LGIM’s voting intentions for 2024

Voting allows 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, among others. 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 at companies’ annual and special meetings helps us to drive change, as well as hold ourselves and companies accountable. 

Sometimes, we may choose to declare our vote intention ahead of meetings, to clarify our views to 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 2024, we will be updating this blog on a regular basis to highlight our vote intentions in advance of certain shareholder meetings. For information about our voting actions and rationales, please visit our dedicated website: 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    

 

BHP Group Ltd*

Meeting: AGM, 30-10-2024

Summary of resolution:  

Resolution 13 – Approve Climate Transition Action Plan

LGIM’s vote intention: 

For resolution 13 (in line with management recommendation)   

Rationale:  

The mining and diversified metals sector produces minerals that are essential to the energy transition. As such, we believe that long-term, responsible investors, such as LGIM, can support these companies as they decarbonise.  Earlier this year, we published our updated assessment framework for mining companies’ climate transition plans.

We note that BHP has made significant strides in carrying out its core role in the transition in a sustainable manner and has demonstrated this through the substantial alignment of its Climate Transition Action Plan (CTAP) with our framework for assessing mining company transition plans. Therefore, LGIM will be supporting BHP’s CTAP. 

Going forwards, we will assess the disclosure of progress on BHP’s plans for the development of a more targeted methane measurement, management and mitigation strategy, as well as the plans it is executing to support the decarbonisation of steelmaking. We will also continue to engage with BHP to ensure resilience whilst navigating the dynamic market for metallurgical coal.

 

Darden Restaurants, Inc.*

Meeting: AGM, 18-09-2024

Summary of resolution:

Resolution 7 – Comply with World Health Organization Guidelines on Antimicrobial Use Throughout Supply Chains

LGIM’s vote intention: 

For resolution 7 (against management recommendation) 

Rationale:

As a universal owner on behalf of our clients, LGIM is committed to addressing health as a global issue that has, and will increasingly have, cross-sector impacts on our clients’ assets. Antimicrobial resistance (‘AMR’) is a sub-theme of our health theme; we believe it has the potential to become the next pandemic and presents a systemic risk to the global economy. The World Health Organization (‘WHO’) estimates that, if no action is taken, global deaths attributable to AMR could rise to 10 million people a year by 2050, and AMR could reduce GDP by $3.4 trillion each year (source: Antimicrobial resistance: a global threat | UNEP - UN Environment Programme).

This resolution asks the company to comply with WHO uidelines on the use of medically important antimicrobials in food-producing animals throughout its supply chains. Our Health Policy states our expectation that restaurant and fast-food companies should require all their meat suppliers to comply with the WHO guidelines. We expect them to be transparent about their AMR strategy, the actions taken to implement it, and steps taken to monitor implementation. We are therefore supporting this resolution.

For more information about the systemic risk of AMR please see our recent blog post on AMR here and for more information on LGIM’s approach to AMR and our minimum expectations of companies, please see our health policy, here.

 

Hindalco Industries*

Meeting: AGM, 22-08-2024

Summary of resolution:

Resolution 5 – Re-elect Kumar Mangalam Birla as Director

LGIM’s vote intention: 

Against resolution 5 (against management recommendation)

Rationale:

The aluminium sector has a significant role to play in the global transition to net zero, and is one of our 20 ‘climate critical’ sectors captured within our Climate Impact Pledge (‘CIP’). Hindalco Industries has been selected for direct, qualitative engagement within this programme.

Our vote against the re-election of Kumar Mangalam Birla is applied in line with our CIP engagement escalation, whereby we vote against the (re-)election of the Chair of the Board at companies lagging our minimum expectations on climate change. This is the second consecutive year we are applying vote sanctions against the company on this basis.

In addition to our CIP dialogue, as part of our increased focus on demand-side sectors of the economy, we have engaged with Hindalco alongside Nordea Asset Management as part of the IIGCC Net Zero Engagement Initiative since 2022. Having signed the IAI’s initiative (‘International Aluminium Institute’) in 2023, Hindalco have committed to disclosing a transition plan by the end of this year, outlining how they intend to meet their decarbonisation commitments. We acknowledge that in their recently disclosed 2023/24 integrated annual report there are some positive steps , for example their double materiality risk assessment that shows greenhouse gas management as their top risk.

However, disclosure of a forward-looking, coherent and quantified transition plan is still absent from the report, therefore falling short of our expectations. We also note they have pushed back  their short term scope 1 and 2 emission intensity reduction target from 2025 to 2027. Despite three engagement meetings and multiple email exchanges, we are still unclear on a) their plans to develop existing disclosure into a coherent transition plan, b) the process, accountability structures and resources in place to develop it over 2024 and c) timings of a planned disclosure.

We had hoped that shareholders would have been given the opportunity to opine on the adequacy of Hindalco’s transition plan at the upcoming AGM. We therefore feel that, given a lack of response to our expectations and questions, a pre-declaration is appropriate. We hope this further raises the profile of the issue and leads to more constructive dialogue with the company.

 

Target Corporation inc.*

Meeting: AGM, 12 June 2024

Summary of resolution:

Resolution 6 – Establish a Company Compensation Policy of Paying a Living Wage

LGIM’s vote intention: 

For resolution 6 (against management recommendation) 

Rationale:

The living wage is captured within LGIM’s focus on income inequality and human rights. The International Labour Organisation (ILO) in conventions 131 and recommendation 135 sets out that minimum wages should be set at a rate that is adequate for the needs of the worker and their family. In March 2023, the ILO set out its own definition of a living wage: “the wage level that is necessary to afford a decent standard of living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work”. Ensuring a worker is paid sufficiently to support themselves and their family to a standard of “human dignity” is also set out in Article 23 of the Universal Declaration of Human Rights.

Wages and benefits paid for standard working should meet at least legal or industry minimum wage standards and always be sufficient to meet basic needs of workers and their families and to provide discretionary income. Yet, according to the ILO in 2019, 630 million workers worldwide (or 19% of all workers worldwide) earn less than they need to escape poverty¹ and, according to Oxfam, inequality is resulting in a death every four seconds.²

Closing the living wage gap worldwide could generate an additional $4.56 trillion every year through increased productivity and spending, translating to a more than 4% increase in annual GDP.³ As a diversified investor, increases in GDP may have a positive impact on the value of our portfolios.⁴

LGIM has been engaging with Target on the topic of living wages for several years. In 2023, we launched our income inequality engagement campaign, which targeted 15 of the largest global food retailers asking them to set out their policy on living wages for workers within their own operations and their supply chain. As one of the largest food retailers in the US, Target is part of this campaign.  While the company has improved its minimum wage, which in 2022 was increased to $15, it does not have a policy on the living wage. Furthermore, comparing their minimum wage of $15 per hour with the living wage for a single person in some locations where they have stores, which range from $18.58 per hour (Lawton, Oklahoma) to $29.87 (San Francisco), their current rate is inadequate for a person to enjoy a decent standard of living. To further understand why a living wage is important, please read two blogs that we have written: one on the material impact of income inequality and another on the importance of paying a living wage.    

Together with Shareholder Commons, which filed this resolution on behalf of Legal & General Investment Management America, we are asking Target to set out its policy on paying living wages to their employees. 

Sources

1. flagship.pdf (tacklinginequality.org) and International Labour Organization (ILO), 2020. World Employment and Social Outlook: Trends 2020

2. Inequality kills | Oxfam International

3. Inequality kills | Oxfam International and Tackling inequality: The need and opportunity for business action, BCTI

4. Labor and Inequality Case Study - The Shareholder Commons

 

Nippon Steel Corporation*

Meeting: AGM, 21 June 2024

Summary of resolution:

• Resolution 2.1 – Elect Director Hashimoto, Eiji
• Resolution 6 – Amend Articles to Disclose Greenhouse Gas Emission Reduction Targets Aligned with Goals of Paris Agreement
• Resolution 7 – Amend Articles to Introduce Executive Compensation System Linked to Greenhouse Gas Emission Reduction Target and Disclose How Compensation Policy Contributes to Achievement of the Target
• Resolution 8 – Amend Articles to Report on Corporate Climate Lobbying

LGIM’s vote intention: 

• Against Resolution 2.1 (against management recommendation)
• For Resolution 6 (against management recommendation)
• For Resolution 7 (against management recommendation)
• For Resolution 8 (against management recommendation)

Rationale:

Resolution 2.1

As one of the largest steel producers in the world, Nippon Steel Corporation has a key role to play in the energy transition and, on account of its scale and potential to influence other firms in its sector and supply chain, is a company with which we have engaged with over several years as part of our Climate Impact Pledge (CIP) programme.

As active owners, we are committed to engaging collectively and individually with companies around the world to highlight and improve their climate lobbying accountability, and to escalate this where required. Climate-related lobbying disclosures are a red line for every company covered within our CIP, as demonstrated in our net zero sector guides. Unfortunately, for a second consecutive year, Nippon Steel has not produced disclosures that meet our expectations. As a result, we are voting against the election of Mr. Hashimoto, Representative Director, Chairman & CEO, through Resolution 2.1.

Resolution 6

LGIM is clear in its expectations of Climate Transition Plans that companies should disclose credible, 1.5°C aligned short-, medium- and long-term emission reduction targets covering scope 1, 2 and material scope 3 emissions. The current disclosures published by Nippon Steel do not provide us with confidence that these expectations are met. As a result, we are voting for Resolution 6.

Resolution 7

We are also voting for Resolution 7. We expect companies within sectors that can have a significant effect on climate change to link part of their pay to delivering on their climate mitigation goals. This is because we believe that linking GHG reduction targets to executive pay can act as a motivational incentive for the company to execute on its decarbonisation strategy.

Resolution 8

After two years of intensive individual and collaborative engagement, we have co-filed this shareholder proposal on climate-related lobbying disclosures.

We believe ambitious climate policy is essential to meeting the goal of the Paris Agreement. We need a supportive policy environment to ensure that all sectors of the economy can undergo an orderly transition to net zero emissions by 2050.

As noted in the rational for Resolution 2.1, Nippon Steel failed to meet our expectations related to corporate climate-lobbying disclosures in early 2022 when we first we discussed this issue in depth. As a result, we made it the focus of our engagement with them for 2023, and also expanded our engagement to work collaboratively with other investors to increase our influence.

Despite several meetings with the company on an individual and collaborative basis, the disclosures provided so far have not met our expectations. As such, we co-filed and will be voting for Resolution 8.

Readers can learn more about this resolution by visiting our blog.

More information on all three resolutions can be found here (in English) and here (in Japanese).

 

Restaurant Brands International Inc.*

Meeting: AGM, 6 June 2024

Summary of resolution:

Resolution 7 – Comply with World Health Organization Guidelines on Antimicrobial Use Throughout Supply Chains

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

Rationale:

Antimicrobial resistance (‘AMR’) is a key area of focus within LGIM’s approach to health, and we consider AMR to be a systemic risk.

Resolution 7 asks the company to comply with WHO guidelines on the use of medically important antimicrobials in food-producing animals throughout companies’ supply chains. Our Health Policy states our expectation that companies within the restaurant/out-of-home sector (e.g. fast-food companies) should require all their meat suppliers to comply with the WHO guidelines. We expect them to be transparent about their AMR strategy, the actions taken to implement it, and steps taken to monitor implementation. We are therefore supporting this resolution.

For more information about the systemic risk of AMR, please see our recent blog post on AMR. For more information on LGIM’s minimum expectations, please see our Health Policy.

More information on our Investment Stewardship activities can be found on our website.

 

Walmart inc.*

Meeting: AGM, 5 June 2024

Summary of resolution:

Resolution 7 – Establish a Company Compensation Policy of Paying a Living Wage

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

Rationale:

The living wage is captured within LGIM’s focus on income inequality and human rights.  The International Labour Organisation (ILO) in conventions 131 and recommendation 135 sets out that minimum wages should be set at a rate that is adequate for the needs of the worker and their family. In March 2023, the ILO provided its own definition of a living wage: “The wage level that is necessary to afford a decent standard of living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work”. Ensuring a worker is paid sufficiently to support themselves and their family to a standard of “human dignity” is also set out in Article 23 of the Universal Declaration of Human Rights.

Wages and benefits paid for standard working should meet at least legal or industry minimum wage standards and always be sufficient to meet the basic needs of workers and their families and to provide discretionary income. Yet, according to the ILO in 2019, 630 million workers worldwide (or 19% of all workers worldwide) earn less than they need to escape poverty¹ and, according to Oxfam, inequality is resulting in a death every four seconds.²

Closing the living wage gap worldwide could generate an additional $4.56 trillion every year through increased productivity and spending, translating to a more than 4 percent increase in annual GDP.³ As a diversified investor, increases in GDP may have a positive impact on the value of our portfolios.⁴

LGIM has been engaging with Walmart on the topic of living wages for several years, and in 2023 we launched our income inequality engagement campaign which targeted 15 of the largest global food retailers asking them to set out their policy on living wages for workers within their own operations and their supply chain. Walmart, as the largest food retailer in the world, is part of this campaign. While the company has improved on some areas of our requests in terms of training opportunities, the company does not have a policy on the living wage, and its minimum wage of $14 per hour for store employees is much less than the living wage, which is around $25 per hour. You can read more about why we want Walmart to pay a living wage in our blog.

Together with Shareholder Commons, which filed this resolution on behalf of Legal & General Investment Management America, we are asking Walmart to set out its policy on paying living wages to its employees. 

Sources

1. Tackling inequality: An agenda for business action (tacklinginequality.org) and International Labour Organization (ILO), 2020: “World Employment and Social Outlook: Trends 2020
2. Inequality kills | Oxfam International
3. Inequality kills | Oxfam International and Tackling inequality: The need and opportunity for business action (tacklinginequality.org)
4. Labor and Inequality Case Study - The Shareholder Commons

 

Chevron Corporation*

Meeting: AGM, 29 May 2024

Summary of resolutions:

Resolution 5 – Report on Reduced Plastics Demand Impact on Financial Assumptions

Resolution 6 – Commission Third Party Assessment on Company’s Human Rights Policies

LGIM’s vote intentions: 

For resolution 5 (against management recommendation) 

For resolution 6 (against management recommendation) 

Rationale:

These two resolutions sit within LGIM’s ‘Nature’ and ‘People’ themes, specifically relating to the circular economy and human rights. Our support for each reflects our emphasis on the financial materiality of these issues, the company’s room for improvement, and the alignment of these proposals with our expectations of companies as set out in our nature framework and human rights policy.

Regarding Resolution 5, 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 to creating nature-positive economies.

Chevron and Phillips 66 jointly own Chevron Phillips Chemical Co. (CP Chem), one of the top 20 producers of plastic resins bound for single-use applications (4.6 million tons), which results in 1.8 million tons of plastic waste, according to a recent analysis by Minderoo Foundation. Recent reports¹ concur that the current rate of expansion of virgin plastic production is unsustainable, and production cuts in plastic use are necessary.

Brands that use resins manufactured by companies like CP Chem are calling for reductions. Coca-Cola Co*, Nestle*, PepsiCo*, Unilever* and Walmart*, members of the Business Coalition for a Global Plastics Treaty, have stated that the top priority of a global plastics treaty should be “reduction of plastic production and use”, focusing on plastics with high leakage rates, short lifespans and made using fossil-based virgin resources.

While we acknowledge the company’s disclosure on this topic within its Climate Risk Report, we believe that additional transparency would allow shareholders to better assess the company’s management of its plastics-related financial risks. We will therefore vote in favour of Resolution 5.

For Resolution 6, we believe companies have the responsibility to respect, manage and mitigate human rights risks. Companies should provide effective remedies to victims of business-related human rights harm. Managing the business elements of human rights within operations and value chains enables companies to establish safeguards to carry out economic activities and to minimise risks and costs.

While Chevron has taken steps to address human rights concerns, including its decision to withdraw from Myanmar in response to escalating human rights violations, questions remain regarding the efficacy of Chevron’s human rights policy and its monitoring practices.² A third-party assessment would allow shareholders better transparency regarding the effectiveness of the company’s policies and systems in preventing, mitigating and addressing its human rights impacts. We will therefore vote in favour of Resolution 6.

Sources

1. https://www.unep.org/news-and-stories/press-release/comprehensive-assessment-marine-litter-and-plastic-pollution ; https://www.oecd.org/newsroom/plastic-pollution-is-growing-relentlessly-as-waste-management-and-recycling-fall-short.htm    

2. SLAPP-Policy-Brief-2022.pdf (earthrights.org)

 

Amazon.com, Inc.*

Meeting: AGM, 22 May 2024

Summary of resolutions:

Resolution 5 – Shareholder Proposal Requesting an Additional Board Committee to Oversee the Financial Impact of Policy Positions

Resolution 6 – Shareholder Proposal Requesting a Report on Customer Due Diligence

Resolution 8 – Shareholder Proposal Requesting Additional Reporting on Gender/Racial Pay Gaps

Resolution 12 – Shareholder Proposal Requesting Additional Reporting on Freedom of Association

LGIM’s vote intentions: 

Against Resolution 5 (aligned with management recommendation) 

For Resolution 6 (against management recommendation)

For Resolution 8 (against management recommendation) 

For Resolution 12 (against management recommendation) 

Rationale:

Our Investment Stewardship team takes a structured approach to engagement, focused on six global themes. One of these themes, ‘People’, looks at improving human capital across the corporate value chain (among other topics) and it is within this theme that the shareholder proposed resolutions above are particularly relevant.

As one of the largest companies and employers not only within its sector but in the world, we believe that Amazon’s approach to human capital management issues has the potential to drive improvements across both its industry and supply chain. Amazon is also a company that annually receives a large number of shareholder proposals, this year totalling 13 proposals, covering a variety of topics including lobbying, climate and emissions-related disclosures, political contributions, gender and ethnicity-based pay gaps, and freedom of association, some of which we will also be supporting.  

Resolution 5 is an example of a misleading shareholder proposal on social and diversity issues. Having initially published a blog on this topic last year in the context of racial equity audits, we find this proposal, despite the title, is not one that we can support, due to the wording of the supporting statement, which does not align with LGIM’s policies and principles on diversity.

Regarding Resolution 6, we voted in favour of this proposal last year and continue to support this request, as enhanced transparency over material risks to human rights is key to understanding the company’s functions and organisation. While the company has disclosed that they internally review these for their products (RING doorbells and Rekognition) and has utilised appropriate third parties to strengthen their policies in related areas, there remains a need for increased, especially publicly available, transparency on this topic. Despite this, Amazon’s coverage and reporting of risks falls short of our baseline expectations surrounding AI. In particular, we would welcome additional information on the internal education of AI and AI-related risks.

For Resolution 8, the company does disclose according to established mandatory US federal ethnicity and gender reporting standards, but does not publish comprehensive and disaggregated data on their gender and racial pay gaps at a regional level outside of the US or on a global level. Disclosure regarding wage progress within the company at each specific level and what job types and compensation are available at that level would also be welcomed. We consider further reporting would be beneficial to allow the company’s investors to gain transparency on pay gaps and company policies, and any actions taken to remediate and minimise material risks that could arise.

Regarding Resolution 12, the rationale is particularly pertinent as labour rights, including the right to freedom of association, is a key theme for LGIM and one that we continue to engage on with the company. We believe an assessment of the company’s commitments could have a number of benefits, including helping to improve human rights and employee freedoms within the company, to monitor and mitigate potential risks, and to manage and inform broader stakeholder questions on this topic. The right to freedom of association, among other labour rights, is material for this company and we consider there is scope for Amazon to increase their disclosures as a market leader. LGIM generally supports proposals calling for reporting on human rights and labour rights, and corresponding transparency in company strategy.

 

Glencore plc*

Meeting: AGM, 29 May 2024

Summary of resolutions:

Resolution 3 – To re-elect Kalidas Madhavpeddi as a Director

Resolution 12 – 2024-2026 Climate Action Transition Plan

LGIM’s vote intentions: 

Against Resolution 3 (against management recommendation) 

Against Resolution 12 (against management recommendation) 

Rationale:

As one of the largest diversified mining companies in the world, Glencore has a key role to play in the climate transition and, on account of its scale and potential to influence other firms in its sector and supply chain, is a company with which we have engaged with over many years as part of our Climate Impact Pledge programme.

In addition to having voted against the responsible director on several occasions due to the company falling short of our climate change expectations, we have also engaged with the company on their previous Climate Action Transition Plan, and voted against its approval every year it has been put to a shareholder vote. We have previously published our expectation for companies to introduce credible transition plans, consistent with the Paris goals of limiting the global average temperature increase to 1.5°C: please see our blog post, here: Say on Climate: empowering shareholders to drive positive change. Our voting records are publicly available on our dedicated website, here: VDS Dashboard (issgovernance.com) 

Upon review of Glencore’s most recent publications and an assessment against our Climate Impact Pledge sector expectations, we remain concerned that Glencore does not meet our minimum expectation requiring mining companies to disclose whether they plan to increase thermal coal capacity. This is especially concerning, since we filed a shareholder resolution at Glencore last year requesting that the company disclose:

• How its projected thermal coal production aligns with the Paris Agreement's objective to pursue efforts to limit the global temperature increase to 1.5°C;
• Details of how the company’s capital expenditure allocated to thermal coal production will align with the disclosure above; and
• The extent of any inconsistency between the disclosure in the first bullet point above with the IEA Net Zero Scenario timelines for the phase-out of unabated thermal coal for electricity generation in advanced economies and developing economies. 

Furthermore, Glencore now recognises that its own targets ‘are not aligned with the IEA NZE scenario’.

As a result, in line with the application of our vote sanctions under the Climate Impact Pledge, we will be voting against the re-election of Glencore plc Chairman, Kalidas Madhavpeddi (Resolution 3). We will also be voting against the approval of the 2024 – 2026 Climate Action Transition Plan (Resolution 12).

 

Misleading shareholder proposals: oil & gas companies

ConocoPhillips*

Meeting: AGM, 14/05/2024

Resolution 5 – Revisit Pay Incentives for GHG Emission Reductions

Exxon Mobil Corporation*

Meeting: AGM, 29/05/2024

Resolution 4 – Revisit Pay Incentives for GHG Emission Reductions

Chevron Corporation*

Meeting: AGM, 29/05/2024

Resolution 4 – Report on Analyzing the Risks Arising from Voluntary Carbon-Reduction Commitments

Suncor Energy Ine*

Meeting: AGM, 7/05/2024

Resolution 4 – End 2050 Net Zero Pledge

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

Misleading proposals (shareholder resolutions brought with the aim of undermining positive environmental, social and governance behaviours) are a relatively recent phenomenon.

Previously focused predominantly on social-related proposals (as referenced in our previous blog on racial equity audits LGIM Blog: How racial equity audits can tackle corporate inequality) we have seen, in the past couple of years, a number of proposals being tabled at large oil and gas companies, with the aim of reversing progress towards net zero emissions.

Such proposals often appear to be supportive of, for example, the energy transition but, when considered in depth, are actually designed to promote anti-climate change views.

The common narrative of these proposals is to challenge the climate-related commitments set out by these companies, with arguments supported by short-sighted views, and fuelled by interests that run counter to LGIM’s commitments to drive long-term, systemic change, with the aim of protecting our clients’ assets over long-term horizons.

Regarding the remuneration-related proposals above, we additionally would direct readers towards our global corporate governance and responsible investment principles, where we set out our expectations that companies in sectors that can have a significant effect on climate change should link part of their pay to delivering on their climate-mitigation goals. Targets should also be set to create new opportunities that not only improve revenue, but also have a positive impact on climate.

Due to the way that these misleading proposals are often drafted, we believe that investors should add an extra layer of scrutiny when assessing them, in order to ensure that their vote is being directed as intended.

We do not support such proposals and will continue to assess shareholder proposals carefully, and to work with our peers, to identify them.

 

Climate resolutions at North American and Nordic banks

Bank of America*, Goldman Sachs*, Morgan Stanley*, Wells Fargo*, Skandinaviska Enskilda Banken (SEB)*, Nordea Bank*, Danske Bank*, Swedbank*

Meetings: AGMs in April and May 2024

Summary of resolutions:

1) Green finance ratio: requesting disclosure of the ratio of clean energy supply financing as a proportion of fossil-fuel energy finance

2) Calling on the banks to stop financing fossil fuels

3) Requests for climate lobbying transparency

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 2024 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.

1) Green finance ratio

LGIM’s vote stance: FOR the resolution (i.e. against management recommendation) – at Bank of America, Goldman Sachs, Morgan Stanley

 LGIM believes that banks and financial institutions have a significant role to play in shifting financing away from ‘brown’ to funding the transition to ‘green’. LGIM expects companies to be undertaking appropriate analysis and reporting on climate change matters, as we consider this issue to be a material risk to companies.

We are therefore supporting these resolutions.

In a positive development, it is worth noting that some of the TARGETED banks have since agreed to provide this disclosure and the proposals were withdrawn; at JPMorgan Chase, Citigroup and Royal Bank of Canada. 

2) Stop financing fossil fuels

LGIM’s vote stance: AGAINST the resolution (i.e. in line with management recommendation) – Skandinaviska Enskilda Banken (SEB), Nordea Bank, Danske Bank, Swedbank

LGIM expects companies to introduce credible transition plans, consistent with the Paris goals of limiting the global average temperature increase to 1.5°C. This includes the disclosure of Scope 1, 2 and material Scope 3 greenhouse gas (GHG) emissions and short-, medium- and long-term GHG emissions reduction targets consistent with the 1.5°C goal.

While we consider the overall principles of the resolution to be broadly supportable, the drafting of these proposals in such broad terms – demanding a climate strategy that seeks to immediately halt new fossil fuel extraction – Is too prescriptive in limiting banks’ activities towards achieving their stated climate goals. Also, this does not consider the nuances in an orderly transition to a net-zero emissions economy.

While LGIM will not support this type of resolution, we will continue to monitor banks’ activities.

3) Lobbying misalignment

LGIM’s vote stance: FOR the resolution (i.e. against management recommendation) – at Bank of America, Goldman Sachs, Wells Fargo, Morgan Stanley

In line with LGIM’s expectations as laid out in our Climate Impact Pledge Sector Guides, we encourage all companies to report their climate lobbying activity in line with the global standard on responsible corporate climate lobbying to ensure that lobbying activities are in line with the climate commitments of the company.

 

Woodside Energy Group Ltd.*

Meeting: AGM, 24/04/2024

Summary of resolutions:

Resolution 2a – Re-elect Richard Goyder as Director

Resolution 6 – Approve Climate Transition Action Plan and 2023 Progress Report

LGIM’s vote intention:  Against resolutions 2a and 6 (against management recommendation) 

Rationale:

The two resolutions are important on account of their subject matter (climate change, which continues to be a core area of focus for LGIM’s Investment Stewardship team), and the climate-related voting history at the company itself. Resolution 2 illustrates our Climate Impact Pledge vote sanctions in action; this is strongly linked to Resolution 6, pertaining to our ongoing efforts to put pressure on companies to construct suitably ambitious and credible transition plans for reaching net zero.

Our vote against the re-election of Richard Goyder (Resolution 2a) is applied in line with our Climate Impact Pledge engagement escalation, whereby we vote against the (re-)election of the Chair of the Board at companies lagging our minimum expectations on climate change; for the oil and gas sector, these are set out in our net-zero sector guide.

This is the second consecutive year in which we are applying voting sanctions against the company, having voted against the re-election of its most senior director, Ian Macfarlane, at the 2023 AGM, given similar concerns.

In the case of Woodside, in addition, we would state that, despite the significant proportion of shareholder votes (49%) against the company’s climate report at their 2022 AGM, as well as the re-election of Ian Macfarlane at the 2023 AGM (34.7%), we note that no material changes have been incorporated in their most recent climate transition plan, which we view as insufficiently robust, both in terms of disclosure and climate-related targets.

This leads us to Resolution 6. Having published our expectations for companies’ climate transition plans in 2022, we reiterate here that LGIM expects companies to introduce credible transition plans, consistent with the goals of the Paris Agreement on climate change to limit the global average temperature increase to 1.5°C.

While we view in a positive light some of the steps that have been taken by Woodside, primarily around methane, and in better aligning executive compensation to climate-related targets, we remain concerned about the insufficiently robust emissions targets, lack of quantifiable disclosure on climate related risks and the quantum of capital to be allocated to low-carbon solutions.

 

Nestlé S.A.*

Meeting: AGM, 18/04/2024

Summary of resolution: Resolution 7 – An Amendment to the Articles of Association regarding sales of healthier and less healthy foods

LGIM’s vote intention:  For resolution 7 (i.e. against management recommendation) 

Rationale:

We believe nutrition is an important topic for investors because it has a significant impact on the health and well-being of individuals, communities and societies. The interconnected challenges of obesity, undernutrition and micronutrient deficiencies is estimated to be 5% of global income, or $3.5 trillion, per annum.[1] Nutrition is therefore one of our global stewardship sub-themes, under the umbrella of Health.

In this shareholder resolution, which we are co-filing with other investors via ShareAction’s Healthy Markets Initiative, we are calling on Nestlé to:

• Set key performance indicators (KPIs) regarding the absolute and proportional sales figures for food and beverage products according to their healthfulness, as defined by a government-endorsed Nutrient Profiling Model
• Provide a timebound target to increase the proportion of sales derived from these healthier products

Further information on this resolution and our engagement with Nestlé can be found in our blog post.

We will also vote against item 1.2 (approval of the remuneration report) and item 4.3.1 (Elections of the members of the Compensation Committee – Dick Boer), due to our concerns over executive remuneration, since awards are permitted to vest for below-median relative performance, which therefore fails our ‘pay for performance’ expectations. We applied the same votes to last year’s remuneration report.

 

Apple Inc*

Meeting: AGM, 28-02-2024 

Summary of resolution: Resolution 7 – Report on Use of AI 

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

Rationale:   

As artificial intelligence (AI) becomes increasingly embedded in our society, LGIM believes that it presents opportunities to drive long-term value and has the potential to create significant risks, stemming, for example, from data privacy and security, regulatory compliance and workforce transitions. Importantly, we also view societal trust in AI as a material risk.

Market participants are taking steps to ensure the safe development and deployment of AI, from tech companies disclosing approaches to responsible AI principles, to regulators and policymakers increasing AI-related laws around the globe.

As set out in our current baseline expectations on AI, we believe companies should be assessing and mitigating risks associated with AI and providing transparency to the market on their approach; this applies particularly to those companies that develop AI systems and will shape the way it is used in our economy and society. 

Resolution 7 asks Apple to produce a transparency report on the company’s use of AI in its business operations and disclose any ethical guidelines that the company has adopted regarding the company’s use of AI technology. Apple has announced general plans to further develop its use of generative AI and other AI capabilities; however, the company discloses very little about its approach to managing AI-related risks, nor any principles or guidelines to inform how the company uses AI, putting the company behind its peers and increasing exposure potential regulatory and other risks.

We met with the company to discuss these topics, and it did not commit to increasing transparency and disclosures around AI at this time. Apple is among several companies that have outsized influence on the integration of AI into our economy. In line with our expectations, we believe companies like Apple should be transparent in their uses of AI and their risk management processes; therefore, we will be voting FOR this resolution.  

More information on our Investment Stewardship activities can be found on our website:

Investment stewardship & governance | LGIM Institutional

 

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

[1] Global Panel on Agriculture and Food Systems for Nutrition (2016) Technical Brief No.3: The Cost of Malnutrition – Why Policy Action is Urgent. London: Global Panel on Agriculture and Food Systems for Nutrition. Available at: https://glopan.org/sites/default/files/pictures/CostOfMalnutrition.pdf