23 May 2024 3 min read

LGIM’s voting intentions for 2024

By Investment Stewardship team

Our voting intentions at upcoming shareholder meetings, including Apple, Nestle, Woodside Energy, North American and Nordic banks, oil & gas companies, Glencore, Amazon, and Chevron.

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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    

 

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

Investment Stewardship team

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Our Investment Stewardship team comprises professionals with experience in areas including responsible investment, corporate governance, and public policy. The team is made up of both sector specialists and experts on ESG themes, such as sustainability, and has a global remit with members in the UK, Japan and the US. The team exercises LGIM’s voting rights globally, holding companies to account. In 2020, LGIM cast over 138,600 votes at over 14,000 meetings.

Investment Stewardship team