The Pensions and Lifetime Savings Association (PLSA) has released its updated annual Stewardship and Voting Guidelines.

It aimed to ensure that the guidelines remain relevant and interactive amid the evolving regulatory environment, identifying five themes of particular relevance for 2024: Social factors, cybersecurity, artificial intelligence (AI), biodiversity and dual-class asset structures.

The guidelines look to provide a framework for pension scheme trustees and investors to ensure that companies are held to account on key issues during the annual general meeting season.

The new section on social factors urged trustees demonstrating good practice to assess the materiality of social factors, prioritise relevant ones and integrate them into stewardship policies, voting guidelines, and asset manager communications for effective risk management and systemic risk mitigation in pension portfolios.

Furthermore, the PLSA said that investors should make sure that companies are held accountable for their social impacts by aligning with evolving industry good practice.

On cybersecurity, the PLSA called for investors to ensure companies are managing cyber risks appropriately, and encourage them to explicitly disclose the governance and oversight structures in place to find and manage these risks, alongside providing timely reporting of any breaches and the measures taken in response.

While AI has the potential to generate significant opportunities, it can also generate risks, the PLSA warned, including the amplification of discrimination, proliferation of misinformation and privacy violations.

Biodiversity was another key theme identified by the PLSA, noting that changes in the natural world would have a direct impact on financial markets, supply chains and corporate profitability, with a knock-on effect on pension investments in sectors linked to biodiversity loss.

Pension schemes will therefore need to begin to treat biodiversity with the same prominence given to climate change.

The guidance also highlighted the “significant increase” in the number and proportion of initial public offerings that have dual-class share structures, with this growth in prevalence and potential loosening of regulatory requirements around the use of dual-class share structures raising “important questions” for investors concerned about the integrity and operation of capital markets.

“As pension funds navigate the complex global investment landscape, it's important that they blend an ambition to see good returns in the interest of scheme members with strong responsible investment practices,” PLSA head of DB, LGPS & investment, Tiffany Tsang, commented.

“One of the main ESG objectives is to cultivate sustainable value for both businesses and investors. The unfolding green transition is undeniably the most significant global growth avenue in the foreseeable future.

“It's pivotal for schemes not to sideline their stewardship duties, particularly in times when ESG considerations might be overshadowed."

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