I am writing to update you on the progress of the AMNT’s Red Line Voting project, following our members’ approval of the Red Lines at our conference on 24 June, and to ask you to let us know if your board is planning to consider Red Line Voting.
For the benefit of the many trustees who have joined AMNT in the last few weeks, Red Line Voting aims to enable pension schemes to fulfil their fiduciary duty – most recently clarified by the Law Commission – by providing a responsible investment policy comprising not only corporate governance but also environmental and social policies. It is specifically designed to be used by pension schemes that invest in pooled funds – no doubt most of us.
Red Line Voting has nothing to do with decisions about which companies you invest in or divest from. It’s about taking responsibility for whatever investments your scheme already holds, to ensure that the companies we invest in provide the most sustainable long term return. We do this by adopting voting policies on environmental, social and corporate governance that we expect these companies to follow; we send these voting instructions to our fund managers and if the company falls foul of these policies, there is a vote against as appropriate at the company’s AGM. The fund manager is expected to engage with the company on these issues and is at liberty to vote contrary to a Red Line if in individual circumstances they judge that to be the more appropriate course of action – but if they do, they are required to explain to the client why they did so.
We know that responsible investment is an important matter for trustees. Before our conference we carried out a survey of our members and asked which issues concern you most. Climate change came second in a very long list. Until now, there has been no easy to understand, ready-made policy on climate change that pension schemes can adopt. Red Line Voting will provide this. Our environmental policy has climate change at its heart and it was produced by working closely with CDP, the Carbon Disclosure Project, which stated:
“CDP fully encourages pension funds to adopt the Red Line Voting initiative. The initiative provides an unprecedented opportunity for pension funds to engage on vital ESG issues with the companies in which they hold shares. Engagement is the most effective way of changing company behaviour, and investors have a vital stewardship role to play. CDP's data is requested by investors and our standards are constantly updated to ensure alignment with investor expectations.”
Red Line Voting is an important development in UK investment. Currently the managers of pooled funds are reluctant to accept voting instructions from multiple investors as they Visit: www.amnt.org Follow us: @AmntOrg Link in: Association of Member Nominated Trustees believe it is too complicated to deal with. Of £5-trillion of assets under management in the UK, about £2.2-trillion is in pooled funds, so the votes associated with that £2.2-trillion are generally not within the control of their investors, which includes the majority of pension schemes. The point of our project is that many pension schemes adopt all or some of the same Red Line policies, so all instructions to fund managers will be the same instructions and so be easier to manage. We do not expect pension funds adopting Red Line Voting to be charged by fund managers for this.
Since AMNT conference in June we have been having further discussions with proxy voting companies, corporate analysts and researchers, to establish whether any final changes are needed to tighten or clarify the explanation and guidance backing each Red Line. We will then finalise our Red Line Voting document, produce our information pack and finalise our Red Line Voting website that is currently under construction.
We are planning to launch the Red Lines in London between mid-October and midNovember – we are currently finalising a venue and date.
In the meantime, we are hearing that some pension schemes have already had initial discussions on the Red Lines and it is on the agenda of several upcoming board meetings. One of our members has indicated that her pension scheme has agreed that acceptance of Red Line instructions will be one of the selection criteria in their upcoming beauty parade of fund managers.
Please email us at email@example.com to tell us if your pension scheme is due to discuss Red Line Voting, is considering adopting the Red Lines and/or whether it will feature in your selection criteria. Also please let us know if you’d like in principle to attend the launch. Log in to the AMNT website to find a lot more information about Red Line Voting, including the Red Lines themselves. We would be delighted to help with any queries you may have.
In the run-up to the global climate change conference in December we expect there may be growing pressure on pension scheme trustees to respond to the challenge of climate change. Adoption of the Red Lines on the environment would be an important contribution.
With best wishes,
Janice Turner Co-chair AMNT
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