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Insurers criticised over investment governance

Insurers unwillingness to regularly monitor the funds they invest in leaves savers in contract-based pensions “ill-served and poorly protected”, a report claims.

A report by responsible investment charity FairPensions, which is based on a survey of the UK’s 10 largest contract-based pension providers, says only one, Aviva, has signed the UK Stewardship Code.

Legal & General was the only company that confirmed it requests reports from external fund managers on voting activity, while none of the respondents said they ask for reports from external managers on their engagement activity with investee companies.

FairPensions also accuses insurers of a lack of transparency in SRI funds, with only the top 10 holdings disclosed on all of the providers’ websites.

It says: “There is no sense that insurance companies view themselves as having a responsibility to regularly monitor fund managers on their ‘stewardship’ of investee companies to ensure that they are well-governed and deliver sustainable returns for customers.

“The unwillingness of insurance companies to fulfil this role leaves contract-based pension holders ill-served and poorly protected compared to fund members in the best governed trust-based pension schemes.”

The report recommends that insurance companies should publicly disclose how they deal with environmental, social and governance issues, issue a statement of compliance with the UK Stewardship Code, monitor the voting and engagement activities of both internal and external asset managers and publicly disclose voting and engagement records, and become signatories to the UN Principles for Responsible Investment.

AWD Chase de Vere head of communications Patrick Connolly says: “It is completely unrealistic to expect insurers to keep tabs on all the underlying funds and managers in their pension contracts.”

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