Pension funds and investment managers join forces to better embed stewardship into the investment process

Pension funds and investment managers have joined forces to launch a new steering group to examine how stewardship and a focus on long-term investment can be better integrated into the investment process to create sustainable value for savers and investors.

The steering group is a joint initiative between the Investment Association (IA) and the Pensions and Lifetime Savings Association (PLSA) and co-chaired by Richard Butcher, Chair of the PLSA, and Archie Struthers, Global Head of Investment Governance and Oversight at Standard Life Aberdeen.

The new group, which held its inaugural meeting earlier this week, brings together asset owners, investment managers and other relevant stakeholders to consider a range of issues aimed at strengthening the relationship between asset owners and investment managers, including:

• The proactive steps investment managers can take to understand and deliver their clients’ stewardship priorities.

• The role investment managers’ disclosures play in the information flow between investment managers and asset owners in their approach to stewardship, including how these disclosures demonstrate that the stewardship and investment approaches have been aligned with the clients’ wishes.

• The role of asset owners in ensuring stewardship plays a key role in their approach to manager selection and ongoing performance and oversight assessment.

• The role the contractual relationship and non-contractual arrangements can play in embedding a long-term focus and clear stewardship expectations, including a consideration of model mandates.

The work of the steering group will respond to the above issues raised by the FCA in its statement on building a regulatory framework for effective stewardship, and help deliver on the recommendations presented by the Asset Management Taskforce Stewardship Working Group in its report, ‘Investing with purpose: placing stewardship at the heart of sustainable growth’, which was published in November last year and aims to better embed stewardship into the investment process.

Richard Butcher, Chair of the PLSA, says: “The relationship between asset managers and asset owners is vital if we are to achieve the objective of investing for good. The PLSA’s 2020 report 'A Changing Climate: How Pension Funds can Invest for the Future' identified a number of barriers to succeeding with this objective. This included a lack of clarity of definitions, poor quality data, better climate stewardship and, critically, the need to set out requirements more clearly. If pension schemes are to deliver on an intention to invest in a climate-aware fashion they need to articulate that intention clearly enough that it will be delivered by their agents. This new group will develop ideas for overcoming these barriers and in doing so will significantly move the cause of investing for good forward. I’m personally and on behalf of the PLSA really glad to be involved.”

Archie Struthers, Global Head of Investment Governance and Oversight at Standard Life Aberdeen, says: “Asset managers must meet, and evidence how we are meeting, the increasing expectations of savers to manage their money in a responsible way. In short, our mandate to operate is dependent on us demonstrating our commitment to responsible stewardship. Our industry is best served if we collaborate closely with asset owners - and their appointed representatives - to manage savers’ assets on the basis of a common understanding, using definitions of success that better reflect society’s expectations. I am excited and feel privileged to be working with this august group of stakeholder representatives on behalf of the IA. Together we can better align and strengthen the common purpose we all share to invest for a more sustainable future.”

Sarah Woodfield, Stewardship Manager at the IA, says: “Investment managers have an important role to play in generating long-term returns for millions of UK pensioners. By working together with pension schemes, we can further embed stewardship within the investment process to ensure our members are delivering long-term sustainable value, that not only meets schemes’ financial objectives, but will also deliver on their environmental, social and governance aims.”

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