Engagement becomes more important to pension funds

Research by the National Association of Pension Funds (NAPF) has revealed that 80% of pension funds now screen asset managers’ stewardship activity in their manager selection processes.

In addition, 60% of pension funds actively question prospective managers over their engagement policies, and 51% set out their expectations in mandate agreements. The findings were published in the NAPF’s 10th annual Engagement Survey. The survey also found that 94% of funds recognise that they have stewardship responsibilities as investors. In the first Engagement Survey in 2004, only one-third of pension funds considered stewardship activity when selecting a manager, but this has now changed, with much more emphasis placed on stewardship and engagement at managers by pension funds. Merely being a signatory to the United Nations’ Principles for Responsible Investing (UN PRI) is no longer sufficient; 60% of funds said that this was not enough and they questioned managers about their engagement work.

NAPF corporate government policy lead, Will Pomroy, said: “A decade on from our first Engagement Survey there is now clear recognition that environmental, social and governance risks can have a material impact on pension fund investments. This year’s survey showed pension funds increasingly pressing for the highest standards of stewardship by their asset managers in the interests of their members.”