Investors call for a Say on Climate

 

LAPFF, Sarasin & Partners, CCLA and Ethos Foundation write to the FTSE All-share urging AGM vote on climate action plans

"Last week the Local Authority Pension Fund Forum (LAPFF), Sarasin & Partners LLP, CCLA and Ethos Foundation wrote to the chairs of all FTSE listed companies (excluding investment trusts) requesting that companies allow for a shareholder vote on their greenhouse gas emission reduction strategy. Having a ‘Say on Climate’ vote aims to enhance transparency and accountability on one of the most pressing financially material risks facing investee companies.

Ahead of the 2023 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.

Cllr 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.”

Natasha Landell-Mills, Partner at Sarasin & Partners LLP, said:

“Climate change is eroding humanity’s ability to prosper. Companies cannot continue to generate wealth on the back of eroding natural capital. Promises to align with net 2 zero are necessary but not sufficient to move us onto a more sustainable path. Where will investment go to build a net zero future? What harmful activities will be wound down? Investors – and the public – need to know how these promises are going to be delivered.”

Tessa Younger, Better Environment Lead at CCLA, said:

“CCLA advocates for companies to produce high quality transition plans to enable them to make better-informed decisions on how to allocate capital. As part of the Delivery Group for the Transition Plan Taskforce, we believe there should be disclosure of robust transition plans, and governance and accountability mechanisms that support their delivery. A routine vote at company AGMs would provide this mechanism for companies to take account of shareholder feedback.”

Vincent Kaufmann, CEO of the Ethos Foundation, said:

“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. 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."

LAPFF Press release  

The Case for the Living Wage - Why a Living Wage Pays Dividends

Thursday evening I went to a well attended ShareAction event to mark "Living Wage" week and the launch of their latest "Investor Briefing" on the business case for a Living Wage.

Rhys Moore, the director of the Living Wage Foundation, spoke first about the doubling of employers who now pay a living wage in the last 12 months. It is now £9.15 per hour in London and £7.85 in the rest of the country. The national minimum wage is only £6.50 per hour. The Living Wage is about 70% of the medium national income while the international definition for poverty is 60%. Last year there was only 5 FT100 companies who paid a living wage, now there is 19.

Rhys thinks that a living wage is becoming a norm for responsible employers. Research shows that 25% of workers who earn less than a living wage, do not work in a "low pay" sector. The foundation are about to launch a living wage "consumer movement" to encourage people to "buy" only at living wage employers.

Next speaker was Phillipa Birtwell from Barclays Bank, who is its "Head of Reputational Risk" and told us about their ground breaking agreement in 2004 with the community group TELCO, over cleaners being paid a living wage at their Canary Wharf offices. Even though only 200 workers were involved, the story went  "viral". The benefits of applying a living wage is a fantastic human interest story.

Lisa Nathan from ShareAction spoke about the investor benefits from a living wage such as staff retention and reduction in turnover, reduced absenteeism and improved morale leading to increased productivity.

As well as being a corporate citizenship issue there is also a macro economic growth argument since if those who are paid the least, get a pay rise, they will spend it locally and boost demand.

Finally, there was a panel (see my pretty rubbish photograph above) with Cllr Richard Greening, Chair of Islington Council Pension Fund; Janice Turner, Vice Chair of the Association of Member Nominated Trustees (AMNT); Sarah Smart, Chair of the Pension Trust, James Corah from CCLA and chair Catherine Howarth.

Richard explained how 98% of all its employees are on a living wage, the only major area that they are not is a Private Finance Initiative (PFI) providing residential care. As a member of LAPFF they are also trying to control executive pay. He believes that the living wage campaign is now at a tipping point and becoming main stream.

Janice from the AMNT talked about an exciting new initiative which could have an significant impact on the living wage. At the moment the vast majority of votes at company annual general meetings are automatically voted in favour of management. Fund managers who do this are not held to account. The AMNT in partnership with others, is trying to draw up "Red Lines" voting guidelines. Pension funds of all sizes could agree to adopt a common set of voting instructions on Governance issues. So it could (this is early days) mean that fund managers are instructed to vote against any company that does not have all its staff on a living wage and and no future plans to do so.

Sarah explained that the Pension Trust was a £6 billion pension fund that caters for the "not for profit" sector. While its primary purpose is of course to meet its pension obligations, she doesn't think that companies paying a living wage is a huge investment problem. Pension funds are for the long term and believe in responsible investment. The Pension Trust recently became a Living Wage employer. The contract cleaners in their head office in Leeds had a pay rise of £1 per hour which has made a big difference to their lives.

Last speaker was James from ethical fund managers CCLA who were hosting this event. He quoted sections from the famous classical economic textbook "The Wealth of Nations" which appear to support the arguments for a living wage. He pointed out therefore that both the author Adam Smith and the Bank of England argue for a living wage.

In the Q&A I made a comment that as a pension trustee we believe that we will get better returns in the long run if we invest in well governed and responsible companies.  For example, those who treat their staff well, who do not destroy the environment, bribe public officials etc.  As investors we must be concerned with the substainablity of companies whose entire business model is dependent on paying its staff poverty wages and being reliant on state benefits to exist.