UK asset owners crank up pressure on managers not following their AGM voting priorities
On the launch of Scottish Widows' 2022 Stewardship Report, the UK pension fund warns that it will take 'tougher action' on investment managers not following its sustainability voting priorities.
UK asset owners have warned that they intend to increase the pressure on asset managers whose AGM voting policies are not consistent with their own.
This includes Sottish Widows, which has issued a “stark warning” to asset managers to follow its sustainability priorities on voting at Annual General Meetings (AGMs) of businesses it invests in, following the publication of its latest Stewardship Report.
The pensions provider, which has nearly £170bn of assets under administration, outlined that it will take “tougher action” on investment managers who are casting votes that undermine its sustainability objectives.
It its latest stewardship report Scottish Widows states that investment managers, such as BlackRock and State Street, “could better use their voting to ensure measurable and timely positive outcomes from companies”.
Maria Nazarova-Doyle, Scottish Widows’ head of responsible investments and stewardship, said that she is concerned about “the quality of investee companies’ engagement happening behind closed doors”.
“If managers fail to act in line with our priority, which will always be the interests of our beneficiaries, we will have no choice but to take action,” she added.
Asset Owner Roundtable review
The UK Asset Owner Roundtable announced earlier this week that it has commissioned a review into the way significant asset managers have interpreted their clients’ long-term interests in the exercise of their stewardship duties, following the 2023 proxy season.
Faith Ward, chair of the roundtable and chief responsible investment officer at Brunel Pension Partnership, stated that the review will focus on how managers have voted at key AGMs in Europe as proof points for our understanding of their approach and our needs. The review is expected to be published in October.
Andreas Hoepner, professor of operational risk, banking and finance at the University College Dublin (UCD), has been appointed by the Asset Owner Roundtable to lead the academic review.
Throughout his time at the UCD, Hoepner has worked at the European Commission in multiple roles, which includes being a member of the 2nd Platform in Sustainable Finance.
Meeting to highlight concerns
Last month, Faith Ward, chair of the UK Asset Owner Roundtable and chief responsible investment officer at Brunel Pension Partnership has called for a meeting with asset managers this autumn to discuss its concerns regarding alignment with its voting positions.
"Despite unequivocal warnings from the United Nations and the IPCC of the risks of delayed action on climate change, that short-term interests are trumping long-term interests of pension funds" she said.
"Delayed action on climate increases the chances of a disorderly climate transition and missing the goals of the Paris Agreement. This in turn increases the risks to pension funds long-term interests and the ability of those funds to serve the interests of their members/beneficiaries" Ward added.
This meeting is backed among others by Scottish Widows. The pensions provider will use the opportunity to inform managers of its new ‘climate and environment theme’, which is more focused on nature than its ‘climate and carbon’ predecessor.
“While we have been pleased with the positive strides we have made with our investment managers over the last year, there is still more that needs to be done to ensure activity is aligned with our guidelines – particularly as our thematic priorities continue to evolve.
“We are hopeful that our meeting with our managers this autumn will result in positive outcomes for all parties.”
If managers fail to act in line with our priority, which will always be the interests of our beneficiaries, we will have no choice but to take action.
Divestment strategy
Growing frustration among asset owners with the lack of progress on engagement has increasingly led to divestments. While the Church of England's Pension fund recently announced that it has pulled out of its positions in Shell and BP, Scottish Widows has divested £3bn from companies that haven’t met its environmental, social and governance (ESG) criteria since introducing an Exclusions Policy in November 2020.
Scottish Widows also plans to divest from companies that are found to have violated UN guidelines on human rights. The report identified BHP and Vale as being in violation of these rights and said that the pensions provider will consider divesting from both if they are “unwilling to engage”.
