Guide for asset managers

Guide for asset managers

Companies may voluntarily agree to provide an annual vote, file resolutions where they fail to do so

There are two basic routes to securing an annual shareholder vote on a company’s climate transition action plan and amending the company’s byelaws accordingly:

1 Voluntary route

  • Companies should be encouraged to publish a climate transition action plan and propose a management resolution to amend the company byelaws so that this is put to an annual vote at the AGM.
  • Shareholders should write to the CEO to persuade them this is a good idea. As this is a reasonable request that can help position the company as a credible climate leader, many are likely to agree.
  • Where companies refuse to proceed voluntarily, a shareholder resolution will be necessary.

2 Shareholder resolution route:

  • Companies with bad or no plans are likely to resist adopting this practice voluntarily because they are afraid of failing the test of an AGM, and the pressure this would put on them to improve their ESG performance.
  • In this case, shareholders with sufficient votes should post a resolution at the AGM. Guides to proposing resolutions in Australia, Canada, the UK and the US are here, and the template resolution for the US here can be easily adapted.
  • A shareholder resolution is likely to succeed given that the proxy advisers ISS and Glass Lewis have already agreed this is a reasonable approach.

Why should asset managers act?

  • Ensuring companies adopt a strong accountability mechanism for their climate change approach may help drive superior returns
  • Asset owners increasingly expect engagement and results on ESG – there is less room to hide. TCFD disclosure alone will not be sufficient. Strong annual vote engagement gives a chance for climate leaders to shine.
  • Asset owners are under increasing pressure to fire asset managers that don’t adopt this as a practice. This could lead to brand damage and lost business.