The AMNT is exploring putting in place a Red Lines fund for members to switch to if asset managers continue to ignore voting instructions

One year on from the introduction of its Red Line voting initiative, the Association of Member-Nominated Trustees’ is exploring ways to increase the pressure on asset managers.


 The programme is intended to give trustees more power over the companies they invest in. It does this by providing a set of tightly drawn voting instructions on environmental, social and governance factors (ESG) schemes can give to asset managers in part or in whole.

The initiative was motivated by the ‘shareholder spring’ in 2012, when large numbers of investors voted against key motions at annual general meetings, and the Law Commission’s 2014 report on fiduciary duty.

AMNT co-chair and driving force behind the programme Janice Turner says many trustees had effectively been asleep at the wheel before these wake up calls.

We thought ‘that’s not good enough’

“It was quite a shock to a lot of trustees that actually there was no way they could take part in the shareholder spring,” she says. “We thought ‘that’s not good enough’.”

The Law Commissioners gave trustees the backing they needed to push this issue, concluding that, if pension schemes believed a responsible investment policy would have a positive long-term impact on investment performance, they should take this into account.

Mixed results

When the AMNT found there was no single comprehensive voting policy that covered all three strands of ESG, the organisation went about creating one.

The Red Lines – a set of 22 guides including explanations of the policies and why they are important and voting instructions for asset manages – on 8 December. The results so far have been mixed.

Turner says many funds have adopted some or all of the policies, while many more – including one £10bn schemes – are discussing doing so with their advisers and asset managers.

Some are actually refusing to accept the trustees’ instructions

“What we are now hearing is that some of the fund managers have agreed to adopt these,” she says. “But some are expressing reluctance, and some are actually refusing to accept the trustees’ instructions.”

But the AMNT isn’t taking this lying down.

“We refuse to accept that trustees have no right to adopt their own responsible investment policy,” says Turner. “The Law Commission made it clear that it is our responsibility to have a responsible investment policy if we think it is going to have a material impact.”

Moving the money

And the only way to make more recalcitrant asset managers pay attention is for schemes to start moving their money elsewhere.

So to strengthen the hand of trustees, the AMNT is exploring establishing an alternative index fund that schemes can switch to if their pooled fund managers aren’t co-operating.

This would be a big step, and it is still early days, but the organisation has already been approached by one fund manager keen to provide such a fund.

The AMNT is currently gathering members’ views on whether such a fund is necessary, and what it should look like. Its polling seems suggests members are split fairly evenly over whether a Red Lines fund should be use an ESG index or simply track markets, and most are unwilling to pay extra for a Red Lines overlay.

If this project goes ahead it will make managers sit up and take notice. The Red Line voting guide has given trustees the tools to send their managers consistent and coherent messages about how they want their shares to be voted. A Red Line fund would give them a ready alternative to switch to if their managers ignore them.

In the long run, everybody will have to do this

So far, the initiative has done a lot in 12 months to highlight the importance to schemes of adopting an ESG policy to manage risks posed by factors from climate change to tax avoidance.

“In the long run, everybody will have to do this,” says Turner. “If Britain adopts the IORP II directive trustees will have to do it. Even if things don’t move in that direction, we believe it is still really important to play the best role we can in looking after the investments we’ve got.”

Janice Turner was speaking at an AMNT conference hosted by Willis Towers Watson