A third of pension funds (31%) think they could be more actively engaged in the companies they invest in, research by the National Association of Pension Funds (NAPF) revealed today.
The survey, which comes against a backdrop of growing public concern over executive pay and responsible investing, also shows that pension funds are becoming more ‘hands on’ with the companies they invest in.
Over half (55%) of the respondents to the NAPF’s annual Engagement Survey said they have signed up to the landmark Stewardship Code, while 20% have committed to doing so in the future. The Code sets out guidelines for investors engaging with companies, and aims to boost long-term investment.
The survey, launched today at the NAPF’s annual Trustee Conference, showed that governance issues were of clear importance to UK pension funds, which manage over a trillion pounds in assets.
Half of the funds surveyed (48%) had reviewed their Social, Environmental & Ethical policy within the last year, and only 13% do not now have such a policy.
In the past year 67% of pension funds increased the scrutiny of their investment manager’s approach to corporate governance. And three quarters (72%) said that responsible investment either currently or will soon influence the selection of investment managers.
While good engagement has strong social and environmental benefits, the survey showed that there can be a financial upside too. Overhalf (52%) the funds surveyed said that engagement with investment companies had added value to the fund.
Joanne Segars, NAPF Chief Executive, said:
“The corporate governance climate has seen a big shift in recent years, and good engagement has risen up the agenda. Pension funds are responsible investors, and these findings show that they take engagement very seriously.
“The ongoing financial turmoil means the case for a long-term approach to investment is stronger than ever. Businesses should expect greater scrutiny from pension funds on everything from environmental strategy to boardroom pay.
“Despite the gains that have been made, more can always be done. Most funds delegate engagement to an investment manager. It is that relationship which needs to be reshaped if good corporate governance is to continue to develop.”
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