Posted inESGLatest news

LGIM forges ahead with global ESG reform of corporates

Iceberg in Greenland in the sunset, beautiful nature.

Legal & General Investment Management’s (LGIM) number one engagement topic in 2019 was climate change, its active ownership report has shown.

The firm supported more shareholder resolutions on climate change than any of the world’s 20 largest asset managers, according to non-profit organisation ShareAction.

“We believe that responsible investing is crucial to mitigate risks, capture opportunities and strengthen long-term returns,” said Michelle Scrimgeour, chief executive of LGIM.

Active engagement with companies and policy-makers is a key component of LGIM’s responsible investment approach.

In 2019, the investment manager added five new companies to its divestment candidates, including South Korean utility provider Kepco and US oil major ExxonMobil, as they were lacking sufficient strategic awareness of climate change.

It also co-filed a climate resolution against oil major BP, which helped to support the company in adopting industry-leading emissions targets.

Political lobbying

In 2019, LGIM was a top supporter of resolutions seeking transparency on political lobbying, compared to the world’s 10 largest asset managers.

“If companies spend investors’ money on lobbying governments, we expect them to account for how and why they do this. We use our engagement and votes to shed light on this activity,” the report wrote.

Voting

Altogether it voted against the election of 4,000 directors last year; due to concerns around the suitability of directors or auditors, pay or other elements of company strategy, plus other reasons.

Changes to its voting policy, since last year’s report, are:

  • Voting against all combined chief executives/chairs in all markets (excluding Japan), beginning in 2020
  • Voting against Japanese companies that do not have at least one woman as director on the board, beginning in 2020

Pay packages

Last year, LGIM opposed 35% of pay packages globally to improve executive pay practices and reduce income inequality at investee companies.

Director of investment stewardship at LGIM 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.”

LGIM also participated in around 30 engagements with regulators worldwide, while collaborating with other investors and taking public positions where appropriate, it said.

Elena Johansson

Senior Reporter

Part of the Bonhill Group.