Stewardship To Expand Across Asset Classes

The HM Treasury-led Asset Management Taskforce has today outlined a series of twenty recommendations to place stewardship at the heart of an agenda to ‘build back better’ post-coronavirus. The proposals would assist market participants, such as investment managers and asset owners, to expand their stewardship activity across different asset classes, including bonds, and create a Council of UK Pensions Schemes to support higher standards of pension stewardship - ultimately to the benefit of the millions of savers across the UK.

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The report, 'Investing with Purpose: placing stewardship at the heart of sustainable growth’, produced by the Asset Management Taskforce – a group of the UK’s leading investment managers, stakeholders and regulators, led by HM Treasury and supported by the Investment Association (IA) - provides a blueprint for integrating stewardship into the investment process and seeks to cement the UK as a global centre of excellence in stewardship practice.

Achieving this will require action across three main pillars: strengthening stewardship behaviour, which includes practical steps to further develop how stewardship works in practice; stewardship for clients and savers by generating sustainable value and achieving savers’ goals; and creating an economy wide-approach to stewardship. The recommendations connect investment decisions more closely with climate change and sustainability considerations, as well as strengthening the relationship between savers’ broader investment goals and their financial returns. This includes:

• Expanding stewardship beyond the traditional focus on equities, so that investment managers can take a more active role as bondholders. Given that just over 30% of assets under management are placed in bonds, the investment industry will ramp-up its work with companies and further develop stewardship practices in this asset class.
• Strengthening escalation of stewardship by providing guidance to investment managers on bringing forward their own resolutions when companies are not responding to their concerns, and asking Government to review the rules which govern shareholders’ ability to bring their own resolutions.
• Embedding better stewardship in pension assets, which represent 40% of the assets under management in the UK, by seeking Government support for the establishment of a Council of UK Pension Schemes to promote and facilitate high standards of pension stewardship. UK pension schemes should also be required to explain how their stewardship policies and activities are in the best interests of scheme members.
• Improving companies’ reporting and disclosure to ensure consistency and comparability. This includes supporting the Government’s recent announcement to change company law to require all large UK incorporated companies (public and private) to report in line with the Taskforce on Climate-related Financial Disclosures (TCFD).
• Widening the adoption of the new UK Stewardship Code beyond investment managers which are expected to be signatories, to all service providers involved in the investment process so that all participants follow the same high standards with respect to stewardship.

John Glen MP, Economic Secretary to the Treasury, said:

“The UK’s stewardship standards are internationally respected and contribute to our standing as a leading global asset management centre. These recommendations will encourage more effective stewardship right across the investment chain and help the asset management sector continue to support sustainable activity as we build back better and greener.”

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Keith Skeoch, Chair of the Asset Management Taskforce’s Stewardship Working Group and Chair of the Investment Association, said:

“Investment is a critical part of how we shape our economic future and will have a profound influence on the quality of the recovery from coronavirus crisis, not just in the UK but around the world. We need to seize this moment to ensure stewardship is further embedded at the heart of the investment process, so that we can create long-term sustainable value that benefits businesses, communities and the environment.”

Catherine Howarth, Chair of the Asset Management Taskforce’s Stakeholder Working Group and Chief Executive of ShareAction, said:

“Wise and determined stewardship by institutional investors will help the UK to recover at pace from the current crisis. It will also strengthen the UK’s ability to handle future threats to our prosperity, such as climate change and biodiversity loss. We hope to see swift adoption of the 20 recommendations in this report, thereby cementing the UK’s existing strong reputation for stewardship of assets.”

Andrew Ninian, Director for Stewardship and Corporate Governance at the Investment Association, said:

“Today’s report looks to further build on the UK’s long history as a globally recognised leader in stewardship. The recommendations are ambitious and far-reaching with the aim of expanding stewardship across all asset classes and ensuring it is embedded into the investment process.”