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But coordination between asset owners and managers on sustainability-related stewardship has come under increasing scrutiny in recent years. As evidence of the financial implications of climatechange become more apparent, and other systemic risks gain prominence, fractures have begun to show.
The DWP issued a consultation last October on proposed changes to the Occupational Pension Schemes (ClimateChange Governance and Reporting) Regulations 2021 to require trustees to calculate and disclose a portfolio alignment metric to show alignment with the goal of limiting climatechange to 1.5 degrees Celsius.
Despite strong progress by asset managers on stewardship since 2020, voting data disclosure and new policies “are not being matched by real-world action”, reports ShareAction.
According to Manning, the FCA is keen to identify regulatory constraints on collaborative engagement, which has been used increasingly by asset owners and managers in recent years, particularly to address systemic environmental risks, such as climatechange and accelerating biodiversity loss.
In October last year, the DWP sought views on proposals to amend the Occupational Pension Schemes (ClimateChange Governance and Reporting) Regulations 2021, requiring reporting on pension schemes’ alignment with the Paris Agreement’s 1.5°C C temperature pathway.
The concept of assessing what effective stewardship should look like was first introduced by the FCA in 2019 in a joint effort with the Financial Reporting Council (FRC), setting the groundwork which helped define what the minimum expectations should be for financial services firms investing on behalf of clients and beneficiaries.
Stewardship is widely considered one of the most effective tools in an asset owner’s toolbox to ensure companies are prioritising ESG-related issues, such as mitigating the effects of climatechange. . “ The DWP will assess whether further guidance is needed in H2 2023. . Plotting a path to Paris .
A recent Financial Conduct Authority (FCA) discussion paper asked for feedback on possible regulatory change needed to support collaborative engagement and systemic stewardship, while the Financial Reporting Council is due to lead a review of its StewardshipCode. Also speaking at the Stewardship Summit, Mark Manning , Strategic Policy Advisor on (..)
“There’s been a lot of grumbling from investment managers about vote reporting requests from pension funds in particular,” he said. Samantha Chew, Stewardship Lead at Aegon UK, which is unable to consider divestment of its largely passively-managed portfolio, said poor transparency and timeliness of vote reporting were two longstanding barriers (..)
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