A third (31%) of pension funds think they could be more actively engaged in the companies they invest in, according to research by the National Association of Pension Funds (NAPF).
More than half (55%) of respondents to the NAPF’s annual Engagement survey, said they have signed up to the 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 also showed that governance issues were of clear importance to UK pension funds, which manage over a trillion pounds in assets. Nearly half (48%) of the funds surveyed had reviewed their social, environmental and ethical policy within the last year, and only 13% do not have such a policy.
In the past year, 67% of pension funds increased the scrutiny of their investment manager’s approach to corporate governance. 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 as well. Over half (52%) of the funds surveyed said that engagement with investment companies had added value to the fund.
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), 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 that needs to be reshaped if good corporate governance is to continue to develop.”
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