Wednesday 22 April 2020 12:01 am

Climate change remains key focus at LGIM as it ramps up pressure on boards

Legal & General Investment Management (LGIM) is continuing to pressure corporate boards on climate change and governance, opposing the election of 4,000 company directors last year.

The asset manager’s ‘Active Ownership’ report released today reveals it took sanctions against 11 companies named as laggards under LGIM’s climate impact pledge. Among these were Exxon Mobil and China Construction Bank.

Read more: Covid-19 might lead to long-term action on climate change

Climate change is a key focus for LGIM, as concerns reached new heights last year. The asset manager said climate change was the topic it had most engaged with companies on in the last year, with 249 engagements.

Last year it co-filed its first shareholder resolution, leading to oil major BP adopting climate targets.

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LGIM pushes on governance and remuneration

LGIM said it is also continuing to improving pay practices, with the report showing it had opposed 35 per cent of pay packages globally.

LGIM said it will “vote against companies where the pensions of newly appointed executive directors are not aligned with the workforce”. Additionally it will vote against companies where executive directors do not retain a significant amount of shares for two years following their departure.

Director of investment stewardship Sacha Sadan said: “The longer executives continue to have a stake in the business, the lower the risk of short-term management decisions.”

“Our updated principles on shareholding requirements aim to achieve this, whilst encouraging more alignment with stakeholders.”

Additionally, LGIM opposed 15 per cent of director-related proposals globally. In January the firm announced it would vote against all companies where the chief executive serves as board chair.

Read more: Barclays outlines new climate policy amid mounting pressure from activists

In the UK, the election of 159 directors were opposed over independence concerns. LGIM rose concerns at Metro Bank due to a lack of independent directors on its board, as well as poor diversity. At the bank’s 2019 AGM, the firm pre-announced its intention to vote against the board chair, directors and members of the audit committee.

LGIM says the pressure meant the bank “began to address its long-standing governance concerns” with both the chair and chief executive stepping down.

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