Nordic pensions heavyweights AP7 in Sweden and KLP in Norway have spoken out separately to warn they will vote against boards at portfolio companies that fail to show enough progress towards a low-carbon economy.
AP7 announced last week that during the 2023 AGM season already under way, it would put more focus than before on holding company boards accountable for delivering credible climate-transition plans.
The Stockholm-based provider of the default option in Sweden’s premium pension system said that according to the International Energy Agency, greenhouse gas emissions had to be halved by 2030 on the path to net-zero emissions by 2050.
“That means that the current pace of climate transition needs to accelerate, with significant reductions in emissions and increased investment in renewable energy,” the SEK905.2bn (€79.8bn) pension fund said in a statement.
Because of this, it was critical that those firms with the most significant climate change emissions had “credible and ambitious short and medium-term emission reduction targets”, AP7 said.
The state fund said it did vote in support of the most proposals to improve climate strategies and reporting each year, and that last year, it had tightened its voting policy for companies targeted in the CA100+ initiative, as well as for firms which significantly underperformed according to the Transition Pathway Initiative Management Quality score.
“In 2023 we have further strengthened our expectations and will vote against core agenda items at high-emitting companies which are not showing sufficient progress towards the climate transition,” the Swedish pension fund said.
It said it had analysed its entire equity portfolio and identified emissions-intensive companies lagging behind peers in taking the necessary steps towards a net-zero emissions pathway.
“Unless significant and credible evidence of improvement becomes clear ahead of the AGM, we will mark our dissatisfaction by a vote against the most relevant board member or against approval of the financial statements at the company,” AP7 said.
Meanwhile, KLP – the largest provider of municipal pensions in Norway – said in a statement that ahead of this year’s AGM’s, it had taken a closer look at companies with high greenhouse gas emissions which were at risk of contributing to deforestation, either directly or through their value chain.
The NOK901bn (€77.9bn) pensions insititution said it was now taking action where companies did not have credible plans for climate change or to reduce the risk of contributing to deforestation, by voting against the boards of firms not taking active steps to adopt such plans.
KLP said the list of companies in this position included large stocks such as ExxonMobile, Adidas and Bunge.
Arild Skedsmo, senior analyst for responsible investments at KLP Asset Management (KLP Kapitalforvaltning), said: “Our message is: Sharpen up. When we vote against the board or board members, we add comments that the company hasn’t handled climate or deforestation risks in a good enough way.”
“It’s a pretty strong message that we don’t have confidence in the board’s assessments in this area, and that we want change,” he said in the statement released on Saturday.
Skedsmo said KLP’s asset management arm looked at assessments from recognised third-party organisations of how the companies fulfilled certain criteria that were particularly relevant to its risk assessments.
“Over 70 companies have unacceptably weak follow-up,” he said.
“In those cases, we are holding the board responsible for not having good plans for climate and nature, either by voting against the re-election of the entire board or individual board members,” he said.