Peers debate AGM vote reporting and savers’ right to know

Earlier this week, the House of Lords debated an amendment to the Digital Markets, Competition and Consumers Bill which would give pension schemes the right to receive standardised comprehensive information from investment managers on how votes were cast on their behalf within one month of request.

When pension schemes or other savers invest in company shares these confer the right to vote at the AGMs of those companies, on the appointments of directors, the annual report and accounts and pay arrangements as well as resolutions tabled by shareholders - for example, in relation to reporting climate risk and setting decarbonisation targets.

Normally voting rights are exercised on savers’ and pension schemes’ behalf by their investment managers. However, existing arrangements are ineffective – investment managers do not have to report votes within a fixed timescale, they can exclude votes they deem insignificant, and they report at the level of the whole firm in a wide variety of formats, making it extremely difficult for pension schemes and savers to identify votes on their own shares. 

Whilst a taskforce appointed by the Department for Work and Pensions recommended that ‘standardised vote reporting’ by investment managers to pension schemes be made mandatory in 2021, The Financial Conduct Authority (FCA) have so far only proposed a voluntary approach.

Baroness Wheatcroft’s amendment, which has been covered by Investment and Pensions Europe, Net Zero Investor and a range of other publications, was supported by the Association of Member Nominated Trustees, which represents trustees of 700 schemes with more than £1 trillion of assets, as well as the fintech firm Tumelo.

Giving the FCA a duty to make rules and guidance requiring investment managers to provide the information to pension schemes - who would then be able to pass it to savers - should drive investment managers to improve their voting performance on key system-level risks such as climate and nature, and encourage pension schemes to switch to managers who manage these issues better. Recent analysis has shown extremely wide differences in the willingness of investment managers to vote for action on environmental and social issues – which should be made fully transparent to savers.

There was wide consensus across peers of all parties, including Baroness Sheehan, Lord Lucas, Lord Clement-Jones and Baroness Altmann on the need for progress – especially given that the Securities and Exchange Commission in the US has required standardised reporting for several years.

In response to peers calls for progress here in the UK, Ministers agreed to write to peers to explain the lack of progress and outline next steps.

You can read the short debate in Hansard and watch it on Parliamentlive.tv [the debate starts at 7.44pm].