UK Asset Managers’ Voting to be on Display
Disclosure framework will offer asset owners needed insights that will underpin their stewardship efforts.
A new reporting template is set to offer asset owners increased visibility of their external asset managers voting behaviours.
The Vote Reporting Group (VRG), first established by the Financial Conduct Authority in 2022, has finalised a voluntary and standardised vote reporting template for asset managers to communicate to pension fund trustee clients on their voting activity. It has been taken on by the Pensions and Lifetime Savings Association (PLSA), which will incorporate the template with its existing guidance.
“The template helps set common expectations between asset managers and asset owners on proxy voting-related disclosures,” Lindsey Stewart, Director of Stewardship Research and Policy at Morningstar Sustainalytics, told ESG Investor.
“This should help cut down on the number and cost of bespoke requests asset owners make in this regard and improve the availability and quality of vote reporting across the board.”
Following a 2023 consultation and discussion paper, the VRG’s template considers themes including voting categories, voting rationales, supporting technology, and ownership and management.
The group confirmed the template will include standard fields, with an added field to distinguish between the country of incorporation and the country of trade, as well as some changes to field names and categories to better align with market terminology.
Vote category fields were also updated to offer more options for users and improve the accuracy of information provided by asset managers.
“Our goal is to improve the flow of timely, accessible and standardised information from asset managers to asset owners on voting activities to help the latter engage with and scrutinise intermediaries’ voting decisions and better align this activity with achieving good outcomes for their beneficiaries,” said Caroline Escott, Senior Investment Manager at UK pension scheme Railpen.
“We also believe that asset managers will themselves benefit from a consistent and standardised market-wide approach, enabling them to more efficiently meet the varying requirements of their clients – including their stewardship priorities.”
Best of both worlds
The PLSA has subsequently updated its Vote Reporting Template, which was first published in 2020, to account for the work done by the VRG.
It has absorbed elements of the VRG’s work, including incorporating standard vote category fields and a narrative rationale field alongside relevant elements of the existing PLSA template.
The PLSA has also decided to include fields to allow managers to outline the rationale for voting decisions on issues that are determined to be significant votes.
“We have been involved in the VRG since its inception – for us, it has served as a mechanism through which the evolution of the PLSA’s template has taken place,” said George Dollner, Policy Lead at the Pensions and Lifetime Savings Association (PLSA).
Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at UKSIF, said that the PLSA is the “natural home” for the new template.
“The PLSA’s existing vote reporting template has achieved some success in promoting transparency on managers’ voting practices and will be familiar already to many industry participants,” he said.
It is expected that the template will be operational and ready for firms to use from early 2026.
Voluntary and private
Despite previous calls for the vote reporting template to be mandatory, the VRG and PLSA have decided that it would remain voluntary.
“We would much rather have an industry-led solution that is looking to drive the outcomes the industry wants, rather than having something mandated,” said Dollner.
“Due to the level of engagement we had throughout the consultation period, we are confident that a mandated solution won’t be necessary.”
In addition, there are mixed views regarding the original proposal to establish the template as a publicly accessible registry.
Asset owners were largely in favour of the registry, noting this would promote transparency and accountability, improve data collection and reduce the need for ad-hoc reporting requests.
“Those less in favour of a public registry, largely asset managers, suggested firms could face legal, technical or compliance challenges from publicly disclosing a vote rationale,” the VRG said.
The VRG and PLSA plan to review client-led uptake of the template and the extent to which it is working in practice before assessing the need for a public registry.
“I think a public registry would be useful for someone who researches this kind of information, but it’s understandable why the group would allow time to operationalise the template as it stands before taking that step,” said Stewart.
The PLSA aims to publish technical guidance to support uptake of the template in the summer.
“Further alignment of expectations on stewardship between asset owners and asset managers, including when it comes to voting policies and vote disclosures, is very important, and it is good to see the VRG’s work on a new disclosure template now come to fruition,” said Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at UKSIF.
“Greater alignment in the coming years between asset owners and managers will help promote stewardship’s role in the wider economy and its ability to support long-term value creation.”
The post UK Asset Managers’ Voting to be on Display appeared first on ESG Investor.