A new report has called for greater clarity and articulation of stewardship expectations during the manager appointment process.
Released jointly by the UK’s Investment Association (IA) and Pensions and Lifetime Savings Association (PLSA), the report provides recommendations aiming to embed stewardship and strengthen the relationship between pension funds and investment managers.
The report is aiming to strengthen the relationship between UK pension funds and investment managers that are jointly responsible for £4 trillion of institutional assets.
The ‘Investment relationships for sustainable value creation: Alignment between asset owners and investment managers’ report offers recommendations to tackle a range of issues.
These include a lack of clarity on stewardship expectations, an overemphasis on short-term performance, and not taking enough account of the stewardship outcomes.
One recommendation advises “pension funds should clearly articulate their stewardship policies and investment managers should set out the stewardship approach for their fund through the appointment process with pension funds being clear how the manager’s approach to stewardship will be incorporated into the appointment decision”.
Another recommendation suggests the establishment of a governing charter to “set out mutual expectations on the promotion of long-term sustainable value”.
This will support various areas of business including performance reviews, responsibilities to the market, ongoing alignment of stewardship policies, and more.
Richard Butcher, co-chair of the steering group, and managing director at PTL said: “Stewardship is essential to building long-term value. Pension trustees and other long-term investors will not succeed in their ESG, climate and sustainability objectives unless they get stewardship right.
“The recommendations we have set out in our paper are designed to make the process easier and more robust – but their success depends on all parts of the investment chain leaning in.”
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