CCLA Investment Management and the Local Authority Pension Fund Forum (LAPFF), supported by investors representing £1.6trn AUM, have written to the chairs of 76 FTSE 100 companies asking for them to respond by 11 October on how they will be setting out credible transition plans.
The letter, also signed by Charles Stanley, Greenbank, Castlefield, Robeco, TAM Asset Management, Downing, Sarasin & Partners and Premier Miton, has been sent to companies that have not held a vote on their climate transition plans in the past three years including financial firms Schroders, Hargreaves Lansdown, HSBC and Lloyds.
Household names targeted include AstraZeneca, Berkeley, BT, Burberry, Coca-Cola, EasyJet, Diagram, Experian, GSK, JD Sports, Kingfisher, Marks & Spencer, Next, Tesco, Rolls-Royce, Rightmove and Vodafone.
The letter stated investors expect companies to set out credible transition plans, including Paris-aligned targets and detailed strategies for achieving those goal, as well as including material climate-related impacts in their financial statements.. Further emerging guidance, including from the Transition Plan Taskforce, recommends plans are produced and updated every three years.
These are needed, the letter continued, 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.
CCLA and LAPFF and the supporting investors said 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’s signatories also pointed out 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 good practice.
Peter Hugh Smith, chief executive of CCLA, added: “Climate change is a material threat to medium and longer-term shareholder value so it is no coincidence that our clients tell us it is the number one issue they care about most. 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 degrees.”
Tessa Younger, stewardship lead environment at CCLA, added: “As investors, we think this approach not only strengthens trust between companies and shareholders but also ensures accountability in advancing meaningful climate action. As leaders in the FTSE, we would like to see these companies also lead on their decarbonisation transition and ensuring accountability to shareholders is a strong signal of their commitment to do so.”
Doug McMurdo, chair of LAPFF, said: “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. 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.”
‘Collaborative advocacy’
Jake Moeller, associate director – responsible investment at Square Mile Investment Research & Consulting, commented: “CCLA and LAPFF are to be commended for instigating this important initiative, which will drive meaningful progress toward a sustainable future. Square Mile is a passionate responsible investment advocate and fund gatekeeper.
“This collaborative initiative aligns with our long-standing belief that shareholders should be encouraged to evaluate and influence climate strategies through dedicated resolutions. By providing a platform for shareholder votes, companies can garner meaningful investor support, allowing for strategic alignment with the goals of the Paris Agreement. This step is crucial for ensuring that climate risks and opportunities are managed effectively for the long-term success of companies and the preservation of shareholder value.
“We highly regard those fund houses which willingly embark on collaborative advocacy. This not only directly improves direct investor outcomes but has unequivocal material environmental, social and financial benefits for all stakeholders.”
Dan Babington, portfolio manager at TAM Asset Management, added: “Around a fifth of FTSE 100 companies give investors the opportunity to approve their climate plans. We need to see this become the norm to enable shareholders to make informed stewardship decisions and offer clients the best possible sustainable portfolio solutions”
