Stewardship and responsible investment 2023

The policy and media spotlight continues this year on responsible investment, a complex arena which the PLSA remains committed to, seen most prominently in our stewardship work. Here we showcase some of our work to date, and we cast an eye on what’s coming down the track.

Taskforce On Social Factors

The PLSA is a member of DWP’s Taskforce on Social Factors, which was officially announced in Q1 2023 and aims to support pension scheme trustees and the wider pensions industry to identify, assess and manage the risks and opportunities around social factors in the investment process. Pinning down reliable data sources and metrics will be key; the taskforce also seeks to review issues such as labour rights as they pertain to health and safety, the supply chain and modern slavery, and inclusion and diversity. Many of these issues also feature as central themes within the PLSA’s own Stewardship and Voting Guidelines.

Plsa Stewardship And Voting Guidelines 2023

The PLSA published its annual guidelines in Q1 2023, to contribute to the work that pension schemes do in preparation for the Annual General Meeting season. The guidelines are designed to help pension fund trustees, investment managers and other institutional investors.

Each year, the PLSA reviews new regulations and trends on shareholder engagement to make sure schemes can make the best of their stewardship and voting opportunities.

Besides covering well-established topics such as board leadership and audit quality, the 2023 edition of the guide has a new chapter on workforce, taking stock of what companies should consider beyond the minimum when it comes to their employees’ wellbeing. The new edition also considers recent political and economic circumstances, with the cost-of-living crisis bringing a renewed focus on executive pay, while climate change continues to be at the forefront of investors’ minds and so features heavily. The document also sheds light on progress made in ethnic and gender diversity, but the PLSA believes more can be done; pension schemes are asked to consider what more they could do to move the dial towards greater equality.

Vote Reporting Group

The PLSA is also a contributing member of the Vote Reporting Group, which aims to enhance shareholder vote reporting by UK asset managers. The group is designing a comprehensive and standardised vote reporting framework for public consultation in mid-2023. It will consider key fields required, voting categories, inclusion of rationales for voting, the supporting technology, and where it should be hosted. This standardised approach should reduce the level of individual or ad-hoc vote reporting and allow for greater ease of comparison. It is also intended to help to ensure good outcomes in line with the FCA’s Consumer Duty and will align with the FCA’s ESG ‘transition’ theme for effective stewardship.

Towards A Greener Future

The PLSA has been a frontline voice on climate change investment risk issues, publishing work such as Towards a

Greener Future to help provide resources on this evolving issue; we will continue to monitor this landscape.

Most recently, the government’s 2023 Green Finance Strategy confirms the commitment to develop the country’s green financial market. The document made a number of pledges, including the following:

• A review of the Stewardship Code in Q4 2023 by the FRC, working with FCA, DWP and TPR, assessing whether the Stewardship Code is creating a market for effective stewardship.

• A UK Green Taxonomy will be a tool to provide investors with definitions of which economic activities should be labelled as green. Consultation is expected in Autumn 2023.

• Government will publish a thematic review of TCFD-style reports produced by schemes in scope.

The PLSA will remain close to these stewardship and investment issues and will seek to ensure that our members’ voices continue to be represented and that savers’ outcomes remain protected, while also keeping an eye on how we can contribute towards greater collective public goods where possible.