U.K. pension trustees want more climate action from managers

Asset managers for U.K. pension funds are not representing their clients' interests when it comes to climate change and should be required to do more, the Association of Member Nominated Trustees said Monday.

AMNT, the organization of private- and public-sector pension fund trustees with more than £1 trillion ($1.37 trillion) in collective assets, reviewed money managers' voting policies on climate change and found poor disclosure, vague statements and insufficient voting policies.

"Given how high climate change is on the regulatory agenda in the U.K., it is very surprising that only four fund managers had a voting policy and guideline that met AMNT's criteria," AMNT founding co-chairwoman Janice Turner said in a news release.

"It is clear that this issue requires urgent action, especially by the FCA (Financial Conduct Authority) as it relates to not only poor disclosure hindering market competition and the ability of trustees to make effective investment decisions, but also whether fund managers are doing what is necessary to tackle climate change in their approach to voting," Ms. Turner said.

According to AMNT, half of U.K. assets under management are in pooled funds where fund managers will not accept the voting policies of pension fund trustees.

For their review, AMNT compared its own climate-change policies with those of 30 fund managers. It found that 40% of fund managers either failed to disclose their voting policy on any ESG issue, did not reference climate change at all, or failed to set reasonable standards for taking action on climate change.

A particular concern was that for those managers with a voting guideline on climate change, it was limited to voting only if there is a shareholder resolution, which hardly happens in the U.K.

Only four fund managers — Aviva, Blackrock, Federated Hermes and Legal & General Investment Management — had voting policies and guidelines that met all five of AMNT's policies on climate change, while dominant proxy advisers Institutional Shareholder Services and Glass Lewis did not, according to AMNT's review.

AMNT has toughened its voting policy on climate change and now expects companies to report in alignment with the Task Force on Climate-related Financial Disclosures' standards. It also requires that any corporate lobbying be done in alignment with the Paris Agreement and that CEO pay be linked to sustainability targets, including climate change.

The trustees' group is calling on fund managers to revise voting policies and guidelines on climate change before the 2022 proxy voting season, to better align them with AMNT's climate-change policies.

It also wants fund managers to accept recommendations issued Sept. 20 by the government's Taskforce on Pension Scheme Voting Implementation that would give pension fund trustees more choice in voting policy. Trustees should also adopt their own voting policy and use it to hold fund managers accountable, AMNT said in the news release.