Disclaimer: Views in this blog do not promote, and are not directly connected to any L&G product or service. Views are from a range of L&G investment professionals, may be specific to an author’s particular investment region or desk, and do not necessarily reflect the views of L&G. For investment professionals only.

20 Jun 2023

6 min read

LGIM’s voting intentions for 2023

By Investment Stewardship team

Our voting intentions at upcoming shareholder meetings, including EMS-Chemie, Chubu Electric Power, three Japanese banks, Toyota, Caesars, Glencore, Amazon, McDonald's, ExxonMobil, Yum! Brands, Unite Group, PPL, Pearson, Coca-Cola, Dish Network, Teck Resources, Woodside Energy Group, Royal Bank of Canada, Toronto-Dominion Bank, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Capricorn Energy PLC*.

Voting allows, among other things, shareholders to appoint the directors that run a company, approve executive pay, agree climate transition strategies, and encourage better reporting on other environmental and social topics.

We believe that holding companies and boards to account for their actions through our voting is a fundamental part of being a good steward of our clients’ assets. In our view, transparency of our granular voting policies and how we have voted on companies helps us to drive change, as well as to hold ourselves and the market accountable.

Sometimes, we may choose to declare our vote intention ahead of meetings, to draw the attention of the market, clients and other companies to a particular issue, resolution or outcome. The decision to do so can be undertaken as part of an escalation strategy, where we deem the vote to be particularly contentious, or as part of an engagement programme.

Over 2023, we will be updating this blog on a regular basis to highlight our voting intentions in advance of the shareholder meeting. For live information about our voting actions and rationales, please visit: VDS Dashboard (issgovernance.com)

More information about our Investment Stewardship activities, policies and engagement activities can be found on our website: Investment stewardship & governance | LGIM Institutional

EMS-Chemie Holding AG*

Meeting: AGM, 12 August 2023

Summary of resolution: Resolution 6.1.1: Elect Bernhard Merki as Director, Board Chair, and Member of the Compensation Committee

LGIM’s vote intention: AGAINST resolution 6.1.1 (against management recommendation)

Rationale:

According to the International Energy Agency (IEA), the chemicals sector is the largest industrial energy consumer and the third-largest industry subsector in terms of direct CO2 emissions.¹ At LGIM, we therefore believe that the sector has a crucial role to play in the global transition to net zero and in addition to publishing our sector-specific expectations under the Climate Impact Pledge, we have also joined a collaborative initiative to engage with the largest European chemicals companies, organised by ShareAction.

EMS-Chemie does not meet our minimum standards with regard to climate risk management, as set out in our net-zero guide for the chemicals sector. The company’s climate-related disclosures are lacking in the transparency and robustness that we believe is necessary for shareholders to obtain a sound picture of the company’s climate transition plans and strategy. We also have concerns with regards to the scope and credibility of its net-zero commitment, as well as its medium-term targets, alignment to a 1.5°C scenario, and reliance on offsets. The company currently does not align executive remuneration with its medium-term emissions targets, which raises governance concerns regarding prioritisation and accountability for climate-related issues.

Further, we have been disappointed in the company’s lack of response to its shareholders’ requests for dialogue regarding its climate strategy and disclosures.

Our decision to vote against the re-election of the Chair of the Board, Bernhard Merki, is an escalation of our collaborative engagement with ShareAction and a reflection of our longstanding climate concerns at the company.

1. Source: Chemicals - IEA

Chubu Electric Power Co, Inc.*

Meeting: AGM, 28 June 2023

Summary of resolution: Item 3.1: Elect Director Katsuno, Satoru

LGIM’s vote intention: AGAINST (i.e. against management recommendation)

Rationale:

As one of our ‘climate critical’ sectors under our Climate Impact Pledge, we believe electric utilities have a significant role to play in decarbonising the global economy. We have published our expectations of electric utility companies.

Chubu Electric Power Co., Inc. (‘Chubu’) provides energy services to customers in Japan. The company generates, transmits, distributes and sells electricity, and also supplies gas.

We have been engaging with the company directly as part of our Climate Impact Pledge, and have met with them a number of times to discuss our minimum expectations where they are not meeting our ‘red lines’. In summary, these are:

Having a target for phasing out unabated coal by 2030
Having a target to reduce material Scope 3 emissions
Disclosure of climate-related lobbying activities and actions the company will take if these are not aligned to a 1.5 degree transition

Although Chubu intends gradually to retire its coal-fired thermal power operations and introduce hydrogen and ammonia, we seek a stronger time-bound commitment regarding the use of thermal coal.

Regarding our Scope 3 emissions expectation, while the company has a target to reduce the Scope 3 emissions of electricity sold to customers, there is no associated target for the sale of gas.

Chubu has expressed an intention to consider disclosing information on its climate lobbying activities, but our expectation is for action, not intention.

In line with our voting sanctions under the Climate Impact Pledge we will therefore be voting against the re-election of the chair, and continuing our engagement with the company to encourage it to take the steps required to meet our minimum expectations on climate action.

Climate resolutions at Japanese banks

Mitsubishi UFJ Financial Group* (MUFG), Sumitomo Mitsui Financial Group* (SMBC), Mizuho Financial Group*

Meetings: AGMs end-June 2023

Summary of resolutions: To amend the articles of incorporation to publish a transition plan to align lending and investment portfolios with the Paris Agreement's 1.5^oC goal requiring net zero emissions by 2050.

LGIM’s vote intention: FOR the resolutions (i.e. against management recommendation). A vote in support of these proposals is warranted as LGIM expects company boards to devise a strategy and 1.5^oC-aligned pathway in line with the company’s commitments and recent global energy scenarios, including the setting of short-, medium- and long-term emissions-reduction targets, considering the full scope of emissions from financing activities.

Background and rationale: Given the sector’s importance in enabling the global energy transition, banks have received a significant number of climate-related shareholder proposals during the 2023 AGM season. We continue to consider that decarbonisation of the banking sector and its clients is key to ensuring that the goals of the Paris Agreement are met. Accordingly, we believe our support of many of these resolutions – depending always on the specifics of their drafting language and advisory or binding nature – is warranted.

A group of climate-focused NGOs (including Market Forces, Kiko Network and Rainforest Action Network) has been active in this area in the Asian market for a number of years, resulting in a climate-related proposal at Mizuho ahead of its 2020 AGM, the first Japanese company to receive such a proposal at the time. Since then, several other banks and energy companies have been targeted with similar shareholder proposals at their AGMs over the years, eliciting strong levels of voting support (often higher than comparable resolutions at European and US companies would receive).

LGIM has supported previous resolutions at each of these Japanese banks at their AGMs since 2020, and we have found that these proposals and the ensuing shareholder dialogue has helped drive improved disclosures and tighter policies at the companies.

We regularly discuss climate-risk management with MUFG, SMBC and Mizuho and we believe that disclosures have improved since 2020. Nevertheless, to invigorate and encourage further strengthening of policies in line with science-based temperature-aligned pathways towards a net-zero-by-2050 world, we believe these 2023 shareholder proposals provide a good directional push.

We note the structure of the proposals through an amendment of the companies’ articles of incorporation and consider this to be the only legal pathway for a shareholder proposal on climate change to be brought under Japanese corporate law. We take into account the binding nature of these proposals, and believe that the drafting of the resolution text is sufficiently general as not to be overly prescriptive on management.

For LGIM’s final voting decisions on each of the proposals at these banking AGMs, please see our Voting Dashboard (24 hours after the shareholder meetings).

Toyota Motor Corp*

Meeting: AGM, 14 June 2023

Summary of resolution: Resolution 4 – Amend Articles to Report on Corporate Climate Lobbying Aligned with Paris Agreement

LGIM’s vote intention: FOR Resolution 4 (against management recommendation)

Rationale:

LGIM views climate lobbying as a crucial part of enabling the transition to a net zero economy, and we have disclosed our expectations across all companies in our blog.

A vote for this proposal is warranted as LGIM believes that companies should advocate for public policies that support global climate ambitions and not stall progress on a Paris-aligned regulatory environment.

We acknowledge the progress that Toyota Motor Corp has made in relation to its climate lobbying disclosure in recent years, and we welcome planned improvements to expand the number of trade associations in scope of assessment and intentions to seek third-party alignment reviews.

However, we believe that additional transparency is necessary with regards to the process used by the company to assess how its direct and indirect lobbying activity aligns with its own climate ambitions, and what actions are taken when misalignment is identified. Furthermore, we expect Toyota Motor Corp to improve its governance structure to oversee this climate lobbying review. We believe the company must also explain more clearly how its multi-pathway electrification strategy translates into meeting its decarbonisation targets, and how its climate lobbying practices are in keeping with this.

Caesars Entertainment, Inc*

Meeting: AGM, 13 June 2023

Summary of resolution: Resolution 1.4 – to Elect Frank J Fahrenkopf

LGIM’s vote intention: Withhold – equivalent to a vote against (against management recommendation) 

Rationale:

Following a two-year engagement campaign, a vote against is applied because of a lack of progress on ethnic diversity on the board. LGIM expects the boards of the largest US companies to include a minimum of one ethnically diverse director.

Board diversity is an engagement and voting issue, as we believe cognitive diversity in business – the bringing together of people of different ages, experiences, gender, ethnicity, sexual orientation, and social and economic background – is a crucial step towards building a better economy and society.

Glencore PLC*

Meeting: AGM, 26 May 2023

Summary of resolution: Resolution 19: Shareholder resolution “Resolution in Respect of the Next Climate Action Transition Plan”

LGIM’s vote intention: For Resolution 19 (i.e., against management recommendation).

In 2021, Glencore made a public commitment to align its targets and ambition with the goals of the Paris Agreement. However, it remains unclear how the company’s planned thermal coal production aligns with global demand for thermal coal under a 1.5°C scenario. Therefore, LGIM has co-filed this shareholder proposal at Glencore’s 2023 AGM, calling for disclosure on how the company’s thermal coal production plans and capital allocation decisions are aligned with the Paris objectives. This proposal was filed as an organic escalation following our multi-year discussions with the company since 2016 on its approach to the energy transition.

The proposal was filed together with Ethos Foundation on behalf of Pensionskasse Post and Bernische Pensionskasse, Vision Super, HSBC Asset Management, the Australasian Centre for Corporate Responsibility (ACCR) and ShareAction.

For more detail, please read our blog on Glencore.

Amazon.com, Inc.*

Meeting: AGM, 24 May 2023

Summary of resolution: Resolution 13 – Report on Median and Adjusted Gender/Racial Pay Gaps

LGIM’s vote intention: For (against management recommendation)

Rationale:

A vote in favour is applied as LGIM expects companies to disclose meaningful information on its gender pay gap and the initiatives it is applying to close any stated gap. This is an important disclosure so that investors can assess the progress of the company’s diversity and inclusion initiatives.

Board diversity is an engagement and voting issue, as we believe cognitive diversity in business – the bringing together of people of different ages, experiences, genders, ethnicities, sexual orientations, and social and economic backgrounds – is a crucial step towards building a better company, economy and society.

Summary of resolution: Resolution 14 – Report on Cost/Benefit Analysis of Diversity, Equity and Inclusion Programs

LGIM’s vote intention: Against (in line with management recommendation)

Rationale:

The resolution is asking for the company to undertake a cost benefit analysis of its diversity, equity, and inclusion efforts. However, the proponent claims that ‘racial equity’ that underlies diversity, equity and inclusion programmes is itself discriminatory. What the proponent fails to recognise is the systemic and institutional nature of racial inequality that has persisted for decades.

Amazon has announced plans to conduct a racial equity audit. LGIM is supportive of how racial equity audits can tackle corporate inequality, but as this resolution appears to weaken the company’s diversity and inclusion practice, rather than strengthen it, a vote AGAINST this resolution is warranted.

Summary of resolution: Resolution 22 – Report on Efforts to Reduce Plastic Use

LGIM’s vote intention: For (against management recommendation)

Rationale:

The circular economy is a key component of LGIM's approach to nature, and we believe solving plastic pollution is critical in a just transition to net zero and nature-positive economies.

In May 2023, we called for urgent action to reduce plastics along with other investors representing over $10 trillion in assets and reiterated the need to reduce single-use plastic packaging in absolute terms.

We acknowledge and applaud Amazon’s progress in reducing the use of plastics in its packaging to date and its engagement with other manufacturers to reduce their use of plastics in packaging. However, Amazon has not set medium- or long-term targets to reduce the use of plastics in absolute terms and is still lagging peers in this regard. Therefore, a vote FOR this resolution is warranted.

McDonald’s Corp*

Meeting: AGM, 25 May 2023

Summary of resolutions:

Resolution 5 – To Adopt Policy to Phase Out Use of Medically-Important Antibiotics in Beef and Pork Supply Chain

Resolution 6 – To Comply with World Health Organization Guidelines on Antimicrobial Use Throughout Supply Chains (a shareholder proposal co-filed by LGIM)

LGIM’s vote intentions:

For Resolution 5 (against management recommendation)

For Resolution 6 (against management recommendation)

Rationales:

Antimicrobial resistance (‘AMR’) is a key area of focus within LGIM’s approach to health, and we consider AMR to be a systemic risk. For more information about our decision to co-file Resolution 6, and about the systemic risk of AMR, please see our blog here.

Resolution 5

The resolution asks McDonald’s to adopt a company-wide policy to phase out the use of medically important antibiotics for disease prevention purposes in its beef and pork supply chains and to set targets with timelines, metrics for measuring implementation, and third-party verification.

In line with the shareholder resolution on AMR that LGIM has co-filed (see resolution 6 and below) and our conviction that AMR is a systemic risk, we will be voting FOR Resolution 5.

Resolution 6

LGIM has co-filed this shareholder proposal together with Amundi and HESTA, in collaboration with The Shareholder Commons.

The resolution asks the company to apply the World Health Organization (WHO) Guidelines on the ‘Use of Medically Important Antimicrobials in Food-Producing Animals’ throughout their supply chains. By asking McDonald’s to require all of their suppliers of food-producing animals to comply with the WHO Guidelines, none of their suppliers would be able to employ WHO-identified medically important antimicrobials for their animal stock. This does not mean that they could not use any antibiotics or antimicrobials in general., just not those identified as medically important.

The overuse of antibiotics, one form of antimicrobial, is known to exacerbate AMR. The majority of antibiotics used globally are for animals not humans, it is therefore essential to limit the employment of antimicrobials, and in particular antibiotics, to stem the speed by which AMR is occurring.

The World Bank estimates that AMR could result in a 3.8% loss in global GDP, an impact comparable to that of the 2008 financial crisis, and in an AMR worst-case scenario, additional healthcare expenditures could amount to $1.2 trillion globally on an annual basis.¹

We ask our fellow investors to also take action on AMR and to support our shareholder proposal at the upcoming AGM.

For more information about LGIM’s decision to co-file Resolution 6, and about the systemic risk of AMR, please see our blog here.

Source:

1. Final Report, Drug Resistant Infections. A threat to Our Economic Future, March 2017, World Bank, pp 18-22

ExxonMobil Corporation*

Meeting: AGM, 31 May 2023

Summary of resolution: Resolution 12: Shareholder resolution calling for a Report on Asset Retirement Obligations Under IEA Net Zero Emissions Scenario

LGIM’s vote intention: For Resolution 12 (i.e., against management recommendation).

Together with CBIS, LGIMA has co-filed a shareholder resolution asking for more transparency on the retirement costs of Exxon’s asset base. In our view, this is a highly relevant and financially material matter, and by filing this proposal we are seeking greater clarity into the potential costs Exxon may incur in the event of an accelerated energy transition.

For more detail, please read our blog: LGIM Blog: We’re calling on ExxonMobil to increase transparency on asset retirement costs

Yum! Brands*

Meeting: AGM, 18 May 2023

Summary of resolution: Resolution 5 – Report on Efforts to Reduce Plastic Use

LGIM’s Vote Intention: For Resolution 5 (against management recommendation) 

Rationale:

The circular economy is a key component of LGIM's approach to nature, and we believe solving plastic pollution is critical in a just transition to net zero and nature-positive economies.

As the filer of this resolution noted, the company has not aligned its packaging targets with key initiatives such as the Pew Report, which suggests that companies should commit to reducing at least one-third of plastic demand through elimination, reuse and new delivery models. Although the company published its Sustainable Packaging Policy, the policy does not make any reference to single-use plastics (but rather mentions “unnecessary packaging”) and its disclosures do not seem to sufficiently address the regulatory risks and the risk of higher costs in case of inaction. Therefore, a vote FOR this resolution is warranted.

Summary of resolution: Resolution 7 – Report on Civil Rights and Non-Discrimination Audit

LGIM’s Vote Intention: Against Resolution 7 (in line with management recommendation) 

Rationale:

The resolution appears to be supportive of ‘non-discrimination’ policies and practice at companies. However, the proponent is requesting to analyse the adverse impacts of the company’s diversity and inclusion commitments on ‘non-diverse’ employees. What the proponent fails to recognise is the systemic and institutional nature of racial inequality that has persisted for decades.

LGIM is supportive of how racial equity audits can tackle corporate inequality, but as this resolution appears to weaken the company’s diversity and inclusion practice, rather than strengthen it, a vote AGAINST this resolution is warranted.

The UNITE Group Plc*

Meeting: AGM, 18 May 2023

Summary of resolution: Resolution 4 – to Elect Richard Huntingford as director

LGIM’s vote intention: Against (against management recommendation) 

Rationale:

Following a two-year engagement campaign, a vote against is applied because of a lack of progress on ethnic diversity on the board. LGIM expects the boards of the largest UK companies to include a minimum of one ethnically diverse director.

PPL Corp.*

Meeting: AGM, 17 May 2023

Summary of resolution: Resolution 1d – Elect Director Craig A. Rogerson

LGIM’s vote intention: Against, Resolution 1d – Elect Director Craig A. Rogerson (against management recommendation)

Rationale: Climate Impact Pledge: A vote against is applied as the company is deemed to not meet minimum standards with regard to climate risk management.

Under our Climate Impact Pledge, LGIM’s targeted climate engagement programme, we set out our minimum standards that we expect companies across 20 climate-critical sectors to meet regarding climate mitigation, adaptation and disclosure. Companies failing to meet our minimum standards may potentially be subject to voting sanctions in their AGMs.

Accordingly, we will vote against the Chair of the Board, Craig A. Rogerson, given PPL’s transition pathway is not aligned with the goals of the Paris Agreement, due to the company’s plans to use unabated coal past 2030.

Pearson plc*

Meeting: AGM, 28 April 2023

Summary of resolution: Resolution 12 – To approve the remuneration policy; Resolution 4 – To re-elect Sherry Coutu

LGIM’s vote intention: Against Resolution 4; Resolution 12 (against management recommendation)

Rationale:

At LGIM, we continue to review and strengthen our executive pay principles to improve pay practices and help companies better align pay with long-term performance.

The company consulted with LGIM in advance of the publication of their remuneration policy to propose some changes to executive pay.

The changes centred around the fact that their CEO is based in the US and should therefore be compensated in line with US peers. For this reason, they proposed to increase the annual bonus opportunity from 200% of salary to 300% of salary. In addition, they proposed to increase the long- term incentive award from 350% of salary to 450% of salary. The CEO’s salary is $1,250,000 and he has been awarded an increase for the year of 3.5%, in line with the workforce in the UK and US. Our main concern was that although the company wants to align the CEO’s salary with US peers, they have elected to use UK practices when it comes to his pension. This would result in a pension provision of 16% of salary, which is more than his US peers typically receive.

We plan to vote against the policy because we feel the company should not pick and choose the regions (UK/US) to set executive pay based on which region offers the highest opportunity.

Our vote against the re-election of the Chair of the Remuneration Committee is an escalation of our voting as LGIM has had reason to vote against pay for more than one year.

The Coca-Cola Company*

Meeting: AGM, 25 April 2023

Summary of resolution: Resolution 7 – Report on Congruency of Political Spending with Company Values and Priorities

LGIM’s vote intention: For Resolution 7 (against management recommendation) 

Rationale:

LGIM believes that companies should use their influence positively and advocate for public policies that support broader improvements of ESG factors including, for example, climate accountability and public health. In addition, we expect companies to be transparent in their disclosures of their lobbying activities and internal review processes involved.

While we appreciate the level of transparency Coca-Cola provides in terms of its lobbying practices, it is unclear whether the company systematically reviews any areas of misalignment between its lobbying practices and its publicly stated values.

We believe that the company is potentially leaving itself exposed to reputational risks related to funding organisations that take positions that are contradictory to those of the company’s stated values, and potentially attracting negative attention that could harm the company's public image and brand.

The proponent of this resolution lists a few examples of lobbying misalignment in the areas of circular economy and public health, which raises a question as to the robustness of the company’s current policy. The company’s current disclosure does not account for congruency of stated values with political contributions, and we believe Coca-Cola should strengthen its political donations policies to avoid future conflicts between political spending and stated diversity and environmental policies.

Producing a report on the congruency of political spending with company values and priorities may help the company to identify and question its previous political spending priorities.

Dish Network Corporation*

Meeting: AGM, 28 April 2023

Summary of resolution: Resolution 1.1 – to Elect Kathleen Q Abernathy as director

LGIM’s vote intention:  Withhold – equivalent to a vote against (against management recommendation) 

Rationale:

Teck Resources Limited*

Meeting: AGM, 26 April 2023

Summary of resolution: Resolution 3 – Approve Spin-Off Agreement with Elk Valley Resources Ltd.

LGIM’s vote intention: For Resolution 3 (i.e., in line with management recommendation)

Rationale:

LGIM intends to vote FOR the approval of the spin-off agreement proposed by Teck Resources. We believe it is a balanced proposal with safeguards to reduce climate-related risks. Elk Valley Resources (“EVR”), the metallurgical coal spin-off, would be constrained for a period by royalty and preference share dividend obligations that would protect investors from reinvestment risk by a new management team.

From a stewardship perspective, the commitment by EVR to achieving net zero operational emissions by 2050, and the guaranteed annual payments to a dedicated environmental stewardship trust, add additional layers of assurance. Climate change remains a core element of our stewardship focus; as a large investor, we believe we have a responsibility to urge companies to achieve their climate goals through engagement.

Managing the transition to net zero is a fundamental aspect of our engagement on the theme of climate, and is a crucial consideration for companies producing fossil fuels and for those extracting metals and minerals essential to that transition. We believe that the proposal will lead to investors in Teck Metals owning an energy transition-focused mining company and the proposed financial structure will, in our view, act as a reasonable safeguard against a new management team running these assets in an irresponsible manner in the companies’ transition period.

Woodside Energy Group Ltd*

Meeting: AGM, 28 April 2023

Summary of resolution: Resolution 2.a – to re-elect Mr Ian Macfarlane as a director

LGIM’s vote intention: Against Resolution 2.a (i.e., against management recommendation)

Rationale:

The rationale for our intention to vote against the most senior director up for re-election, Mr Ian Macfarlane, reflects our concerns around the company’s lack of commitment to aligning with the Paris objectives and net zero, and the insufficient reaction to the significant proportion of shareholder votes against their climate report (49%) in the 2022 AGM.

Additionally, following the completion of the BHP petroleum assets merger in 2022, we are looking to get more clarity on the decarbonisation targets of the combined group, and note a number of gaps in the company’s disclosure, primarily around the overreliance on offsets for achieving climate goals. LGIM voted against Woodside’s climate report in its 2022 AGM, and 49% of shareholders voting against the report was the highest level of dissent seen among oil & gas peers who put their climate plans to a vote last year.

In 2023, we have met with the company (investor relations) and with the chair of the board. Our engagement was constructive, and the company has acknowledged shareholder dissent regarding its climate strategy. However, we still feel that actions taken are insufficient to restore investor confidence and that there is a lack of urgency around better aligning the company with the Paris objectives. We therefore intend to vote against Resolution 2.a, for the reasons outlined above.

Climate resolutions at North American banks

Royal Bank of Canada*, Toronto-Dominion Bank*, Citigroup*, Bank of America*, Wells Fargo*, Goldman Sachs*, JPMorgan Chase*, Morgan Stanley*.

Meetings: AGMs in April and May 2023

Summary of resolutions:

Resolution type – To adopt a time-bound policy to phase out lending and underwriting for fossil fuel exploration and development
Resolution type – To publish a report that disclosed science-based absolute 2030 GHG reduction targets for high-emitting sectors
Resolution type – To publish a report that describes how the company intends to align its financing activities with its 2030 sectoral emissions targets

Background and rationale: Given the sector’s importance in enabling the global energy transition, banks have received a significant number of climate-related shareholder proposals ahead of the 2023 AGM season. We continue to consider that decarbonisation of the banking sector and its clients is key to ensuring that the goals of the Paris Agreement are met. Accordingly, we believe our support of many of these resolutions – depending always on the specifics of their drafting language and advisory or binding nature – is warranted.

Proposals for a time-bound fossil fuel phase-out

Last year we supported several shareholder resolutions at the North American banks that sought to halt the financing of new oil and gas projects. As investors advocating for a just and orderly energy transition, which satisfies all aspects of the current energy crisis (energy security, affordability and sustainability), we continue to emphasise that the boards of financial institutions need to closely consider their strategy and risk appetite towards fossil fuels into the near future. As such, we believe that many of the proposals that ask the board to devise their own time-bound phase-out strategy are supportable. Moreover, in the North American market, these resolutions tend to be advisory rather than binding, further alleviating concerns of micro-management.

This year, LGIM is supporting such shareholder proposals (against management recommendation) at Citigroup* (23/04), Bank of America* (25/04), Wells Fargo* (25/04), Goldman Sachs* (26/04), JPMorgan Chase* (16/05) and Morgan Stanley* (19/05).

We did not support a similar resolution at Royal Bank of Canada* as the drafting of the resolution text also sought to restrict financing of broadly defined fossil fuel transportation.

Proposals for reporting on absolute GHG reduction targets

We have embedded scope 3 disclosure and targets into our minimum expectations for all sectors, with specific detail within individual sectors. We will generally support resolutions that seek to expand and improve the level of emissions disclosure and target-setting for the high-emitting sectors in line with energy scenario analysis and market expectations of absolute reductions over time.

This year, LGIM is supporting such shareholder proposals (against management recommendation) at Royal Bank of Canada* (05/04), Bank of America* (25/04), Goldman Sachs* (26/04) and JPMorgan Chase* (16/05).

Proposals for additional reporting on aligning financing activities with published 2030 targets

Like the proposals for reporting on absolute GHG emissions reduction targets in line with companies’ published climate management strategies, we generally support resolutions that seek additional disclosures on how they aim to manage their financing activities in line with their published targets. We believe detailed information on how a company intends to achieve the 2030 targets they have set and published to the market (the ‘how’ rather than the ‘what’, including activities and timelines) can further focus the board’s attention on the steps and timeframe involved and provides assurance to stakeholders. The onus remains on the board to determine the activities and policies required to fulfil their own ambitions, rather than investors imposing restrictions on the company.

This year, LGIM is supporting such shareholder proposals (against management recommendation) at Toronto-Dominion Bank* (20/04), Bank of America* (25/04), Wells Fargo* (25/04), Goldman Sachs* (26/04), JPMorgan Chase* (16/05) and Morgan Stanley* (19/05).

In addition, most of these banks had other environmental, social and governance (ESG) related shareholder proposals on their agendas, many of which we believe warrant our support. For LGIM’s final voting decisions on each of the proposals at these banking AGMs, see our Voting Dashboard (24 hours after the shareholder meetings).

Capricorn Energy PLC*

Meeting: GMs, 1 February 2023 at 9am and 2pm

Summary of resolution: GM, 1 February, 9am. Resolution 1 – Approve NewMed Acquisition

Shareholder requisitioned GM, 1 February, 2pm. Resolution 1-7 – To remove the following current directors of Capricorn from office: Simon Thomson, James Smith, Nicoletta Giadrossi, Peter Kallos, Keith Lough, Luis Araujo and Alison Wood.

LGIM’s vote intention: GM, 1 February, 9am – AGAINST Resolution 1, (against management recommendation)

LGIM is still analysing the 700-page prospectus in relation to the NewMed transaction and may choose to add to this pre-declaration in due course.

Shareholder requisitioned GM, 1 February, 2pm – FOR Resolution 1-7, (against management recommendation)

Rationale:

LGIM has undertaken numerous engagements with the Capricorn board over the past nine months to express our widespread concerns with the transactions the board has proposed, including the NewMed transaction that will be put forward to shareholders at the General Meeting on 1 February. These concerns include governance, process, conflicts, future strategy, executive compensation, environmental risks and valuation. Rather than attempt to address these concerns constructively, the Capricorn board has suggested that we sell our shares in the company if we are not satisfied with the board’s decision-making process and proposals.

LGIM’s view has consistently been that the proposed combination with NewMed has weak strategic rationale and will not lead to meaningful synergies; rather it creates significant new risks for Capricorn shareholders. LGIM therefore intends to vote against this proposed combination.

At the subsequent shareholder requisitioned general meeting on the same day, LGIM intends to support the proposal to remove the majority of the current serving directors, namely Simon Thomson, James Smith, Nicoletta Giadrossi, Peter Kallos, Keith Lough, Luis Araujo and Alison Wood. To vote against the majority of a current board is an unusual step for LGIM and reflects the depth of our concerns.

In particular, we note the timing of the proposed meetings and believe this is a matter of grave concern. The decision to hold the company’s meeting before the shareholder requisitioned meeting appears to be a direct attempt to undermine due process. Investors should be given the opportunity to consider the two matters separately and for there to be a reasonable period allowed to pass between the two votes being cast and their outcomes known. It is LGIM's view that meaningful board change is needed to restore investor confidence. The process to date raises serious questions about the ongoing suitability and fitness of the entire board – and the chair and senior independent director in particular – to serve as directors of a listed company.

More information on our Investment Stewardship activities can be found on our website: Investment stewardship & governance | LGIM Institutional

*For illustrative purposes only. The above information does not constitute a recommendation to buy or sell any security.

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LGIM’s voting intentions for 2023

EMS-Chemie Holding AG*

Chubu Electric Power Co, Inc.*

Climate resolutions at Japanese banks

Toyota Motor Corp*

Caesars Entertainment, Inc*

Glencore PLC*

Amazon.com, Inc.*

McDonald’s Corp*

ExxonMobil Corporation*

Yum! Brands*

The UNITE Group Plc*

PPL Corp.*

Pearson plc*

The Coca-Cola Company*

Dish Network Corporation*

Teck Resources Limited*

Woodside Energy Group Ltd*

Climate resolutions at North American banks

Proposals for a time-bound fossil fuel phase-out

Proposals for reporting on absolute GHG reduction targets

Proposals for additional reporting on aligning financing activities with published 2030 targets

Capricorn Energy PLC*

Investment Stewardship team

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Capricorn Energy PLC*

Investment Stewardship team

Recommended content for you

Learn more about our business

We are one of the world's largest asset managers, with capabilities across asset classes to meet our clients' objectives and a longstanding commitment to responsible investing.

Explore Trending topics

Sign up for blog email alerts

Receive the latest articles in a weekly digest by registering via the email preference centre

Categories

Other pages

Learn more

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Dish Network Corporation*