Last year LGIM committed to its climate impact pledge, which meant that companies would be excluded from its Future Fund range if they did not embrace the transition to a low carbon economy. In all other funds where LGIM cannot divest, the fund manager has said it will vote against the chair of the board on this issue.
In 2016 LGIM said that sustainability topics were raised at 47% of company meetings in 2016, up from 35% in 2015 with climate change continuing to be a key focus.
Sacha Sadan, director of corporate governance at LGIM said: “Climate change presents material long-term financial risks in many sectors and that is why our Climate Impact Pledge is so important – it will be applied to all of the assets LGIM manages globally and the combined approach of ranking, engaging, voting and divesting sends a powerful message that investors are serious about tackling this issue. With over $1 trillion of assets under management, our collective voice can carry a lot of weight.”
LGIM has reported that in 2016 it voted against at least one resolution at 23% of UK companies in 2016, up from 18% in 2015. Globally LGIM voted against at least one resolution at 56% of companies in the main FTSE World Indices, compared to 52% in 2015.
In total, LGIM said that it had 500 company meetings in 2016, 39% of which were held with companies based outside of the UK. The top five themes discussed were: board composition , remuneration, strategy, nomination and succession, and climate change.
LGIM reported that during 2016 it voted against 118 pay resolutions in the UK and against 14% of companies on just pay alone. Where necessary, LGIM said it used its vote against individual directors and in 2016 it voted against 18 named directors on pay and 89 individual directors in total, an increase of 82% compared to the previous year.
Sadan said: “We have been pressing for pay to be aligned with long term shareholders for some time, and while the majority of companies are getting the message, there remain a significant minority who continue to benchmark just against their peers. The increasing pay gap is having an impact on society and that is why we are taking a stronger line on bonus awards and the need for companies to publish their pay ratio. Company directors need to relate to their entire workforce now more than ever.”