Smaller investors will have greater opportunity to flex their shareholder voting muscles as some of the world’s largest asset managers expand proxy voting services.
Three multi-trillion-dollar investment houses – including BlackRock the world’s largest – are rolling out plans to allow pooled fund and retail investors to make their voices heard at corporate AGMs.
This month in a letter to investors, BlackRock CEO Larry Fink, revealed an extension to its Voting Choice technology to individual investors in select mutual funds in the UK.
Fink says: “We believe that voting choice can empower asset owners to have a deeper and more direct connection to the companies they are invested in, and allow company management to better understand the views of these asset owners on critical governance issues.”
Fink says engagement between companies and their owners “is one of the foundational elements of our modern system of capitalism” and that advances in technology “enhance that engagement, broaden the touchpoints a company has with its owners, and bring more voices into our capitalist system”.
He adds: “This revolution in shareholder democracy will take years to be fully realised, but it is one that, if executed correctly, can strengthen the very foundations of capitalism.”
The announcement follows a similar move this month by the world’s second largest asset manager Vanguard which announced it would “pilot a number of proxy voting policy options for individual investors to choose from in several Vanguard-managed equity index funds”.
Meanwhile, this October, Legal and General Investment Management (LGIM), which has USD 1.6 trillion in assets under management, launched its ‘expression of wish’ digital service, allowing trustees to “identify the ESG issues that matter most to their members and encouraging direct dialogue between trustees, members and the industry”.
The initiatives follow expressions of frustration from UK government that pension trustees were unable to reflect defined contribution scheme members’ views on corporate governance.
In a statement made last year, pensions minister Guy Opperman said: “It is a disappointment to me that trustees still face challenges when seeking to exercise their rights to vote in line with their voting policies. In particular, where trustees are using pooled fund arrangements that otherwise represent cost-effective options for investing members’ money.”
Alison Robb, trustee at the NatWest Group Defined Contribution Scheme, which will be the first client to use LGIM’s expression of wish service, says scheme members are “increasingly engaged with what companies are in their pension” and they want to be heard on “the issues that they care most about”.
Robb adds: “This service will enable us as trustee to engage more closely with LGIM’s stewardship team and understand how they are voting in practice. This will help us develop our voting policies and communicate with our pension scheme members.”
Expansion of proxy voting services looks set to gain momentum as multi-billion-dollar asset managers also explore their options.
This October, Schwab Asset Management, which has USD645 billion in AUM, said it will pilot a proxy polling solution from global fintech firm, Broadridge Financial Solutions, which will canvas fund shareholders on key proxy issues.
Georgia Stewart, CEO of Tumelo which provides the tech for LGIM’s voting service, expects that by 2030 “every investor, retail and institutional will be able to vote on the shares in their pooled investments”.
Tumelo says: “With the big asset managers taking the lead, it is only a matter of time before others follow suit; from an investor’s point of view, why would you invest your money with an asset manager who doesn’t offer this service? Tumelo is in active discussions with a number of UK fund managers to launch truly scalable investor voting services in the near future.”
