Interview – Brunel Pension Partnership
respond. We will continue to engage with them following their announced short and medium-term targets.
So, pressuring them to put forward their own climate policies has been a step forward? Absolutely. It is unprecedented and we are pleased with the outcome. We have subsequently seen more net zero announcements coming from the bank- ing industry. It will be important to follow the progress in that area of the financial industry. It is an area that investors are increasingly becoming more aware of as an important sector to engage on.
As you indicated earlier, the challenge will be deciding if this is a sincere commitment or not. Have they put in place a roadmap of how to get there?
These announcements are fantastic, but we need to see short and medium-term targets as well as the structural changes they are going to put in place. You cannot wait until 2040 to start doing the work.
Speaking of climate change, how have the updated reporting standards in the State- ment of Investment Principles affected your work? Generally, it has not had a huge impact as it is very much business as usual. We are already supporting our partner funds and we have regular meetings and sub-groups to keep one another updated on progress. The climate change policy we released in January last year is a great example of these high standards and our framework, for which we have won an ESG Initiative of the Year award.
As part of that, we run regular workshops with our partner funds where we have engagement conversations to seek their views. They are very much part of the pro- cess and we could not have delivered this policy without their input.
Are there differences in how partner funds approach engagement or is Brunel stream-
14 | portfolio institutional | February 2021 | issue 100
lining the process? Brunel takes a unified
approach to
engagement by seeking the endorsement of our partner funds in enacting the policy.
A criticism of engagement is that while shareholder rebellions are rising, most shareholders vote with the board. This was hotly debated last year when the Securities & Exchange Commission put forward
its proposals on shareholder
requirements. From our perspective, while shareholder proposals rarely gain a majority, we have seen that they do have an impact. As mentioned earlier, in the UK share- holder proposals that secure more than 20% of the vote the company must explain what action they will take and report on the outcome of their engage- ment with shareholders. This helps raise awareness of topics other investors might not be aware off.
I had an interesting discussion with one of our asset managers about voting poli- cies. BlackRock has analyzed the percent- age of support for shareholder resolutions and the action taken by companies in the subsequent 12 months. It provides some interesting insights into the 20% thresh- old and the reaction that comes on the back of it. Coming back to Barclays, without the pro- posal of the shareholder resolution, I do not know whether we would have seen a net zero announcement from the bank or not. I know that is not reflected in our shareholder resolution only just getting 24% of the vote, but when you look at the company’s net zero ambition getting nearly 100% support, that in our view is the direct impact of shareholder engage- ment. You cannot always measure impact by the percentage of people that have voted for shareholder resolutions. It can take time for shareholders to become aware of an issue and to support it. Take diversity, for example. Proposals on diversity put forward in the 1990s
If anything, the pandemic has highlighted the need to act, to move away from regarding ESG as a non- financial extra.
were rarely getting 6% of the vote, so it took a while for shareholders to under- stand the importance of the issue and to address the best way of voting on it. Now- adays it is covered in most investor poli- cies and shareholders are regularly voting against boards for having poor diversity and are setting clear expectations for the future. For example, from 2022 LGIM will vote against S&P500 and FTSE100 companies if they do not have a person of colour on their board, which is progress considering the 6% of votes we saw in the 1990s. So, shareholder resolutions are a useful tool for engaging with companies and we will see an increase of proposals in the coming years. Unfortunately, we still hear from compa- nies that say we are the only one that is concerned about an issue. So, shareholder proposals are sometimes required as an escalation process and to raise awareness among other shareholders.
What are the lessons to be drawn from Boohoo? A lot of UK schemes held posi- tions in the clothing retailer, as did some ESG funds. The argument was that they were engaging with the company on its la- bour standards. Is this an example of the limitations of shareholder engagement? Hindsight is a wonderful thing. This is not the first example and will not be the last. We have seen this before with the Volkswagen emissions scandal and
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
