The Local Authority Pension Fund Forum (LAPFF), Sarasin & Partners, CCLA and Ethos Foundation have written to the chairs of all FTSE listed companies – excluding investment trusts – requesting that companies allow for a shareholder vote on their greenhouse gas (GHG) emission reduction strategies.
Having a ‘Say on Climate’ vote aims to enhance transparency and accountability on one of the most pressing financially material risks facing investee companies, the institutions said in a statement.
Ahead of the 2023 annual general meeting (AGM) season, the letter welcomed those boards that have already enabled shareholders to have a ‘Say on Climate’ via a resolution on the ballot paper.
However, the letter urged all companies to follow suit by disclosing their transition plans aligned to a 1.5°C temperature outcome and allowing investor oversight on the robustness of plans through a vote on the strategy and any associated capital expenditure requirements.
The intervention comes against the backdrop of increasing pressure from government and regulators to draw up plans and take action to reduce emissions.
The letter’s signatories noted the HM Treasury’s launch of the UK Transition Plan Taskforce to develop the ‘gold standard’ for private sector climate transition plans in the UK.
The taskforce states that a transition plan should be integral to the company’s overall strategy, setting out how it aims to prepare and contribute to a rapid shift towards a decarbonised economy.
Doug McMurdo, chair of LAPFF, said: “The lack of disclosure and the timidity of climate plans at many companies are very serious concerns for investors. Such concerns should be addressed by all companies publishing credible climate action plans and allowing investors to have a say on whether the strategies are fit for purpose.”
Vincent Kaufmann, chief executive officer of the Ethos Foundation, added: “Climate change represents a significant risk for companies and their shareholders. Shareholders expect a board of directors not only to set ambitious targets to reduce GHG emissions but also, and more importantly, to define a clear and efficient strategy to achieve these targets.”
He said that the aim of ‘Say on Climate’ is precisely to enable shareholders to assess the effectiveness of climate strategies and, when necessary, to increase pressure on the board of directors if the measures taken are not considered sufficient.
Pass-through voting technology give path to effective stewardship, says Tumelo
A new research paper published by investor voting fintech company Tumelo has highlighted the potential of pass-through voting technology, claiming that to be a path to effective stewardship.
Pass-through voting is the mechanism by which investors in a pooled fund can vote the shares in proportion to the assets under management they have invested – giving them a direct say in how the companies they invest in are run.
Until recently, voting on key issues at shareholder meetings was done exclusively by fund managers, as the registered owners of the shares. But technology now allows them to ‘pass-through’ votes to those clients who want more influence or flexibility over voting.
Tumelo’s paper, with contributions from academics from the University of Arkansas School of Law and lawyers from Mishcon de Reya, outlined the “underrated” role of fund managers, as stewards of companies.
“The vote fund managers have in the boardroom is essential to direct the influence corporates have – and will have – on our society,” it said.
The paper argues that there is growing pressure on fund managers in both the UK and US to pass through votes to investors.
While the US is pursuing a ‘top-down’ approach, such as via the proposed INDEX Act, pressure in the UK is instead ‘bottom-up’, with asset owners insisting fund managers support them in fulfilling their stewardship duties.
Support for pass-through voting is growing across a myriad of regulations, task forces, and recommendations, Tumelo said, pointing to action from the Financial Conduct Authority and the Pensions and Lifetime Savings Association.
Georgia Stewart, CEO and co-founder of Tumelo, said: “Corporates have grown in power and globalised to such an extent that some – Apple, Tesla, Exxon, for example – have the impact of small governments. And if they aren’t yet as big as governments, they certainly influence them. Therefore, the voice – the vote – fund managers have in the boardroom is essential to challenge and to decide the impact companies have on our society.”
She added that the shareholder’s vote is a vital tool in the democratic corporate governance system.