Asset managers keep pension trustees in the dark on holding companies to account

The trustees of the UK’s pension pots are being kept in the dark by asset managers on how they oversee the investments, according to new research.

Most asset managers were unable to provide details of how they exercised their voting rights or engaged with the companies they invest in, according to research from Dalriada Trustees, one of the largest providers of independent professional trustee services to UK pension schemes.

Of the 43 asset managers contacted by Dalriada’s service partner, Minerva Analytics, only one third (33%) were able to provide details of how they had used their influence in voting as investors. 

Some 28% provided no information, while 40% said there was no information to report.

The exercise of voting rights is a key way for pension trustees to ensure they are meeting their fiduciary duties to act in the best interests of their members. This has become increasingly important when holding companies to account on the extent to which they meet environmental, sustainable and governance (ESG) goals. 

When it comes to engagement, asset managers are similarly lacking appropriate data required by pension scheme trustees.

Only 23% of managers were able to provide detailed information on engagement they undertook, a further 19% were able to provide partial information. 42% of managers provided no information on engagement, while 16% said that there was no information to report.

Trustees of both DB, DC and hybrid schemes are required by law to create an annual Implementation Statement, which outlines how their policies on exercising rights, including voting rights, and engagement with their investments have been undertaken.

David Fogarty, Director at Dalriada Trustees Limited with responsibility for Investment commented: “As Trustees, we need to be able to show members what action we are taking in terms of voting and engagement on the assets we govern on their behalf. Yet, we are in a position where we are receiving insufficient information from the asset management community. We are seeing managers marketing funds for their ESG credentials, but they are failing to provide clear evidence of the actions being taken; clearly, this needs to change.”

David Crum, Managing Director, Asset Steward Solutions at Minerva Analytics, commented: ”The newly introduced requirement for Trustees to create Implementation Statements is an incredibly important legal obligation, helping scheme members understand what stewardship actions have been taken on their investments by their scheme’s asset managers. At a time when many Trustees and scheme members alike are worried about important issues such as climate change, it’s incredibly disappointing that the majority of asset managers appear to subscribe to the view that they cannot explain their policies, approaches and actions to their ultimate employers.” 

Guy Opperman, Pensions Minister, said:

“It’s totally unacceptable that fund managers are unable or unwilling to respond to reasonable requests from pension funds for information on how their votes were cast. Pension fund trustees need this information to fulfil their statutory and fiduciary duties. Asset managers need to step up, use their votes and report efficiently. I will be closely monitoring progress.”