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  

Local Authority Pension Fund Forum (LAPFF) Annual Conference 2022: Day 1

 

Last week I went to the Local Authority Pension Fund Forum (LAPFF) Annual 3 day Conference in Bournemouth. I have been one of the Joint Vice Chairs for the past 3 years and an active participant in LAPFF both as a trade union pension rep and a Councillor for many years. 

LAPFF is the leading voice for Local Authority Pension Funds in the UK and its members assets exceed £350 Billion.  

There were Councillors, Council officers, trade union reps, fund managers, advisors and guest speakers from all over the UK and even the world. Some joined virtually while most were present in person. 

On day one, the Chair of LAPFF, Cllr McMurdo, formally opened conference and the first presentation was by a representative of  French energy giant Total on its recent (welcome) withdrawal from  Myanmar. 

The conference is held under what is called "Chatham House" rules which means that you should not repeat what is said without the permission of the speaker. I have reached out to the speaker since I am genuinely interested on the reasons why Total did not decide to pull out in the past (also see picture in collage) during previous horrible military dictatorships and repression. It would be good to understand why now and what actually changed their mind?

Next was a powerful presentation on the recent visit to Brazil by LAPFF to the local communities who had suffered grave loss of life and devastation following the apparently negligent collapse of  the so called Tailings Dams. 

There was a virtual video with a community leader from Brazil (name withheld due to fears for their safety) and from a concerned Brazilian investor. The Chair of Vale (the 5th largest Mining Company in the world) actually came in person to conference and also spoke to us. 

It is more than a pity that some large mining companies have failed to engage with LAPFF on this very important matter. 

Mining and Human Rights: LAPFF Chair Returns from Brazil Tailings Dam Trip

Check out this press release by the Local Authority Pension Fund Forum (I am Joint Vice Chair) on the recent visit by our Chair to Brazil. Many thanks to Doug and our engagement partners, PIRC, for all their work during this important visit. 

Some Progress Noted but Lots of Work Still to Do

"LAPFF Chair, Cllr Doug McMurdo, returned from Brazil recently where he spent three weeks investigating the progress of reparations following tailings dam collapses in Mariana (2015) and Brumadinho (2019). This trip was part of LAPFF’s broader work on mining and human rights. The context for the trip is available in the mining and human rights report LAPFF published in April 2022.  The motivation for the trip reflects LAPFF’s view that social and environmental impacts by investee companies are financially material for investors.

During his trip, Cllr McMurdo met with communities affected by the 2015 Mariana and 2019 Brumadinho dam collapses. BHP and Vale own the Mariana Fundão dam through their joint venture operator, Samarco. Vale owns the Córrego do Feijão dam that collapsed in Brumadinho. Water quality and delays in house building in Mariana are the two major concerns cited by affected community members with whom LAPFF spoke.

After meeting with affected community members, Cllr McMurdo spent two days with the Chair of Vale and senior executives from the company. LAPFF extended an invitation to meet a BHP representative during Cllr McMurdo’s trip, but the invitation was declined by the company.

At the end of the trip, Cllr McMurdo met with a number of Brazilian investors led by ESG-focused asset manager, JGP Asset Management, with whom LAPFF has been partnering on this project for a couple of years. Collectively, the investor group worked with senior executives of Vale to set in motion a process to increase the pace and quality of reparations following the tailings dam collapses.

Quote from LAPFF Chair: “It is clear that Vale has taken steps to improve its corporate culture and its dam safety practices. LAPFF’s objective is to be a critical friend to the company in fostering better and faster delivery of required reparations and dam safety measures.”

The largest impediment to completing reparations in Mariana quickly enough and to an adequate standard appears to be the Renova Foundation. Vale, BHP, and Samarco – but no affected community members – sit on the board of this organisation which was established to provide reparations following the Mariana tailings dam collapse in November 2015. The Foundation has an overly complex structure, similar to that of a joint venture, and does not have adequate independence in its governance. Both shortcomings have led to poor and drawn-out execution of reparations.

Quote from JGP Asset Management: “Unfortunately, we cannot go back in time and avoid the two disasters that Vale was involved in. However, Vale can act today to become the reference point for an ESG standard in mining, a critical industry for the global energy transition. As investors, we keep engaged with the company on several fronts, but especially in corporate governance and relations with the communities where Vale has operations.”

Quote from Vale: “Vale is enhancing its dialogue and engagement with shareholders, communities and society, in order to act in greater alignment with their expectations. I was pleased to personally welcome LAPFF’s representatives in Brazil and to show Vale’s efforts on reparations initiatives and dam safety. I want to thank LAPFF for its feedback and I would like to renew our commitment to building a better company. It is a long way to travel and we will continue to act attentively in making Vale one of the safest and most reliable mining companies in the world.”

 

LAPFF Conference 2021: Day One

Day One of the Local Authority Pension Fund Forum Annual (LAPFF) conference started with a welcome by our Chair, Cllr Doug McMurdo. 

First item was a blended panel on the Local Government Pension Scheme APPG (all Party Parliamentary Group) report on a "Just Transition". 

With Chair, Clive Betts MP, Cllr Doug McMurdo, Sabrina Muller (Policy Analyst for Sustainable Finance, Paul Hunter (PIRC) and moderated by Cllr Glyn Caron (LAPFF Executive). 

The opening event is about the
Just Transition inquiry, with APPG Chair Clive Betts speaking about the findings & how investors can facilitate a #JustTransition through engagement. 

The need to take people along whilst tackling the #ClimateCrisis is essential. "We risk having no transition at all if it is not seen as just." Sabrina Muller of @GRI_LSE speaking about the overlooked factor of location when thinking about job creation & losses. It risks exacerbating existing #inequality between UK regions.

Paul Hunter with @smith_institute summarising the landmark study by the Local Authority Pension Funds APPG https://appglocalpensionfunds.org Investors are vital but can't do it all, government strategy is a must

Next was "How is Sainsbury Plc addressing Climate Change" with Mark Given (Chief Marketing Officer, Sainsbury Plc), Jo Harlow (Non executive director, Sainsbury Plc) moderated by Rachel Brothwood (LAPFF Executive). Who presented and took questions on how the 2nd largest retailor in the UK has a "Plan for Better". 

Then "Say on Climate" with a virtual presentation by Sir Chris Hohn (Founder of TCI Fund Management) moderated by Cllr Rob Chapman (LAPFF Executive). The no nonsense self made billionaire investor did not mince his words and made it clear that he expected companies to produce 5 year action plans on Climate change and not 2050 targets. He also told us asset owners to sack fund managers who fail on Climate change and ESG. 

Final event of day was "30 Years of LAPFF  Vision & Impact"" with myself and my fellow Vice Chair of LAPFF, Cllr Robert Chapman, moderated by Brian Bailey.  A film showing our work over the past 30 years & how to bring about the best returns for local authority pension funds. "Run by us, for us". There was some interesting reminiscences about our history which are probably best kept within the LAPFF family. 

Hat tip @LAPFF feed