Fintech wants retail investors to have greater say on ESG issues
In recent years, institutional investors have become increasingly vocal about sustainability issues, such as climate change and racial inequality, at AGMs. But do retail investors, who are often the end investors via investment platforms and pension schemes, agree with the way their fund managers are voting?
Tumelo, a fintech that gives retail investors a say in how institutions vote, has analyzed the most popular issues among its users. During this year’s AGM season, the topic that garnered the most attention was animal welfare – not a common focus for shareholder campaigns.
‘It doesn’t necessarily mean people are voting pro-animal welfare… but when there was an animal welfare vote, more people piled in and wanted to have a say,’ Georgia Stewart, CEO at Tumelo, tells IR Magazine.
Other popular issues among the platform’s user base include climate change, plastic waste and human rights. ‘There’s probably a wider range of topics than institutional investors might expect,’ says Stewart.
Tumelo is one of a number of UK start-ups focused on making the investment industry more accessible to retail investors. The firm, which works with pension schemes and retail investment platforms, shows people which companies their funds are invested in and highlights shareholder proposals on the AGM agenda.
Users can indicate how they would like their fund managers to vote and leave a comment explaining their thinking. The voting preferences are then sent to the relevant investment firms. After the AGM, meeting results are displayed on the platform and fund managers can post a message about why they ultimately voted for or against.
How open votes appear on the Tumelo platform
Tumelo provides a brief explanation of the different viewpoints on the vote, with links to source material, like the proxy statement, so users can investigate further. In the future, it plans to expand the number of questions that appear on the platform beyond just shareholder proposals.
‘It’s fund managers who get to engage and have a vote on important ESG issues, whereas underlying investors aren’t generally able to voice their opinion,’ says Stewart. ‘That’s the problem Tumelo is trying to solve.’
The platform is also starting to work with direct shareholders to get their votes counted at the AGM, says Stewart. ‘We can surface the votes to them, ask for their opinion and send it back to the custodian,’ she says.
Tumelo went live with its first client in the summer of 2020. It currently works with pension providers, including Aviva Investors and Legal & General, and retail platforms like Peak Investing, which promotes an ethical approach to investments.
Stewart says the auto-enrollment system for pensions in the UK, where companies and employers must contribute a minimum amount each month, has encouraged pension schemes to explore new ways of engaging with members.
People are being forced to save but many of them ‘can’t tell you who the provider is, what funds they’ve got… or how it is affecting the environment and all of those communities they love and depend on,’ she says.
Despite the auto-enrollment scheme, people are still not saving enough for retirement, notes Stewart. ‘We need to get pension members more engaged, so they save more and understand what their money is being funneled into.’
The fintech’s progress comes amid a backdrop of higher investor backing for ESG campaigns. In the US, 34 ESG proposals have received majority support this year, compared to 21 in 2020, according to data from Proxy Preview.
In recent years, a number of start-ups have tried to broaden retail access to the investment industry. They include Primary Bid, which lets ordinary investors take part in capital raising transactions, and Company Meet Investor, a platform that helps issuers set up virtual meetings with retail holders.