A group of UK pension schemes are engaging index providers on their inclusion rules following recent listing changes in the UK. 

This month, the Financial Conduct Authority (FCA) confirmed reforms to the UK’s listing regime in a bid to encourage more companies to list.  

The new rules will merge the premium and standard segments on the London Stock Exchange into a new single segment, meaning firms choosing to IPO in the UK will have more flexibility to adopt dual-class share structures.

Leading up and in response to the update, some investors and industry bodies pushed back against the reforms, claiming they would weaken the UK’s corporate governance standards. Jen Sisson, the CEO of the International Corporate Governance Network (ICGN), also spoke about her concerns in the latest episode of The Responsible Investor Podcast. 

Among the investors pushing back against the relaxed rules was Railpen. According to the UK railways pension scheme’s 2024 stewardship report, last year it coordinated a letter signed with fellow UK pension schemes to index providers asking them to protect their asset owner clients from any changes resulting from the FCA’s proposals. 

Speaking to Responsible Investor, Caroline Escott, acting head of sustainable ownership at Railpen, confirmed that this engagement with the six largest index providers is continuing after the adoption of the new rules. 

“We have encouraged the index providers to consider changing their standard index inclusion rules to exclude companies with dual-class share structures without a sensible time-based sunset clause, but we recognise that building a bespoke index may also be a possibility,” Escott said. 

She added: “The way in which indices are constructed fundamentally determines many investors’ ability to obtain the best long-term performance and help beneficiaries achieve the income they need in retirement.”

All index providers targeted have responded to the initial outreach, she said. She declined to name the organisations and the other pension schemes involved in the engagement push.

Now that the FCA’s final rules have been published, Escott said the group will continue the conversation with index providers.  

“We are hopeful that, given these providers’ growing interest in responsible investment products, and their long and welcome history of adjusting index inclusion rules to support basic governance standards, a solution will be found to limit the impact of the withdrawal of investor protections on scheme members.” 

RI asked FTSE Russell, S&P Dow Jones and MSCI whether they were being engaged as part of the initiative.

A spokesperson for FTSE Russell said the firm has received feedback from various external stakeholders and interested parties “but we are unable to comment on the exact nature of the dialogue with specific parties”.

The spokesperson added that it would be possible to develop bespoke indices if there is sufficient demand by index users.

More broadly, they noted that companies are required to pass a minimum voting rights hurdle requiring at least 5 percent of voting power to be in public hands – a requirement that was introduced in response to a market consultation in 2017.

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