribe Impact Capital, the Superannuation Arrangements of the University of London (SAUL) and Guy’s & St Thomas’ Foundation.
The industry open letter states that:
‘Asset managers wield significant influence over how public companies are run, and their actions impact corporate governance profoundly. Globally, the data shows that the three largest fund managers currently cast approximately 23% of the votes at companies in the S&P 500, a percentage projected to rise to 40% by the mid-2030s if current trends continue.
‘Regrettably, we have continued to evidence a divergence between the voting behaviour of appointed asset managers, when compared with our investment principles and the expectations of our beneficiaries. This disconnect is especially noticeable regarding environmental, social, and governance (ESG) issues, where some asset managers are regressing rather than progressing on their expectations of portfolio companies.
‘We see the 2023 voting season as an inflection point. Investors have witnessed decreasing levels of support for shareholder proposals, including on climate related issues. Conversely, both the United Nations and IPCC are calling for a rapid acceleration in commitments and actions to ensure we meet the goals of the Paris Agreement. The continued anti-ESG rhetoric has now made it impossible for global asset managers to fairly represent the opposing views of their investors. Some asset managers have already taken steps to enable their investors to choose how they want to vote. More asset managers should offer flexibility, ensuring capital owned by investors is voted in accordance with their stated values.
‘Advances in technology have made client-directed voting possible, granting asset managers the ability to afford the same voting rights to clients across both segregated and non-segregated mandates. Fintech companies help asset managers offer operationally efficient pooled funds while giving clients more voting power. For example, Tumelo’s pass-through voting technology enables investors to choose a voting policy or vote on specific issues without disrupting their asset managers’ existing stewardship process. BlackRock and SSGA have also launched voting solutions, offering a broad selection of voting policies for asset owners to choose from.
‘Finally, we believe that pass-through voting is more than just good practice; the choice for clients is essential to ensure asset owners meet their fiduciary duties. We have welcomed FCA, DWP, FRC and other UK policy efforts to support investors in undertaking robust stewardship. We are responsible for the investments of millions of beneficiaries, it is therefore critical that we steward their assets by considering and endeavouring to reduce systemic, material risks. Selected asset managers have stepped up to offer this functionality to our co-signatories who now have incredible voting flexibility; together we are calling for greater access to pass-through voting across the industry.’
