A number of pension providers have backed an "urgent call" for increased adoption of pass-through voting by asset managers, in a move that aims to empower investors to directly influence proxy votes in proportion to the assets they have invested.

The open letter to asset managers received backing from several pension providers, endowments, and wealth managers, collectively overseeing over £250bn in assets.

Signatories of the letter include: Scottish Widows, London CIV, Merseyside Pension Fund, Environment Agency, Smart Pension, EQ Investors, Tribe Impact Capital and Superannuation Arrangements of the University of London (SAUL), and Guy's & St Thomas' Foundation.

In the letter, the coalition acknowledged that asset managers wield "significant influence" over how public companies are run, arguing that their actions impact corporate governance "profoundly".

"Globally, the data shows that the three largest fund managers currently cast approximately 23 per cent of the votes at companies in the S&P 500, a percentage projected to rise to 40 per cent by the mid-2030s if current trends continue," the letter stated.

However, it argued that "regrettably" there has been continued evidence of a divergence between the voting behaviour of appointed asset managers, when compared with our investment principles and the expectations of our beneficiaries.

According to the letter, this disconnect was especially noticeable regarding environmental, social, and governance (ESG) issues, where some asset managers are regressing rather than progressing on their expectations of portfolio companies.

The coalition also highlighted the 2023 voting season as a key "inflection point", pointing out that while investors have witnessed declining support for shareholder proposals, including on climate issues, this is at odds with the global mandate for more decisive environmental action, with both the UN and Intergovernmental Panel on Climate Change (IPCC) calling for a rapid acceleration in commitments and action to help meet the goals of the Paris Agreement.

"The continued anti-ESG rhetoric has now made it impossible for global asset managers to fairly represent the opposing views of their investors," the letter continued.

"Some asset managers have already taken steps to enable their investors to choose how they want to vote. More asset managers should offer flexibility, ensuring capital owned by investors is voted in accordance with their stated values."

Recent advances in technology have also made client-directed voting possible, the coalition pointed out, granting asset managers the ability to afford the same voting rights to clients across both segregated and non-segregated mandates.

More broadly, the letter argued that pass-through voting is not just a best practice, but a "necessity" to ensure asset owners can meet their fiduciary duties.

"We are responsible for the investments of millions of beneficiaries, it is therefore critical that we steward their assets by considering and endeavouring to reduce systemic, material risks," it stated.

"Selected asset managers have stepped up to offer this functionality to our co-signatories who now have incredible voting flexibility; together we are calling for greater access to pass-through voting across the industry."

---