A study by the University Pension Plan of Ontario of the voting decisions of investment managers revealed a “certain level of misalignment” with asset owners, says Delaney Greig, the UPP’s director of investor stewardship.
The investment organization evaluated its proxy voting alignment with external investment managers to compare if they meet the UPP’s stewardship goals, alongside proxy voting data service provider OxProx.
“We were anticipating a certain degree of divergence but I think we were surprised by where we saw that. There [were] a couple of cases of managers where philosophically [we] felt that we had very close alignment — then we saw in the proxy voting that, . . . [it] didn’t necessarily carry through into voting.”
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The results are giving the UPP an opportunity to reflect on its own voting priorities and how closely aligned its partners are to it, which will help in evaluating manager oversight and engagement, she adds.
“The UPP project helped to validate what the research is telling us, which is that there are indeed voting misalignment issues in the market,” said Dustyn Lanz, chief executive officer OxProx, in a press release.
Greig was surprised to see manager tendencies aren’t entirely black and white on progressive investment issues, noting some managers with strong climate stances could be lacking in diversity, equity and inclusion efforts or human capital issues.
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Following the study, the UPP held conversations with some managers to understand the nuance of deciding when and how to exert influence with a company. Proxy voting is a meaningful tool for asset owners to express their interest to a company, but when a manager owns a large portion of a company in a concentrated portfolio, the avenues to send signals are very different, she adds.
“Votes against management carry a much different weight. They may be more reticent to be voting against management but that doesn’t mean they aren’t concerned about the same thing.”
Greig wants to see this evaluation practice become more common with asset owners based in North America, akin to Europe, and adds the UPP will do it again in a few years to evaluate shifts in their managers’ decisions. “We want to show what is possible and what it takes to do this, so that other asset owners would be inspired to do the same.”
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