Thursday, May 21, 2015
Red Line Voting
"I’m writing to invite you to play a part in bringing into being, on 24th June, a new asset-owner approach to engagement and voting. It will open the way to restoring asset owner control over engagement and voting policies relating to investments held in pooled funds.
The Association of Member Nominated Trustees will, at its summer conference in London, be asking its members to vote to bring Red Line Voting into existence. Red Line Voting is a new approach developed over the last two years to address the problem faced by pension schemes that invest in pooled funds – the reluctance of fund managers to allow pension schemes to direct how the votes associated with their investments should be cast.
I consider this to be an extremely important matter. According to the Investment Association, of the £5-trillion of assets under management in the UK nearly half is invested in pooled funds. It is right and proper that the trustees of pension schemes should be able to direct the responsible investment policy for these investments. Up to now fund managers have said that it would be too difficult to manage multiple voting instructions from many pension schemes.
So AMNT has developed a new approach. With expert technical support their working group of member nominated trustees, of which I am one, has developed a series of tightly drawn Red Lines – voting instructions – covering the range of environmental, social and corporate governance policies and applicable to all the companies in which the fund invests. Pension schemes that choose to adopt some or all of them instruct their fund manager to engage and vote accordingly. The fund manager is at liberty to vote contrary to a Red Line if in their judgement that is the appropriate action, but they have to explain to the client why they did so.
Red Line Voting makes it easy for the fund managers to manage: they may receive instructions from many pension schemes, but they are all the same instructions so votes can be allocated accordingly.
This new approach will be of great assistance to the pension schemes that do have a responsible investment policy as it will undoubtedly lead to greater support for their policies when votes are cast.
Many pension schemes that do have a corporate governance policy do not have a social or environmental policy, so Red Line Voting is a way to close that gap. And above all it will enable, for the first time, many small and medium sized pension funds to respond to the growing calls for them to protect their assets through responsible investing.
To take part in the June 24th meeting you need to sign up to AMNT (it’s free) at http://amnt.org and then register for the conference (also free). You can also find more details about Red Line Voting on the website, and once registered as a member you will be able to see and comment on the draft Red Lines.
The conference is from 10am to 5pm at 160 Queen Victoria St, London EC4V 4LA.
I urge you to join and accompany me to the AMNT conference: with your support we will see the launch of a new surge in asset owner engagement with responsible investment.