Pension schemes are being offered a new fund service which allows trustees to set their own voting preferences.
This service, launched by AMX and asset manager DWS, in conjunction with Minerva Analytics and Northern Trust, will allow schemes to actively engage in stewardship on key issues such as climate change, board diversity and executive pay.
This initiative comes as the UK government legislated trustee reporting requirements on voting policies and launched a task force on pension scheme voting implementation.
This pooled fund service aggregates investor stewardship preferences and seeks to execute votes in alignment with these expressed wishes. Where aggregate investor preferences conflict within a pooled fund, voting instructions can be split accordingly.
These new pooled funds will be supplied on demand with the first solution expected to be a low-carbon equity offering.
Institutional investors in pooled funds have historically relied on the investment manager to execute a voting policy for the pooled fund. However, when investor preferences have diverged from the manager’s policy, they have been forced to accept the votes placed by the manager.
With this new service companiescan now receive proxy votes from the AMX DWS pooled funds aligned with investor preferences on key issue, particularly in relation to climate change.
The minister for pensions and financial inclusion Guy Opperman says: “I’m delighted to see AMX and DWS launch a product allowing trustees to choose a voting policy, which provides the same benefits of scale and efficiency offered by pooled funds. This will tackle, head-on, the industry practice of ‘invest in my fund, accept my voting policy’.
“I strongly hope this prompts other pension scheme trustees to challenge their fund managers about plans to offer this service and drives engagement with other key issues such as how their managers are engaging and voting on pressing issues such as climate change.”
Simon Howard, chair of the Voting Implementation Taskforce, says: “Voting is a key tool which allows pension funds to better meet their broader stewardship obligations, but pension funds have faced difficulties in getting their wishes reflected in the votes cast in their name.
“This new product from AMX and DWS shows these issues can be overcome and will allow funds to express views and get them implemented. The Taskforce on Pension Scheme Voting Implementation very much welcomes it. The UK needs to lead in stewardship and responsible investing, and innovative products like this – along with changes in attitudes – will be key.”
AMX head of business development Christopher Head adds: “This is another step on our journey at AMX to provide institutional investors with best-in-class fund structures which disrupt the traditional and outdated ways of doing business.
“It is a paradigm shift which will begin the transition of voting power from investment managers to the rightful institutional asset owners and will increase the speed by which important climate change and governance issues are addressed by corporate stewards across the globe.”
DWS global head of systemic investment solutions Fiona Bassett adds: “Providers of index solutions can no longer be facilitators of passive ownership of assets, so I am pleased that DWS and our partners are innovating in this space to move the market forward and bring about the reform that is now generally accepted is much needed.
“DWS’s index tracking expertise goes back decades, and we also have substantial resources committed to putting us at the forefront of ESG advances, so we have the capability to not only bring this solution to market but to make it a success.”
