London LGPS fund adopts a system of voting wherein decisions are made collectively based on the voting choices of their individual members.
In a significant move towards greater transparency and accountability, Southwark Council has adopted pass-through voting for its local government pension fund. This innovative approach empowers the pension fund to exercise greater influence over its investments in pooled funds, thereby aligning investment stewardship more closely with the fund's specific priorities and fiduciary responsibilities.
Southwark, which is part of the London CIV Pool, has set an ambitious target to become net zero by 2030. The council's decision to adopt pass-through voting is a strategic step towards achieving this goal, as it allows the pension fund to have a direct say in proxy votes for shares held in pooled investment vehicles.
Pass-through voting, a mechanism that has been gaining traction among pension funds, enables investors in pooled funds to cast votes at Annual General Meetings (AGMs) for individual investee companies. This democratises voting power, giving pension funds a voice in governance issues that affect their investments and fiduciary outcomes.
Clive Palfreyman, strategic director of resources at Southwark, emphasised the importance of pass-through voting in allowing Southwark to express its commitment to tackling the climate emergency. He noted that this approach will enable the council to engage more effectively with companies in its pooled funds, ensuring that its investments reflect its goals.
Southwark is not alone in adopting pass-through voting. LGPS Central pool, NESPF, the Camden Pension Fund, Bedfordshire, and other LGPS funds have followed suit, recognising the potential benefits of this approach. Southwark was one of the first LGPS funds to scale back its fossil fuel holdings, and its decision to adopt pass-through voting is a further demonstration of its commitment to sustainable investing.
Edd Micklem, global head of partnerships at Tumelo, a company helping managers adapt to a complex stewardship landscape, highlighted the significance of customising stewardship strategies to amplify pension funds' influence and ensure investments align with their goals. Tumelo's ProxySphere voting technology supports the pass-through voting with Legal & General Investment Management (LGIM), one of the managers that Southwark has implemented pass-through voting with. Southwark has also implemented pass-through voting with BlackRock.
As pension funds become more aware of their potential to influence the companies they invest in, the adoption of pass-through voting is set to become more widespread. This approach not only empowers pension funds but also promotes greater transparency and accountability in the investment industry, which is crucial for achieving Southwark's net zero goal and addressing the climate emergency.
- The adoption of pass-through voting by Southwark Council marks a significant step in environmental-science, as it allows the pension fund to directly influence companies' governance on climate-change issues.
- With Southwark's decision to adopt pass-through voting, the council's investments in pooled funds will now reflect its priorities in finance, specifically in aligning with its goal of achieving net zero by 2030.
- As more pension funds realize the potential impact they can have on the companies they invest in, investing in environmental-science and tackling climate-change could become increasingly essential, thanks to the democratization of voting power through pass-through voting.
