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| 3 minutes read

Investors step up pressure on boards to keep pace with climate targets in upcoming AGM season

In its annual letter to investee companies at the beginning of 2023, Aviva Investors issued a warning that, in the upcoming AGM season, it will not shy away from holding boards and individual directors accountable where ‘pace of change does not reflect the urgency required’ in relation to climate and sustainability targets. The Chief Executive of the asset management company, Mark Versey, set out some specific expectations, including the publication of a ‘robust and viable’ climate transition plan and said that it may sell off stakes in companies which consistently fail to meet its requirements.

Aviva Investors is not the only stakeholder to have issued such a warning: in February, the sovereign wealth fund of Norway, Norges Bank Investment Management, the largest investor in the world, warned directors of investee companies that it will vote against their election if they do not hit targets relating to environmental or social matters. Last year, the fund voted against the election of every director of 18 companies and has suggested that the fund will vote against at least 80 companies in the next few months.

As time goes on, the investor’s conundrum between stewardship and divestment of assets will undoubtedly intensify, with many investors using divestment as an ultimatum for companies who do not tangibly commit to playing their part in solving the climate crisis.

A potential outlet for investors’ dissatisfaction which has gained traction over the last couple of years in particular has been ‘Say on Climate’ votes – resolutions proposed by companies in order to enhance transparency and accountability on climate-related matters. During last year’s AGM season, 20 FTSE 350 companies tabled climate-related resolutions, three of which were requisitioned by shareholders. Of this twenty, four companies received significant (i.e., 20 per cent. or greater) votes against such resolutions, each of which followed up with a statement explaining what actions the company intends to take to understand the reasons behind the vote result.

According to Institutional Shareholder Services, ‘Say on Climate votes are gaining strong momentum and will likely develop into the key channel through which shareholders can express their views’. Support for such resolutions has not, however, been unanimous. While being ‘supportive of companies providing disclosure concerning their climate-related risks and opportunities’, Glass Lewis has stated that it will ‘generally recommend against shareholder proposals requesting that companies adopt a Say on Climate vote’. Vanguard has similarly expressed that it ‘remains cautious about the value of a Say on Climate vote’ and as such, does ‘not proactively encourage companies to hold such a vote’. Signalling that it ‘takes voting decisions on proposals as a fiduciary acting in clients’ long-term economic interests’, Blackrock has also expressed that many climate-related shareholder proposals do not, in its view, ‘promote long-term shareholder value’.

For the upcoming AGM season, it seems some investors are nevertheless likely to demand further climate-related resolutions, as demonstrated by The Local Authority Pension Fund Forum (LAPFF), Sarasin & Partners, CCLA and Ethos Foundation, who in February 2023 wrote to the chairs of all FTSE listed companies, requesting that companies allow for a shareholder vote on their greenhouse gas emission reduction strategies.

Ahead of the upcoming AGM season, boards can expect scrutiny from shareholders on climate-related matters and may prepare themselves accordingly, for example by:

  • pro-actively engaging with any shareholders who have previously raised concerns on climate-related issues;
  • preparing answers to questions which may be raised at the AGM on climate-related matters, including in relation to climate transition plans and any disclosures which have not met required standards, and be able to provide explanations and assurances that the company is committed to hitting targets in the future;
  • considering whether a ‘Say on Climate vote’ may be appropriate, and, if so, thinking carefully about its scope and whether it is intended to be a one-off resolution or recurring; and
  • post-AGM, ensuring that any significant votes against resolutions are followed up with a statement explaining what actions it intends to take to understand the reasons behind the vote result and a further update on actions taken following the vote and outcomes of those actions.

Despite large investors looking for engagement on climate targets, the most appropriate means of doing so remains a live issue and companies need to be thoughtful and prepared.


shareholder activism, renewable energy, reporting