Climate change

We expect our investee companies to clearly demonstrate how they are moving towards Paris Agreement-aligned goals and targets. We also want to see evidence of this action. We have a scoring system that lets us identify the companies that are lagging. Where we are responsible for votes at general meetings, we use them to send a strong message to businesses that aren’t meeting their responsibilities.

As of last year, our policy is to vote against the chair of the audit committee if we feel a company could do much more to improve its action against climate change. If that individual is not standing for election, we will vote against the annual report and accounts. This approach emphasises the importance we place on climate disclosure and action. It also shows we are willing to escalate action to encourage directors to take personal responsibility. For example, our in-house assessment rated Berkshire Hathaway, the investment company run by renowned investor Warren Buffet, as an environmental laggard. To highlight this and encourage action, we voted against the re-election of the chair of the governance committee.

Perhaps unsurprisingly, companies in the utilities, banks and oil & gas sectors are facing the most resolutions around their plans to mitigate climate change. In the US, resolutions targeting corporate lobbying and political contributions are also significant themes; while in Japan, nuclear energy is a regular topic. At Exxon Mobil’s AGM, we voted in favour of the election of new ‘dissident’ directors, who are committed to speeding up energy transition plans at the oil & gas multinational. We were therefore happy to see three of these directors appointed.

We voted for a resolution asking the company to report on its climate-related lobbying, which passed. We also supported a request for the firm to issue an audited report on how Net Zero 2050 climate scenarios affects its finances. This did not pass, but achieved 49.4% support, suggesting a solid base on which to build for future action.

Employment practices

In 2021, we saw an increase in resolutions targeting employment practices. One of the key themes was racial equity audits; we supported 90% of these. We also supported all of those tabled at banks and other financial services companies, as we believe these businesses need to examine and improve their diversity. Investment bank Goldman Sachs was one of those companies to receive a shareholder proposal asking for a racial equity report. We voted in favour of this resolution, which did not pass. Having engaged with the company, however, we were impressed by the steps taken and plans in place to address this issue. It is appropriate for the company to measure the success of these strategies.

We voted in favour of 70% of resolutions asking companies to report on how they assess and manage their human rights risks. Our position here is clear – we expect companies to demonstrate how they conduct human rights due diligence on their products and practices. We require companies to be certain that their products and services don’t breach human rights. The rise of electronic surveillance technologies and facial recognition software is a growing cause for concern.

A shareholder resolution proposed that Amazon report on the potential human rights impacts of its Rekognition facial recognition product. We voted in favour of the resolution – which didn’t pass – because the company would likely benefit from an independent report on how its due diligence process determines whether customers’ use of its products or services contribute to human rights violations. The company's decision to place a one-year moratorium on police departments’ use of the Rekognition product indicates that it acknowledges the potential risks associated with its technologies.

Diversity and inclusion

As a global asset manager, we recognise the importance of taking into account regional differences. We want to see far greater diversity and inclusion on company boards. That’s because we believe companies making progress here are better positioned for long-term sustainability and outperformance. Where companies fall short of our expectations, we generally vote against the chair of the nominations committee or against the annual report and accounts. However, we accept that different countries and regions are making progress at different speeds and we do take this into account (see table 1).

Final thoughts…

By using the voice and voting power afforded to us by our clients, we can engage with companies to shape their future narrative. We have been able to see this first-hand. A radical resolution today that only achieves a handful of votes is possibly tomorrow’s bold new direction which will achieve support across the board. We are proud to play our part in the transformation that shareholders are bringing to the boardroom.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

1. Our regional differences for female board representation are briefly summarised below