Partnership to provide greater visibility on stewardship decisions amid efforts to increase communication across value chain.
A new platform to provide Fidelity International’s institutional clients with greater insight into stewardship decisions reflects trustees’ growing demand for “evidence that their fund managers are playing their part”.
The firm, which has US$812.8 billion AUM, has partnered with investor engagement fintech Tumelo, to launch a Stewardship Hub for pension funds, trustees and advisors. It is intended to enable clients to examine underlying fund holdings and the actions taken by fund managers on stewardship activities.
Tumelo CEO Georgia Stewart says trustees face increasing pressure to meet new regulatory requirements, often relating to management of ESG risks, which require them to evidence an enhanced level of manager scrutiny.
“They want to be able to see fund managers ‘walk the talk’, to see how the stewardship policy they write is being put into action on real votes and to have data all in one place so that it’s easy to compare and work with,” she said.
“Trustees need evidence that their fund managers are playing their part and for good stewardship, trustees must have good data.”
According to Fidelity, the hub will also help pension trustees produce Implementation Statements by providing access to statistics from the Pension and Lifetime Savings Association and copies of fund manager policies.
As well as Statements of Investment Principles or Implementation Statements required by the UK’s Pensions Regulator, which require reporting on fund managers’ stewardship activities, trustees of larger UK pension schemes must ensure their funds are managed and report in line with the recommendations of the Task Force on Climate-Related Disclosures.
“Meanwhile, signatories to the UK Stewardship Code are urged to seek beneficiary views, take account of beneficiary needs, and communicate activities and outcome of stewardship to them,” noted Stewart.
Pension scheme member votes spanning key ESG issues will also be available to view in the Hub, which will initially be trialled with Fidelity’s Master Trust clients.
“This centralised Hub enables better visibility, analysis and communication between fund managers and trustees, ultimately benefiting the thousands of members who look to their pension providers to represent their voices,” said Anne-Marie Brennan, Platform CIO and Head of Products at Fidelity International.
Increasingly asset owners, and pension schemes in particular, have expressed that their priorities have not fully been taken into account by asset managers through shareholder voting on ESG issues at annual general meetings (AGMs) or in discussions with portfolio companies as part of their engagement activities.
In December last year, responsible investment NGO ShareAction revealed a number of members of the Net Zero Asset Managers (NZAM) initiative and Climate Action 100+ (CA100+), were continuing to block efforts to improve performance at listed companies on ESG issues.
A 2021 report by ShareAction titled ‘Voting Matters’, which scrutinised how 65 global asset managers voted across 146 social and environmental shareholder resolutions during the most recent AGM season, revealed both CA100+ and NZAM initiative members voted against nearly a third of environmental resolutions.
Asset owners and the UK government have lobbied for change recently. In 2020, Pensions Minister Guy Opperman announced the formation of a new body to investigate barriers preventing investors’ voting policies from being implemented in pension funds.
The Taskforce on Pension Scheme Voting Implementation (TPSVI) was launched in response to concerns that asset managers of pooled pension funds were not voting in accordance with asset owner policies.
Fidelity’s Stewardship Hub will display the vote preferences of pension scheme members on company issues, including from climate change to gender equality, where Tumelo’s Shareholder Platform is made available to them. In line with TPSVI, Tumelo enables trustees to extend their fiduciary responsibility to stewardship and to make sure voting and engagement undertaken by fund managers is in the long-term best interests of members.
“Trustees need to analyse an asset manager’s voting policy and behaviours before investing, and thereafter,” said Stewart. “As was suggested by the TPSVI, trustees can overcome this challenge by creating their own voting policies to give to asset managers to follow – an ‘expression of wish’.”
Recommendations by the Department for Work and Pensions (DWP), which acknowledged that pension scheme trustees felt they were “being called on to do more” whilst managers were not providing necessary performance data, warned of the potential for regulatory intervention.
“If the market does not move more rapidly to offer Expression of Wish or equivalents across all pensions investment structures, we would recommend the Minister for Pensions to ask the Law Commission to propose legal frameworks that give investors the necessary rights,” the report said.
Stewart said that use of expressions of wish or split-voting – which gives trustees the option to vote on behalf of their scheme – are likely to become more popular in future, but would require trustees to have a better understanding of how well different managers’ voting policies compare with their schemes’ beliefs and principles.
“Trustees should have actionable insights drawn from high-quality data, so they feel educated and informed on stewardship issues. They should be empowered to hold their ground in dialogues with their asset managers and feel confident switching if there is a misalignment,” she said.
Aviva Investors partnered with Tumelo in March last year to allow workplace pension clients to log member voting data and send it back to end fund manager and stewardship teams, for instance. Tumelo also partnered with LGIM on a similar project in September 2020, which facilitated 4,400 Defined Contribution members across eight pension schemes to evaluate, assess, and log their opinions on pending shareholder proposals.