An investor group, which includes Local Authority Pension Fund Forum (LAPFF), CCLA Investment Management, Sarasin & Partners and Ethos Foundation, have written to the chairs of 35 FTSE 350 companies setting out their expectations for shareholder votes on climate transition plans ahead of next year’s annual general meeting (AGM) season.
Investors have for several years called on companies to provide such votes to enhance transparency and accountability given the substantial climate-related financial risks.
While some companies have responded positively, the letter said: “Such resolutions during 2023 were far from standard practice, including among high-emitting companies.”
While encouraging companies to provide a climate transition plan vote, the letter, signed by 18 investors representing £1.8trn in assets under management, urged those who haven’t to do so by stating: “Having such a vote will enable shareholders in the first instance to express their view on transition plans through a specific resolution rather than immediately voting against the chair or another board member.”
The letter focused on companies within sectors considered to “face heightened climate risks, whose actions are essential to the accelerated action required to meet the Paris goals and where the risks we face as investors are substantial”.
The intervention comes against the backdrop of increasing focus from government and regulators around climate transition planning.
For example, an emerging recommendation from the UK government-backed Transition Plan Taskforce is for companies to produce transition plans every three years. While in France, a proposed new law would require listed companies to put their transition plans to an advisory vote every three years with an annual vote on the implementation of the strategy.
Doug McMurdo, chair of LAPFF, said: “Climate change is one of the biggest risks facing investors. Therefore, it only makes sense that companies provide shareholders with a vote on how they are planning and delivering the transition to a decarbonised economy. For those companies not providing its own investors with the opportunity to have a say on climate plans, the focus of shareholder attention will inevitably first fall on director elections.”
Tessa Younger, stewardship lead, environment, at CCLA, added: “We see a vote on transition plans or transition plan reporting as a mechanism for shareholders to assess company commitments, provide support for associated capital spend and ensure debate on expectations for greater action where needed. Such accountability isn’t just about individual companies, it underscores the urgent need for systemic change across industries and economies.”
Vincent Kaufmann, chief executive officer of the Ethos Foundation, also noted that votes on transition plans and transition plan reporting put responsibility for the climate strategy firmly with the board and promote shareholder buy-in on climate, thus, institutionalising a regular high-quality dialog on climate between companies and their investors.
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