The Pensions and Lifetime Savings Association has updated its Corporate Governance Policy and Voting Guidelines to include new recommendations encouraging pension funds to use their votes at company AGMs to vote against directors who are not doing enough to help limit the risk of dangerous climate change.
The PLSA sad in a statement that its new guidelines provide practical advice on how to approach common issues such as the conditions under which pension funds should support or oppose the typical resolutions at AGMs, including the approval of the report on executive remuneration, the re-election of directors or the appointment of the auditors.
The document also includes an additional section on the sustainability of the company.
The PLSA say that its research has demonstrated that failure to mitigate global temperature increases will not only have “devastating environmental, social and economic consequences”, but could also have a “significant impact on the viability of business models” across a wide range of sectors.
The guidelines recommend that where shareholder attempts have failed to encourage companies in relevant sectors to provide a detailed risk assessment and response to the effect of climate change on their business, they should not support the re-election of the chair.
Luke Hildyard, stewardship and corporate governance policy lead at the PLSA, explained: “Following recent events, votes at AGMs will be under increasingly intense scrutiny from policy makers, the general public and pension funds. As long-term investors in companies, pension funds are keen to engage with the companies they invest in, to help those companies produce better returns for pension savers. AGM votes are a key tool for investor engagement.
“The PLSA has long argued that pension funds should use their votes to encourage companies to behave responsibly on issues like executive pay and the economic implications of the risk of climate change are also becoming increasingly clear.
“Companies that want to thrive over the long-term must ensure their business practices are consistent with international agreements to limit global temperature increases. We are therefore advising our members to use their AGM votes to influence those companies that fail to recognise this reality.”