Responsible investment charity FairPensions has published the first comprehensive analysis of  the UK's leading asset managers' approach to the Stewardship Code. Despite "encouraging signs of improvement", FairPensions' research reveals that 41% of the asset managers fail to publicly disclose information relating to their engagement activities and just 31% provide detailed explanations of their engagements. The wide variation in disclosures also acts as a significant impediment to comparative analysis, claims the report.

Many asset managers will probably disagree with FairPensions' methodology; a number of houses with well-established governance teams have not scored as highly as might be expected. However, on the basis that it is well known that they disclose their voting and engagement directly to their clients (as opposed to the general public) their scores will be skewed under the FairPensions schema. Others may question the merits of allocating two points for the  disclosure of every vote, (as opposed to just those withheld from management) and only one point for providing a rationale on contentious issues.

Conflicts of interest disclosures are particularly problematic, according to the research, with a "disappointing 'tick-box' approach also evident". In light of this, FairPensions is therefore calling on the Financial Reporting Council to publish guidance so as to give some meaning to what a "robust" policy should contain.

As with the UK Governance Code, the Stewardship Code is a comply or explain standard rather than a hard and fast set of rules. FairPensions is concerned that this leaves open the possibility of very weak disclosures with nevertheless claim to delivery compliance: “In our view, the early evidence on disclosure should leave the FRC in no doubt that a laissez-faire approach to encouraging robust stewardship will fail to drive the change which is so necessary to protect the assets of ultimate owners and beneficiaries.”

FairPensions director of engagement Louise Rouse said: "The financial well-being of millions of individuals depends on the decisions made by these leading managers. Yet in too many instances, public disclosure of their decision-making is either non-existent or limited to the provision of practically useless summary statistics."

Further Reading

The full report can be accessed here >>

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