Asset owner series #2 — why voting alignment matters

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Author: Edd Micklem, VP Investor Partnerships, Tumelo

Voting alignment has been getting increased air time within the UK pensions industry as it steadily becomes a growing concern. As the phrase suggests, it refers to a scheme's stewardship and voting activity.

For those who aren't familiar with the concept, read on for details of what it is and why it matters.

What is voting alignment?

To give a definition, voting alignment refers to the compatibility between an asset owners' voting preferences and the voting behaviour of that asset owners' fund manager(s).

As explained in our first blog in this asset-owner series, pension trustees often delegate their scheme's AGM voting rights to fund managers.

One would assume — or hope — that, when voting on behalf of schemes, fund managers will reflect the schemes' statement of investment principles (SIP) or voting policies. This would show that they are pulling in the same direction, and not cancelling out each other's efforts.

This is the crux of voting alignment.

Why does voting alignment matter?

Alignment sits at the core of implementation statements (IS), as the statements require schemes to show how their statement of investment principles (SIP) has been followed.

It applies even to scheme's delegated voting activities, with trustees being encouraged to ensure that their fund managers' votes are aligned with relevant policies on exercising the scheme's rights.

Real impact on engagement efforts

When a scheme's votes are misaligned with the rest of the scheme's activities, stewardship efforts could be weakened, as Maria Nazarova-Doyle, stewardship head at Scottish Widows, highlighted in a 2022 report. In the report titled "Driving change through the voting chain", she said:

"Asset owners are passionate about delivering strong outcomes for their members and under regulatory pressure regarding their responsible investment credentials. Therefore, when the voting of their asset managers is misaligned with their own beliefs it becomes an area of frustration. In addition, some asset owners experience their asset managers voting in different ways with opposite rationales for their decisions, thus nullifying the influence a pension fund could otherwise have." [emphasis added]

Ms. Nazarova-Doyle suggests that alignment can be approached from at least two different angles: i) how a scheme's fund manager votes in relation to a voting policy, and ii) how a scheme's fund managers vote compared to each other. The takeaway? For a scheme looking to maximise its stewardship impact, a thorough look at voting alignment may prove enlightening.

Key focus of regulation

From a regulatory perspective, alignment will only become more important going forward. The report mentioned above, which was published by the Occupational Pensions Stewardship Council (OPSC), concluded that "asset owners should feel more empowered to engage their asset managers on their voting options". As voting is part of a scheme's stewardship efforts, the report highlights the importance of "better and more open, honest communication" between asset owners and managers.

Plus, the Taskforce on Pension Scheme Voting Implementation (TPSVI) is recommending pension trustees take a more active role in directing the votes cast by their fund managers. This reflects the TPSVI's focus on aligning asset managers' approach to voting with trustees' policies.


This article has highlighted the importance of alignment across a scheme's portfolio, but it is also important to consider and review what effective voting would look like:

  • Does a scheme's SIP continue to represent its values and principles?

  • Could a voting framework or policy be developed to support fund managers to better represent a scheme's views?

  • Have themes of particular interest (governance, biodiversity, etc.) been identified as significant votes?

As always with upcoming regulation, early prep will more often than not prove to be the right call. So here's a question to get the ball rolling: how closely do your scheme's votes reflect its stewardship priorities?

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