The push to require pension scheme trustees to develop voting policies on environmental, social and governance (ESG) issues (which are considered to be financially material to their investments) is meeting some resistance from fund managers it seems.
Earlier this year, the Association of Member Nominated Trustees (AMNT) complained to the FCA that trustees are not able to exercise their voting rights due to the refusal by the fund management industry to accept client-directed voting in pooled fund arrangements – most notably the AMNT’s Red Line Voting policies which were launched at the end of 2015. Red Line Voting is intended to allow trustees to give their fund managers a series of tightly drawn voting instructions spanning ESG policies, essentially setting out the “red lines that UK-listed companies should not cross”.
However, the AMNT claims that fund managers are still unwilling to accept client-directed voting in pooled fund arrangements. The AMNT considers this to be a market failure and has asked the FCA to take urgent steps to investigate and propose remedies. This call has now been taken up by the Treasury Committee. The Committee has written to the FCA stating that expert witnesses at its evidence session, Green finance: unlocking private capital for net-zero, agreed that the issue amounts to a market failure and recommended regulatory intervention.
The Committee has asked the FCA to comment on six questions including what action it has taken in respect of the AMNT complaint and whether it intends to investigate the alleged failure of the fund management industry. The FCA’s response is requested by 5 November 2019.