Britain’s LGIM votes against fewer companies for climate failures

By Juliette Portala

(Reuters) – Legal & General Investment Management said on Tuesday it had voted against chairs at 80 companies this year for failing to meet its minimum climate change standards, down 35% from last year after it found more businesses had laid out decarbonisation ambitions.

Firms in the oil and gas, banking and mining sectors and real estate investment trusts were among those Britain’s biggest asset manager voted against most heavily, LGIM said after publishing its latest annual Climate Impact Pledge report, which covers around 1,000 companies.

LGIM said the fall in the numbers of chairs it had voted against was evidence that engagement with laggards was working and that there was greater momentum to address climate risks.

However, while more companies had published climate commitments, it stressed that detailed net-zero transitions plans to back up targets continued to be lacking.

“Companies that aren’t taking sufficient action, we will vote against the board chairs and their re-election across all of the assets LGIM has voting rights on,” Michael Marks, LGIM’s Head of Responsible Investment Integration, told Reuters.

As part of its climate engagement campaign, which covers a small part of its overall assets, LGIM assesses companies on issues like emissions targets, board oversight of climate risks and the quantity of future earnings at risk in a low-carbon transition.

The British fund house manages 1.42 trillion pounds ($1.73 trillion) but potential exclusions are applied to around 87 billion pounds of assets.

Despite more companies meeting minimum standards in 2022, LGIM said 12 companies remained on its exclusion list and that it had divested from two businesses – China Resources Cement and Invitation Homes – for failing to respond satisfactorily to engagement efforts.

“We can’t force companies to actually do anything but we can keep that pressure up and we do so with the weight of all of our investment capital behind us,” Marks added.

LGIM reinstated Japan Post Holdings after it made improvements including disclosure of scope 3 emissions – those generated by customers – and published net-zero targets.

“We don’t believe divestment is the answer. It doesn’t change the real-world outcome … The public statement is one of those things that really makes a difference,” Marks said.

($1 = 0.8213 pounds)

(Reporting by Juliette Portala, editing by Tommy Reggiori Wilkes, William Maclean)