Pension schemes should hold the directors of companies in which they invest individually accountable for the management of climate change risks, according to the Pensions and Lifetime Savings Association.
In its annual Stewardship Guide and Voting Guidelines, the PLSA says pension fund investors should consider voting against the re-election of the responsible director or the chair if the company has failed to behave responsibly.
This could include if shareholders have attempted to engage on climate change issues but the company has failed to demonstrate effective board ownership, or if the business is slow to move towards disclosures consistent with the Taskforce for Climate Related Financial Disclosure, Carbon Disclosure Project, Sustainability Accounting Standards Board or other established third party frameworks.
The PLSA said investors also had the right to question the company if it has operations which are highly carbon intensive but has not made adequate progress in providing the market with investment relevant climate disclosures, had not listened to investor concerns about any direct or indirect corporate lobbying activity whose objectives are considered to frustrate climate change mitigation or had not responded to the result of a climate change-related resolution.
PLSA said its guidelines were particularly relevant this year, following the introduction of new regulations in October 2019 requiring trustees of all schemes to understand and disclose how they include financially material ESG factors and undertake stewardship in their investment decision-making. But, according to PLSA, investors also have a duty to go beyond just compliance.
Caroline Escott, policy lead investment and stewardship, PLSA, said: “Pension schemes hold key stakes in FTSE 350 companies and it’s right that they use their influence as owners to encourage companies to behave responsibly. Issues like climate change and executive pay are important for investors as they can significantly influence corporate success and hence the value of individuals’ savings.
