Good governance allows pension schemes to act as effective stewards of their assets, positively influence corporate behaviour for the better, and delivers beneficial outcomes for savers. The GGIC argues that sustainable growth requires good governance, and that UK pension schemes need to be empowered to help companies grow within private and public markets frameworks that support efficient and effective long-term value creation. The campaign will shine a light on the evidence that effective corporate governance and shareholder rights help companies perform better by helping ensure they are well-run, transparent, and accountable. Well-managed companies that make decisions in the best interests of all shareholders are more likely to grow sustainably, avoid costly mistakes, and attract long-term investment.
The campaign also points to growing geopolitical uncertainty and jurisdictions rolling back shareholder rights and governance mechanisms as an opportunity for the UK to become investors’ destination of choice for stable policy, high-quality companies and, through this, sustainable economic growth.
Following the publication of the Financial Services Growth and Competitiveness Strategy last week, the group looks forward to working with the UK government on a governance-focused approach that aligns with its growth mission, helps achieve thriving UK companies and supports flourishing capital markets. The GGIC is particularly encouraged by the government’s commitment to establish a Listings Taskforce to support businesses to list and grow in the UK. As longstanding, pragmatic investors, pension schemes know how to support and grow companies through to maturity. In our engagement with government stakeholders, we will highlight how GGIC and pension scheme knowledge can support in making the initiative a success. GGIC also welcomes other reforms aimed at improving liquidity for UK listed companies, for instance around encouraging retail investment.
Caroline Escott, Head of Investment Stewardship and Co-Head of Sustainable Ownership at Railpen said: “Today’s launch comes at a vital moment for the UK’s capital markets and economy. Over a year on from the general election, this government is making welcome headway on its reform agenda, providing the stable policy platform needed on issues including pensions, financial services, planning and industrial development to overcome the country’s economic challenges and kickstart growth.
“Damaging to this drive is the misperception that the UK’s historic world-leading corporate governance and shareholder rights mechanisms unnecessarily hinder growth, rather than providing the UK with a key differentiator and supporting long-term value creation in the interests of everyday UK savers. Last year’s UK listing changes watered down many longstanding shareholder rights – changes which to date do not appear to have had a positive effect on the UK IPO environment. Our campaign group of leading UK pension funds, who are already extensive investors in the UK economy, will instead put the evidence-based, ‘governance for growth’ case to policymakers, and will work with others across industry to highlight how good governance goes hand in hand with a growing economy and thriving capital markets.”
Wyn Francis, Chief Investment Officer at Brightwell said: “Strong governance shouldn’t be viewed as a barrier to growth but a catalyst for it. Well-run companies that are transparent and accountable are more likely to succeed over the long-term. That’s how we deliver sustainable returns for members and support a thriving UK economy. This initiative is about making sure our voice is heard in shaping the future of capital markets because good governance isn’t just good practice, it’s good business.”
Policy pillars and priorities:
The campaign’s advocacy will be focused around four policy pillars, which put saver needs at the heart of capital markets policymaking:
- Securing pension schemes a formal seat in policy discussions on the UK’s capital markets and corporate governance standards, including via participation in the new Listings Taskforce;
- Avoiding artificial divides between private and public markets, helping to smooth the journey of companies as they scale and mature;
- Working collaboratively with government to promote the UK's governance standards internationally, including on international trade missions;
- Empowering UK pension schemes to help companies grow by recognising the importance of shareholder rights.
While the campaign will focus on longer-term, strategic relationship-building and awareness-raising with political and policy decision-makers around these pillars, in the immediate term the group will focus engagement on the Draft Audit Reform and Corporate Governance Bill. In conversations, GGIC members will welcome the government’s commitment to reform, make the case for company shareholders to be able to fully and genuinely interact with their portfolio companies, support large private companies to have high-quality audits, and advocate for the benefits of better disclosure being provided to company boards and investors on voting outcomes by companies that list with unequal voting rights.
Caroline Escott added: “UK pension schemes naturally want to see our capital markets succeed, ensuring we can access well-run, high-performing companies that help deliver good outcomes for members and the economy more broadly. Our fiduciary duty means we’re in a unique position in the financial system, motivated purely by everyday savers’ interests and delivering over the long-term, rather than short-term fee generation. At a time when government is urging UK pension schemes to boost the economy, it’s fundamental that we have a seat at the capital markets and corporate governance policymaking table to make the case for sustainable growth. Last week’s announcement that the government will establish a Listings Taskforce encouraged many across the sector and provides an opportunity to set a precedent around involving pension schemes and utilising their expertise. We hope to have productive conversations with the government on this possibility.
“As well as having the space to convey our views, we want to work collaboratively with government on international trade missions to celebrate the UK economy. As has been pointed out elsewhere, in addition to structural factors, markets are in part driven by prevailing investor sentiment. We want to work with ministers to help change the mood music on the UK and tell an optimistic story that gets people excited about investing in Britain because of its governance standards. Our involvement will also add substance to these initiatives by integrating investor-to-investor knowledge and understanding into the discussions.”
Craig Heron, Director of Public Markets at Railpen, added: “We know there’s no silver bullet when it comes to getting the UK’s capital markets and economy growing again. Much of the discussion this year has so far focused on ‘liquidity fixes’, which while valuable, ignores the importance of enticing investors with the ability to positively shape the companies they invest in. We believe that a ‘governance for growth’ approach helps take us some way along that road, and we stand ready to support and accelerate the government’s growth objectives with that vision in mind.”
The GGIC includes:
• Brunel Pension Partnership
• The Church of England Pension Board
• People’s Pension
• Brightwell
• Railpen
Supportive comments:
Faith Ward, Chief Responsible Investment Officer, Brunel Pension Partnership said: “We believe good governance and an enabling environment for investors to ensure long-term value creation are paramount to meeting the objective of growth in the UK. We stand committed to supporting policymakers and regulators in achieving a thriving UK economy.”
John Ball, CEO, Church of England Pensions Board said: “There is a vital role for UK pension funds to play in contributing to and shaping a growing UK economy that can serve the interests of the many millions of UK pension savers. Whilst ensuring an efficient market is vital to the government’s growth agenda it is also important that we do not throw away the lessons learnt of good corporate governance and of past corporate failures and financial crises. This campaign places good corporate governance at the heart of an agenda to support long-term sustainable growth in the UK. The UK can be the home of best practice and corporate governance attracting both domestic and international investment in well governed companies. We are excited by the role we can play in joining with peer funds to support this vital agenda.”
Leanne Clements, Head of Responsible Investment, People’s Partnership, provider of People’s Pension said: “Now more than ever in this complicated policy landscape, it’s essential that owners of capital come together to proactively engage with UK policy makers on key corporate governance issues that will impact millions of savers. We are very pleased to be involved in the creation of this group and look forward to playing an active role going forward.”
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