The UK’s largest asset manager is widening its analysis of corporate climate policy and ramping up pressure on boards.
Legal & General Investment Management says that nearly 350 companies now qualify for “voting sanctions” at their annual meetings, which typically mean that LGIM will vote against re-electing the chair, after they fell below the asset manager’s climate expectations.
LGIM announced on June 15 that it had beefed up its climate engagement, expanding the number of companies it assesses on climate factors from around 1,000 last year to more than 5,000.
Analysis conducted as part of its broadened approach has yielded 299 companies that are eligible for voting sanctions, after they failed to meet LGIM’s minimum standards on climate. These standards include companies’ net zero ambitions and their emissions intensity. LGIM will vote against the re-election of their chairs “where possible”.
In addition to this expanded group, LGIM has also identified 43 businesses among its so-called “dial movers” – a list of 105 companies LGIM regards as having sufficient size and potential to drive action on climate within their sectors – and has deemed them eligible for vote sanctions against their chairs. The number of dial movers eligible for voting sanctions has increased from 21 companies last year.
“After a year of geopolitical and economic upheaval, global efforts to spur the energy transition are wavering”, said LGIM chief executive Michelle Scrimgeour in a statement announcing the change.
As well as increasing the number of companies it now scrutinises, its coverage now includes 20 “climate critical sectors”, from the previous 15 in that particular group.
It has also added two Chinese businesses – airline Air China and conglomerate COSCO Shipping Holdings – to its divestment list. LGIM investment mandates that carry divestment policies will exclude the companies in this list, which is made up of 14 businesses including oil major ExxonMobil, US life insurer MetLife and a host of Chinese companies.
LGIM has, however, removed one company from its divestment list. Dairy manufacturer China Mengniu Dairy has satisfied the asset manager with its deforestation policy and a pledge towards carbon neutrality by 2050.
Transition focus
LGIM has not shied away from voting against the direction of boards during this year’s AGM season. It voted against approving Shell’s climate transition plan at the oil major’s May meeting and backed a shareholder resolution at Toyota’s June AGM – against the board’s advice – calling on the company to provide extra transparency regarding its climate lobbying activities.
In the end, Shell’s transition plan was backed by 80.01 per cent of votes cast, while Toyota’s climate lobbying resolution received 15 per cent support.
LGIM has now trained its sights on a clutch of Japanese banks, and is backing resolutions that have asked the Mitsubishi, Sumitomi and Mizuho banks to issue transition plans aligning their lending and investments with the Paris Agreement’s 1.5C target, demanding net zero emissions by 2050.
The banks’ boards have recommended that investors vote against these resolutions, which will be considered at AGMs taking place at the end of June.
LGIM has been opposing other major companies’ boards and management – though none of its votes secured majority support.
Earlier in June, LGIM withheld support for the re-election of Frank Fahrenkopf as an independent director to the board of gambling giant Caesars Entertainment – an action deemed equivalent to voting against the board – following a two-year campaign over the board’s perceived lack of diversity. “LGIM expects the boards of the largest US companies to include a minimum of one ethnically diverse director,” it said.
LGIM also co-filed a resolution at mining company Glencore’s May AGM, asking Glencore to explain how its thermal coal production plans can be reconciled with the Paris Agreement.
The resolution gained the backing of 29.2 per cent of votes, although LGIM’s head of investment stewardship Michael Marks told Sustainable Views that the resolution “didn’t get to perhaps the levels we’d have liked”.
It has also voted for ESG resolutions against recommendations made by the boards of Amazon, McDonald’s and ExxonMobil.