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  

Future of the Local Government Pension Scheme - LAPFF at #Lab14

Still catching up on my posts from Labour Party conference. On the Monday lunchtime I attended the Local Authority Pension Fund Forum (LAPFF) fringe.

The Chair of LAPFF, Cllr Kieran Quinn (standing in photo) spoke first on the future of the Local Government Pension Scheme (LGPS) and that the government had lost its nerve about forcing the merger of the schemes. He doesn't know if it will be on the agenda of any new government post May next year.

Kieran believes that fees are too high and by acting collectively you can drive out costs but decisions should be made locally. The government also seems to be backing off forcing schemes to invest in passive rather than actively managed investment funds.

Next speaker was Henry Boucher (on left), who is a fund manager and partner of Sarasin & Partners.

Henry is an active fund manager. He posed the question "Is active management really worth it?" and answered it by saying not all active managers are worth it and some are indeed over paid. But in the LGPS there are better results for lower fees than many other investments in the world. Research has shown that 40% of all fees are taken by only 10% of asserts,  mostly hedge funds.

He thinks the chief problem is that shareholders fail to hold companies to account. The USA even use to have what was called "bearer share certificates" with no names on them. Companies ran themselves. Chief Executives are being allowed to pay themselves too much. It cannot be right that they get an average $30 million per year.

He wants companies to be run properly and not use slave labour or destroy the environment. We need state of the art governance. The LGPS is good on this but needs some changes. However, it doesn't make sense to have all investments in passive funds.

My question about changes in LGPS governance with the requirement to involve employees more and how the panel thought this would happen?

Kieran thought that a greater scrutiny role by employees is for the good. The more diversity in boards the stronger the decision making process. He understands that some of the trade unions think there is a democratic deficit in the LGPS.

(Chair was Alan MacDougall from PIRC)