Technology that enables pension scheme members to vote on shareholder resolutions is being piloted by Legal & General Investment Management and is set for wider rollout due to the success of early trials.
LGIM is rolling out the functionality from fintech startup Tumelo to around 40 schemes. Members will be able to see all companies in their portfolio and vote on contentious resolutions. Investors are informed about new votes and vote results via email or in-app notifications.
As well as enabling members to express their wishes with regard to the activities of the companies they part own, the solution is seen as having the potential to drive stewardship activity, increase member engagement and assist trustees and independent governance committees in deepening their understanding of member views, particular with regard to environmental, social and governance issues.
Tumelo can give trustees and scheme sponsors deeper insights into the evolving attitudes of their members to issues debated at investee company board meetings.
The company, founded by three Cambridge graduates, was set up to challenge the university’s £7bn endowment fund to improve the way it invests.
Tumelo project manager Will Goodwin says: “It started at Cambridge where we attempted to get the university’s endowment fund to invest in the right thing. It has now evolved into something that schemes and providers can put in place to enable members to have their voice heard and have an impact.”
Interacting with members in such a direct way has the potential to create levels of engagement previously unheard of in pensions circles, often in unexpected ways.
Legal & General Investment Management head of DC Emma Douglas predicts that some members will vote in ways counter to the way trustees possibly would, but believes this is an inevitable part of what will prove to be a long and ultimately fruitful raising of understanding of the way companies work and the decisions made on the behalf of members.
Tumelo would, for example, enable scheme members who are Newcastle United fans to vote on resolutions at Sports Direct concerning the executive pay of CEO and NUFC chairman Mike Ashley.
“Yes, the genie will definitely not go back in the bottle. But I love the idea that we can get such levels of engagement. This is going to give people more of a sense of empowerment, and that has to be a good thing. We were so far away from that before Tumelo.”
Douglas says LGIM is piloting the system with two FTSE100 companies. So far 1,500 pension scheme members have placed over 3,000 votes on 75 different shareholder proposals, and 32 per cent of users are returning to vote on a monthly basis.
Members can select the subjects for which they will receive resolution notifications, based on the issues that are important to them.
“Members relate to stories and this will help hugely in helping us shape these stories – about how BP and Shell have engaged on net carbon, for example. This gives us permission to tell members about these stories.”
Given that Tumelo simplifies the resolutions to make them understandable for scheme members, is there a risk of bias in the framing of the alternatives?
“We will be working with them – spot checking, to ensure the wording is kept neutral,” says Douglas.
LGIM is planning to roll the proposition out to other schemes.
“Given how successful the early pilots have been we will be rolling this out soon,” says Douglas. “It will become a hygiene factor for schemes.”