Voting policies and ESG

More signs of investors starting to bring broader ESG concerns into their voting activity. First up the UK’s Railways Pension Fund has unveiled its new voting policy. This includes a commitment to challenge companies on issues including climate change, fair pay and workforce issues.
The last point is particularly interesting as in our experience it’s still rare for UK asset owners to tie their voting activity to the S in ESG. The policy states: ‘We expect boards to be able to communicate the importance of the workforce in the context of the company’s business model and strategy, and how they engage with their employees – including details of activities undertaken and any material outcomes. For 2021, this should include disclosures around work undertaken to support employees’ wellbeing in the course of the Covid-19 pandemic.
Where disclosure is deemed inadequate or where we have concerns that employee relationships are being neglected, RPMI Railpen may choose to vote against the adoption of the Report and Accounts or the director we deem responsible.’
Elsewhere the Investment Association said it will ‘amber top’ companies that fail to meet the Task Force on Climate-related Financial Disclosures (TCFD). The IA – which represents the fund management industry – says it will no longer allow companies in high risk sectors to ignore climate change since it represents such a significant issue for shareholders.
Once companies receive an amber top, shareholders are more likely to vote against the accounts or directors. This is yet more evidence that climate change will prove a contentious issue at AGMs this year and is an issue that boards ignore at their peril.

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