The rise in demand for pass-through voting from investors, combined with support from regulators, is fostering the democratisation of investing in a major way, according to a new report by Broadridge.
The financial services provider included the finding in its latest white paper, entitled: “Pass-through Voting: Granting a voice to the investor community in the passive investment space.”
It explains how growth in the investment funds space has increased the industry’s interest in leveraging technology to provide pass-through voting and the importance of giving a voice to institutional and individual investors who own specific funds, but not directly the underlying stocks.
Pass-through voting is the practice of providing investors a voice in how asset managers vote proxies on the underlying equities in a specific fund. Funds can allow individual and institutional investors to vote in proportion to their holdings relative to the other shareholders.
Additionally, funds can poll retail investors to learn their preferences. Broadridge says it is working with the industry to incorporate these capabilities.
In the report, Broadridge explained that pass-through voting capabilities could be an industry differentiator, because firms can meet industry demand with investors focused on ‘governance’ as part of the ESG agenda.
In addition, it says that regulatory changes are likely to drive forward more end-investor engagement and that pass-through voting provides ‘valuable input’ for investment stewardship teams. It also allows all investors to weigh in on important decisions.
The white paper was prepared in collaboration with Firebrand Research.
Commenting on the findings, Demi Derem, general manager, international investor communication solutions at Broadridge (pictured), says: “Pass-through voting gives a voice to investment fund holders.
“Institutional investors are increasingly active in expressing their views on ESG-related agenda items, among other things, which they consider to be important. Firms that fail to meet this demand can quickly find themselves falling behind their competition.”
