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<p>The Government has taken a variety of significant steps to promote stewardship
and engagement on the part of institutional investors. A key focus has been to work
closely with the investment industry on initiatives involving both institutional investors
and asset managers, acknowledging that while some institutional investors engage directly
with companies, many others delegate to asset managers to engage on their behalf.</p><p>Specific
achievements include:</p><ul><li>a strengthening of the Stewardship Code to emphasise
engagement on companies’ long-term strategy;</li><li>the creation of an Investor Forum
to improve the amount and effectiveness of collective engagement by key institutional
investors;</li><li>the development, by the National Association of Pension Funds,
of a new Stewardship Disclosure Framework to encourage asset managers to report on
their activities and to enable investors to hold them to account.</li></ul><p> </p><p>The
Government has comprehensively reformed the legislative framework for corporate reporting
to boost transparency on company directors’ remuneration and ensure annual reports
are more focused on long-term company strategy. In this way we are encouraging companies
to report the information which is relevant to long-term stewardship investors.</p><p>The
Law Commission’s report on the fiduciary duties of investment intermediaries, commissioned
by the Government, concluded that fiduciary investors such as pension scheme trustees
should consider whether and how to engage with companies to promote their long-term
success, either directly or through their investment managers. The Government is now
taking forward the Law Commission’s recommendations in a number of areas, including
by consulting currently on whether the Occupational Pension Schemes (Investment) Regulations
2005 should be amended to require trustees to state their policy on stewardship with
reference to the Stewardship Code.</p><p>This work has been part of a broader commitment
– in response to the Kay Review of equity markets - to address the longstanding concern
that short-termism has impeded the creation of sustainable value by British companies.
The Government published a comprehensive progress report on the implementation of
the Review in October 2014. This is available online at: <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/367070/bis-14-1157-implementation-of-the-kay-review-progress-report.pdf"
target="_blank">https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/367070/bis-14-1157-implementation-of-the-kay-review-progress-report.pdf</a></p><p>The
Government is now undertaking further work in a number of areas, including:</p><ul><li>supporting
the work of the Financial Reporting Council to monitor how signatories to the Stewardship
Code are delivering against their commitment;</li><li>supporting the work of the Association
of Member Nominated Trustees (AMNT) to develop “Red Line Voting” – an initiative which
will enable pension schemes and other investors to adopt common voting positions on
a range of governance issues; and research to examine how shares are held by institutional
and individual investors – to provide an insight into how the Government can encourage
greater investment engagement.</li></ul>
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