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80% of pension funds screen asset manager’s stewardship activity, says NAPF survey

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The National Association of Pension Funds’ (NAPF) tenth annual Engagement Survey looks at pension funds’ engagement with their investee companies – an activity which is generally delegated to their asset managers.

Pension funds responding to the survey were almost unanimous (94%) in their recognition that they have stewardship responsibilities. While this consensus has been cemented in recent years this year’s survey highlighted a strong new development, the increasingly active approach pensions funds have adopted in factoring stewardship activity into the selection of asset managers.

The first NAPF Engagement Survey, conducted in 2004, showed that one third of responding schemes’ considered stewardship activity when selecting investment managers or consultants. Ten years on, pension schemes’ attitudes have changed markedly, with 80% of respondents to our survey stating that they now take stewardship activity into account when selecting their investment managers and for over 50% this extends across all asset classes.

This year’s survey asked schemes how they screen asset managers’ during the selection process with respect to their stewardship activity. Pertinently the results demonstrated that this is not a mere tick-box exercise for most funds; 60% responded saying they are not content for managers to simply be a UN PRI (Principles for Responsible Investment) signatory but will instead actively question prospective managers about their stewardship approach. 

Once selected, it is evident that pension funds’ scrutiny of their managers’ stewardship activities continues to grow too. More time is now spent reviewing reporting; more attention being paid to the votes cast and in turn more questions are being asked on a more regular basis.

Will Pomroy, Corporate Governance Policy Lead, NAPF, says: “A decade on from our first engagement survey there is now clear recognition that environmental, social and governance risks can have a material impact on pension fund investments and that these issues need to be managed through ongoing engagement with companies and the exercising of voting rights. This recognition has rightly in turn been translated into the selection of asset managers; from one third to 80% considering the stewardship approaches of asset managers in a decade is a real step change with significant implications.

“This year’s survey showed pension funds increasingly pressing for the highest standards of stewardship by their asset managers in the interests of their members. This is confirmed by the interest in our new Stewardship Accountability Forums. Our Accountability Forums are designed to enable pension funds of all sizes to constructively quiz leading asset managers about their approach to being good stewards of client assets.  The first forum, held today, has attracted senior participation from three of the largest asset managers and more than 30 pension funds representing in excess of £230bn of assets under management.”

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