Guide to taking action for asset managers
Investors all across the globe are working to ensure companies are taking necessary action on climate change in line with a net-zero emissions pathway. Find out more about their targets and commitments below.
Why take action as an asset manager?
As economies around the globe transition to net-zero, asset owners increasingly expect engagement and results on environmental issues from investment managers. Whilst climate change presents a huge challenge for companies around the world, it is also a business opportunity, and investors who recognise and act on climate risk in their portfolios will be better off long-term.
Asset managers should guide companies to develop and disclose how they intend on transitioning to net-zero emissions by 2050 or sooner in the form of a climate transition plan, and propose a management resolution to amend the company bylaws to ensure these plans are put to a vote at future annual general meetings (AGM).
Why should asset managers have a ‘Say On Climate’ vote?
- Ensuring companies adopt a strong accountability mechanism for their climate change approach can help drive superior returns.
- Asset owners increasingly expect engagement and results on ESG – there is less room to hide. TCFD disclosure alone will not be sufficient. Strong annual engagement gives a chance for climate leaders to shine.
- Asset owners are under increasing pressure to fire asset managers that don’t adopt this as a practice. This could lead to brand damage and lost business.
How to secure an annual shareholder vote as an asset manager
A step-by-step process
There are two basic routes to securing an annual shareholder vote on a company’s climate transition plan and amending the company’s bylaws accordingly:
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Voluntary route
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Companies should be encouraged to publish a climate transition plan and propose a management resolution to amend the company bylaws so that this is put to an annual vote at the AGM
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Shareholders should write to the CEO to persuade them that this is a reasonable request that can help position the company as a credible climate leader
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Where companies refuse to proceed voluntarily, a shareholder resolution will be necessary.
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Shareholder resolution route
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Companies with bad or no plans are likely to resist adopting this practice voluntarily because they are afraid of failing the test of an AGM vote
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In this case, shareholders with sufficient holdings should post a resolution at the AGM. Guides to proposing resolutions in Australia, Canada, the UK and the US are here [LINK], and the template resolution for the US here [LINK] can be easily adapted.
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A shareholder resolution is likely to succeed given that the proxy advisers ISS and Glass Lewis have already agreed this is a reasonable approach.
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Additional resources
Further information, guidance, and support to help you accelerate shareholder action on climate change.
As Europe’s largest asset manager, and a major shareholder in several companies via the funds and mandates it manages on behalf of its clients, Amundi believes that it is its responsibility to encourage and accelerate the transition of companies towards a more sustainable model. With this in mind, Amundi adopted a demanding approach to the analysis of Say on Climate resolutions in the 2022 season, a practice it had encouraged in 2021 by voting mainly in favour of these resolutions.
– Amundi, 2022
Giving shareholders a vote on companies’ plans to reduce greenhouse gas emissions would help address one of the most material risks that many companies face. It is also vital for the world that companies put into practice the key net zero promises they have made. Looking ahead to the 2023 AGM season, Sarasin & Partners has joined with the Local Authority Pension Fund Forum, CCLA and Ethos Foundation to write to the chairs of all FTSE-listed companies (ex-investment trusts), urging them to disclose their 1.5-degree Celsius transition plans and allow investors a say as to whether they are good enough.
– Sarasin & Partners, 2023
We view Say on Climate as a tool to hold companies, their boards and management accountable for climate ambitions. Furthermore, it acts as a potential escalation tool for investors. The ability to assess progress over time should be clear, while companies should avoid frequent changes to long-term strategies, unless there is evidence of misalignment.
– Allianz, 2023