The Local Authority Pension Fund Forum (LAPFF) and CCLA, supported by investors representing £1.6trn (€1.9trn) in assets under management (AUM), have written to the chairs of 76 FTSE 100 companies that have not held a vote on their climate transition plans in the past three years setting out their expectations ahead of the next year’s annual general meeting (AGM) season.
The letter noted that investors expect companies to set out credible transition plans, that include Paris-aligned targets and detailed strategies for achieving those goals.
It added that to enable shareholders to make informed investment and stewardship decisions, companies should outline their climate strategies within these transition plans and include material climate-related impacts in their financial statements.
The signatories – which include Brunel Pension Partnership, BVK, Church Commissioners for England, LGPS Central, Lothian Pension Fund, P+, Superannuation Arrangements of the University of London and Velliv, among others – said that specific votes on such climate transition plans enable shareholders to signal support for plans and associated capital expenditure requirements.
By having such a vote, shareholders can initially indicate their confidence in the transition plan through a dedicated resolution rather than it being directed to one of a variety of other resolutions on the ballot, the letter said.
The document also pointed out that around a fifth of FTSE 100 companies, excluding investment trusts, have provided their investors with the opportunity to approve their climate plans and this is now being viewed as a “good practice”. Emerging guidance, including from the Transition Plan Taskforce, recommends plans are produced and updated every three years.
Doug McMurdo, chair of LAPFF, said that AGMs provide shareholders with the opportunity to support a board’s approach to key strategic decisions and hold them to account for their management of material risks and opportunities.
He said: “Given the considerable climate-related risks that major companies face and the implications for long-term company success, we are encouraging boards to provide investors with the chance to support their climate transition strategies or raise specific concerns.
“Such votes provide a great opportunity for boards to engage with their shareholders and wider stakeholders to strengthen their strategies and gain investor backing for their transition plans.”
Peter Hugh Smith, chief executive officer of CCLA, added that climate change is a material threat to medium and longer-term shareholder value.
“We all know that the world needs to do more and move faster if we are to reach net zero by 2050. As owners of the companies we invest in and as good stewards of our clients’ capital, we have a duty to continue to push companies, and support wider efforts, to limit global temperatures to below 1.5°C,” he said.
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