UK House of Lords debates transparency improvements for FS bill
January 31, 2023
The UK’s House of Lords has debated proposed amendments to the Financial Services and Markets Bill to improve voting transparency.
On January 30, the Lords considered revisions to voting reporting, which were recommended by Baroness Sheehan and Baroness Hayman.
Earlier this month, Baroness Hayman argued the current drafting of the bill failed to align the UK’s financial services sector with net zero.
During the bill’s committee stage, Baroness Sheehan proposed regulation which would require pension funds to provide information on request to beneficiaries.
The regulation would also require the Financial Conduct Authority (FCA) to ensure fund managers, personal pension providers, and insurers give information on request to clients.
The amendments are designed to improve investor’s’ ability to exercise their voting rights and facilitate the UK’s journey to net zero.
Baroness Hayman said: “This group of amendments aims to ensure that the future regulatory framework of the financial services sector supports the Government’s net-zero and nature commitments.”
Baroness Whatcroft added that individual investors “want to see evidence that the company is taking its net-zero responsibilities seriously.”
The amendments would also support the UK government’s expectations laid out in ‘Greening Finance: A Roadmap to Sustainable Investing’, which was published in October 2021.
In the report, the Treasury stated it expected pension funds and investment managers to be transparent about their engagement and voting.
To achieve this, pension funds and investment managers must publish “easily accessible, high-quality quantitative and narrative reporting”.
Firms are also expected monitor, encourage, and challenge companies by using their rights and influence to promote long-term, sustainable value generation.
Though the Lords agreed that improving voting transparency is an important issue, the amendment was withdrawn.
Lord Harlech (whip, standing in for Baroness Penn) talked about a lot of forthcoming initiatives – “The Government believe that it would be premature and unnecessary to amend voting disclosure legislation at the current time, given the initiatives that are already under way.”
Baroness Sheehan pointed out the disappointment. “[In] Greening Finance: A Roadmap to Sustainable Investing, which was published in September 2021,… the Government set out their expectations that pension funds and investment managers should ‘Be transparent about their own and their service providers’ engagement and voting, including by publishing easily accessible, high-quality quantitative and narrative reporting.’ She pointed out that letting this amendment fail would be a failure of the government to stick to its word.
After debate, the Lords withdrew the amendment due the Department for Work and Pensions’ commitment to review disclosures requirements later this year.
Last Updated: 1 February 2023