Pension funds are increasingly taking up their stewardship responsibilities, a new study from the National Association of Pension Funds (NAPF) indicated today (Tues).

The NAPF Annual Engagement Survey, which was launched at the NAPF Annual Trustee Conference today, showed that seven out of ten respondents (71%) had taken the stewardship activities and policies of asset managers into account when selecting them. This was a significant jump from 48% in 2011. And an overwhelming majority (90%) said they had reviewed their asset managers’ application of the stewardship policy.

The survey also revealed that pension funds exercised their votes more often and in an increasing number of jurisdictions, with 93% of them having cast their votes this year.

However, while pension funds have made good progress with their stewardship responsibilities, there is still some room for improvement, particularly among investment consultants.

The survey showed that investment consultants proactively raised the issue of stewardship with pension funds in only two out five cases (38%). When it was discussed, investment consultants recommended signing up to the Code in less than half of the cases (45%).

The NAPF said that investment consultants represent an important segment in the investment chain as intermediaries between pension funds and asset managers. As such, they are in a powerful position to promote the sign-up of the Code among pension funds.

Joanne Segars, NAPF Chief Executive, said:

“Our research shows that pension funds are embracing their stewardship responsibilities and are beginning to foster a market for stewardship.

“We are particularly encouraged that more pension funds are considering the stewardship activities and policies of asset managers before appointing them, and that they are monitoring their managers’ application of their stewardship policy. This is significant progress, but clearly more needs to be done.

“As key intermediaries between pension funds and asset managers, investment consultants could do more to encourage the take-up of the Code by explaining its relevance to their pension fund clients. We believe that this could help drive more pension funds to sign up to the Code.”

The Stewardship Code was launched by the Financial Reporting Council (FRC) in 2010 to improve engagement between institutional investors and companies. It has already been signed up to by 57 asset owners, including many of the UK’s larger pension funds, and 189 asset managers.

The NAPF has recently published a stewardship policy to help pension funds sign up to the Code. Among other things, the policy recommends that pension funds consider asset managers’ stewardship capabilities and policies when selecting a manager, and that they review the stewardship activities of their asset managers periodically.