Has your pension scheme got a responsible investment policy? So many, after all, delegate this to their fund managers. Small schemes are often told they are too small to get involved in this and are advised to leave the matter alone. Others are told that as they invest in pooled funds it isn’t possible to direct their fund managers in this matter.
But responsible investing is a matter for small pension schemes and pooled funds investors. It matters because responsible investing is all about ensuring that the companies your scheme invests its money in are run to the highest standards and that is just as important to your scheme as it is to the big schemes.
More and more research is demonstrating that the best-run companies are outperforming their competitors. And it hardly needs saying that climate change is now a matter of such global urgency that every company should be taking all the action it can to play its part in limiting the expected rise in global temperatures to 2c or below. If we fail to do this the longterm outlook for our investments would be dire.
So trustees that adopt active responsible investment policies are helping to raise corporate standards thus lowering the longterm risks to their investments, and fulfilling their fiduciary duty as set out by the Law Commission in 2014 when it stated that trustees should be taking financially material environmental and social issues into account as well as corporate governance.
This is why the AMNT spent two years developing its Red Line Voting inititative for the UK market, launched a few weeks ago. It covers the range of ESG matters and provides trustees with the UK’s first easy to understand, off-the-shelf policies on the environment and social issues. Climate change is at their heart: CDP, the global organisation that monitors companies’ carbon emissions, water and forestry use, has stated that if widely adopted the Red Lines would be a game-changer in driving corporate change with regard to climate change.
Red Line Voting was specifically designed to make it easier for fund managers to accept voting instructions on pooled funds. If your pension scheme has a corporate governance policy does it say anything on environmental and social issues? As most schemes have more than one fund manager, delegating everything could lead to the schemes’ shareholder votes being cast in contradictory ways: hardly a consistent policy, and a matter that can only be resolved by the pension scheme adopting its own set of policies and issuing them to the fund managers.
We are delighted at the growing support for Red Line Voting. AMNT trustees have taken copies of the Red Lines for their colleagues and they are being discussed at the boards of pension schemes with a vast range of assets, from under £20-million to over £1-billion. Adoption of the Red Lines has begun, and the process is being assisted by companies such as LCP, which has drawn the attention of its clients to it, and the fund manager Wheb which announced that it will be adopting Red Line Voting on a trial basis for the 2016 voting season. Trustees of charities are also taking an interest, as are overseas investors in the UK market.
We are very keen to have feedback from trustees on their progress in adopting the Red Lines. Those who report that their professional advisers are unclear about Red Line Voting are telling us which companies they want us to brief, and meetings are taking place around the pensions and financial services industry. For further information and to download the Red Lines we now have a dedicated website, www.redlinevoting.org. It’s time we trustees took control of our responsible investment policy: it’s in everyone’s interests that we do.
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