The Pensions and Lifetime Savings Association (PLSA) has called upon trustees to hold companies to account on how they manage climate change risk in its updated annual Stewardship Guide and Voting Guidelines.

In October, new regulations were introduced requiring trustees to understand and disclose how they include financially-material ESG factors, and undertake stewardship, in their investment decision-making.

The guidelines said that investors should consider voting against the re-election of the responsible director or the chair if the company is large and is not already moving towards disclosures consistent with Task Force for Climate Related Financial Disclosure, Carbon Disclosure Project, Sustainability Accounting Standards Board or another established third party framework.

In instances where shareholders have attempted to engage on the issue but companies have still failed to demonstrate effective board ownership, for example by providing a detailed risk assessment and response to the effect of climate change on the business, or incorporating appropriate expertise on the board, scheme investors should also vote against re-election, the guidelines state.

Caroline Escott, Policy Lead Investment & Stewardship at the PLSA, said: “Pension funds are ideally placed to encourage companies to behave in a way that ensures sustainable business success.”

Scheme investors should use the 2020 AGM season to hold directors individually accountable on issues of continued concern, she said.

“For instance, in cases where schemes feel that the agreed executive pay packages are not aligned to long-term performance, we recommend that pension fund investors vote against the re-election of remuneration committee chairs responsible for pay practices alongside voting against the remuneration policy or report,” Escott continued.

The PLSA’s review of the 2019 AGM voting season found that although investors continue to express high levels of significant dissent on remuneration-related votes, this was rarely accompanied by a vote against the Remuneration Committee chair or the chair of the board.

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Published: April 1, 2020
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