Local Authority Pension Fund Forum (LAPFF) and CCLA, supported by investors representing £1.6 trillion AUM, have written to the chairs of 76 FTSE 100 companies that have not held a vote on their climate transition plans in the past three years setting out their expectations ahead of next year’s AGM season.
The letter notes that investors expect companies to set out credible transition plans, that include Paris-aligned targets and detailed strategies for achieving those goals. To enable shareholders to make informed investment and stewardship decisions, companies should outline their climate strategies within these transition plans and include material climate-related impacts in their financial statements.
The investors state that specific votes on such climate transition plans enable shareholders to signal support for plans and associated capital expenditure requirements. By having such a vote, shareholders can initially indicate their confidence in the transition plan through a dedicated resolution rather than it being directed to one of a variety of other resolutions on the ballot.
The letter’s signatories point out that around a fifth of FTSE 100 companies (excluding investment trusts) have provided their investors with the opportunity to approve their climate plans and this is now being viewed as good practice. Emerging guidance, including from the Transition Plan Taskforce, recommends plans are produced and updated every three years.
Cllr Doug MCMURDO, Chair of LAPFF, said:
“AGMs provide shareholders with the opportunity to support a board’s approach to key strategic decisions and hold them to account for their management of material risks and opportunities. Given the considerable climate-related risks that major companies face and the implications for long-term company success, we are encouraging boards to provide investors with the chance to support their climate transition strategies or raise specific concerns. Such votes provide a great opportunity for boards to engage with their shareholders and wider stakeholders to strengthen their strategies and gain investor backing for their transition plans.”
Peter HUGH SMITH, Chief Executive, CCLA, said:
“Climate change is a material threat to medium and longer-term shareholder value so it is no coincidence that our clients tell us it is the number one issue they care about most. We all know that the world needs to do more and move faster if we are to reach net zero by 2050. As owners of the companies we invest in and as good stewards of our clients’ capital, we have a duty to continue to push companies, and support wider efforts, to limit global temperatures to below 1.5 degrees.”
Towards the end of 2023, LAPFF and CCLA spearheaded an investor group writing to 35 of the highest emitting companies in the FTSE 350 index including those in the oil and gas, utilities and mining sectors. Twenty-one responses were received with two intending to hold a vote at the 2024 AGM and one intending to hold a vote at its 2025 AGM. Five companies had previously put their transition plans to a vote.
