Policy guidance update: responsible investment

Caroline Escott surveys the PLSA’s specially produced guides to five key issues.

At the PLSA, providing policy support to our members means a few different things. It of course includes the research and advocacy which shapes the environment within which the institutional investment chain operates. It also means providing proactive, practical and tangible help for our members to demystify the rapidly changing pension policy framework.

Our consistently most popular guides relate to investment and responsible investment. The download statistics alone demonstrate that these resonate with fund and business members alike and, with the plethora of new disclosure requirements placed upon trustee boards, IGCs and LGPS funds, you can see why.

By the time you’re reading this, we will have produced five pieces of accessible written guidance in 2020 as part of our ‘Investing for Good’ programme of work. Each guide is designed to help schemes of all shapes and sizes understand exactly how to become active owners of their assets and undertake effective and meaningful responsible investment approaches on beneficiaries’ behalf.

Our 2020 guides can be split into two categories:

1) Regular PLSA guidance – updated each year

  • AGM Voting Review 2019. Produced in January each year, this report analyses and highlights the key trends from the previous year’s voting across the issues which matter most to investors – such as executive remuneration, climate change, audit and directors’ elections. 
  • PLSA Stewardship Guidance and Voting Guidelines 2020. The PLSA has issued Voting Guidelines in early February every year since 2013. The Guidelines build upon the findings of the AGM Review to offer guidance to investors on how they should consider exercising their vote during the following year’s AGM season. Consistently one of our most popular pieces of guidance, in 2020 we updated it to include detailed advice on how schemes should build stewardship, engagement and voting policies. We also explained issues such as securities lending, exercising your rights in pooled funds, and how to do your due diligence in deciding whether to support a climate change resolution.

2) One-off policy guidance

  • Engaging the Engagers: a practical toolkit for achieving effective engagement through your managers. The PLSA recognises that in reality most pension schemes will delegate their stewardship and engagement activities to their asset managers, while the trustee board retains strategic oversight. With increased policymaker scrutiny on how pension schemes act as effective stewards of their assets, the PLSA worked with The Investor Forum to suggest practical tips and questions for scheme investors to hold their managers to account on stewardship and cut through the ‘greenwash’. Published July 2020.
  • Implementation Statement guidance. The 2018 and 2019 changes to both the Investment Regulations and the Disclosure Regulations require trustees to disclose how their investment ‘actions’ have followed their investment ‘intent’ as set out in their Statement of Investment Principles (SIP). This is a new discipline for both DC and DB schemes, so the PLSA worked with a group of experts – including regulators, government officials, schemes and their service providers – to offer concrete suggestions for how to produce good practice implementation statements. Published August 2020.
  • Vote Reporting Template. To produce compliant implementation statements, trustees need consistent, comparable and mandate- or fund-level information on the voting (and engagement) activities undertaken by their managers. However, managers are not required by regulation to produce their information in this way. To make gathering this information easier for trustees, the PLSA has produced a ‘first version’ Vote Reporting Template for asset managers to use. The spreadsheet itself is accompanied by separate guidance for asset owners on how to use the information for their disclosures, as well as for asset managers on how to fill it out. Although the initial template was launched in September 2020, the PLSA will be reevaluating what’s needed over the next year as the first reports are produced and in light of the ever-evolving regulatory context.

Policymaker scrutiny of schemes’ responsible investment activities is only going to grow as the UK seeks to ‘Build Back Better’ in the wake of coronavirus and in advance of the UK hosting COP26 in November 2021. We know that trustees are keen to access impartial and credible support to help them hold their advisers, managers and other service providers to account. We hope that our 2020 responsible investment guides will continue to resonate with schemes, and we look forward to continuing to bring regulators, government officials and our members together to support scheme investment in members’ best interests.