EOS at Federated Hermes, the stewardship provider advising on £938bn (€1trn) of assets, has set out the expectations of public UK companies that will guide its corporate engagement and approach to recommending votes at shareholder meetings next year.

In a letter sent to 124 listed UK companies, the provider said it wanted to emphasise company purpose, diversity and inclusion, climate change and executive remuneration.

On diversity and inclusion, EOS said that in 2021 it would be introducing several new, stricter policies with regards to voting against companies making insufficient progress, and would be taking “an industry-leading policy position on diversity below the board level”.

A new policy will see it recommend a vote against the chair of any FTSE 100 company that does not have at least one director from an ethnic minority background and no credible plan to rapidly achieve this.

On climate change EOS will for the first time recommend voting against the chair of the board or responsible directors where a company’s strategy is materially aligned with the goals of the Paris Agreement.

It is also raising the bar for how companies are scored by the asset owner-backed Transition Pathway Initiative (TPI), saying a vote against would be recommended where companies do not demonstrate sufficient management of climate-related risks, such as those below a TPI Level 4 management rating (versus Level 3 in 2020).

On pay it said boards must use their judgement to ensure it can be justified “in the context of the experience of broader stakeholders”, especially for companies that have made redundancies or made use of government support during the pandemic.

Phoenix launches ESG DC default fund

Phoenix Group, the UK’s largest long-term savings and retirement business, has developed an ESG defined contribution (DC) default solution.

The solution is for pension fund clients of its Standard Life Assurance Business and will be launched in mid-December.

A multi-asset solution, it will blend three responsible investment approaches – screening, tilting and stewardship – and focus on environmental, social and corporate governance (ESG) factors that mitigation financially material risks, while seeking to improve sustainability outcomes at a portfolio level.

At launch, “ESG-componentry” will make up 64% of the asset allocation, increasing to over 90% during the second quarter of 2021, according to Phoenix.

“We’ve listened to feedback from stakeholders across the industry and sought input from our ESG experts to develop this solution”

Gareth Trainor, Phoenix’s head of responsible investment solutions

It said the launch evolved from the group’s “passion for responsible investment” and was also driven by growing demand from employers, their advisers, trustees and scheme members for an ESG default solution.

“We’ve listened to feedback from stakeholders across the industry and sought input from our ESG experts to develop this solution,” said Gareth Trainor, head of investment solutions.

“Placing ESG factors in the context of being ‘a financially material consideration’ helps identify areas that could have a positive or negative impact on the business model of a company that you are investing in. In particular, ensuring that these ESG factors have a financial benefit that will align with trustees’ fiduciary duty to act in the best interest of members.”

He added: “Straying beyond these factors could be considered to be moral or ethical decision-making on behalf of members, something that the trustees or employer would need to canvas member opinion on.”

Since October 2019, UK pension schemes have had a statutory duty to specify their policies in relation to financially material considerations, including those involving ESG factors.

And under new rules coming into force in October, schemes face new requirements to publicly disclose, in an “implementation statement”, their investment and responsible investment activity over the previous year.

DWS SDG strategy exceeds €1bn in assets

The volume of the funds DWS Invest SDG Global Equities and DWS SDG Global Equities has exceeded €1bn in the second year after the fund strategy was launched, DWS announced today.

“The interest of investors in sustainable investments is unbroken,” the asset manager said.

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