A new research calls for better clarity and articulation of stewardship standards during the process of management selection.
The research, released jointly by the UK's Investment Association (IA) and Pensions and Lifetime Savings Association (PLSA), aims to enhance the connection between pension funds and investment managers by instituting stewardship.
The purpose of the paper is to enhance the interaction between pension funds and investment managers responsible for £4 trillion in institutional assets in the United Kingdom.
The paper titled "Investment relationships for sustainable value creation: Alignment between asset owners and investment managers" provides solutions for addressing a variety of problems.
These include a lack of transparency on stewardship standards, a focus on short-term success, and insufficient consideration of stewardship outcomes.
One recommendation suggests that "pension funds should clearly articulate their stewardship policies and investment managers should set out the stewardship approach for their fund during the appointment process, with pension funds making clear how the manager's stewardship approach will be factored into the appointment decision."
A second proposal involves establishing a governing charter to "define shared expectations about the promotion of long-term sustainable value."
This will help several business areas, including performance assessments, market obligations, and the continuing alignment of stewardship principles, among others.
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.”
By fLEXI tEAM