As we approach proxy voting season, Royal London has provided a preview of some of the updates to their voting approach for this year.
The topics below are not new, but are rapidly shifting in scope, momentum, and complexity. As such, we have redefined how we plan to approach these through voting.
Sophie Johnson, head of governance and voting, Royal London Asset Management said:
“As active owners, we believe that constructive engagement with companies is key to driving long-term growth for our clients. However, where progress stalls or concerns remain unaddressed, we are prepared to escalate our approach – whether through voting against directors, supporting shareholder resolutions or publicly voicing our position.
“Escalation is a critical tool in our stewardship approach, ensuring companies remain accountable on issues that impact shareholder value”
Climate
While the world is navigating growing uncertainty in relation to climate policy, our proprietary Climate Transition Assessment (CTA) framework guides us in assessing whether the companies we invest in with the highest emissions are taking meaningful steps to align to net zero.
This year where our assessment shows negative movement, or a company is classed as ‘not aligned’ towards a net zero pathway, we will escalate our concerns against the most relevant member of the Board.
We are also supporters of the investor-led Transition Pathway Initiative (TPI), which constitutes a valuable tool in evaluating a company’s readiness for the climate transition. Beyond our highest emitters, we will also look to vote against the most relevant director at the bottom scoring companies according to TPI’s assessment.
Diversity
We value diversity across our organisation and we also see it as an important theme in our engagement plans. The executive order recently issued by the new US administration has led many companies to publicly roll back on their policies and initiatives.
Our position is clear, we continue to view a diverse board and workforce as a positive and we expect companies to be aligned with that. We will pay close attention to shifts in companies’ efforts in relation to diversity and if required use our voice through our votes. Where companies have shifted away from their policies, we will consider voting against the applicable board member(s).
Human rights
We believe that companies have an important role to play in mitigating human rights risks and effectively navigating the interplay between business and human rights.
The United Nation’s Universal Declaration of Human Rights (UDHR) represents an important framework aimed at promoting a better world. Focusing on what we consider to be high-risk sectors in our investments, we will look to vote against the relevant board members at companies where human rights policies are not aligned with the UDHR.
Biodiversity
We recognise the risks that the deterioration of nature poses to businesses and financial systems. In 2025 we will focus on those companies operating in material and sensitive sectors as defined by the Task Force on Nature-Related Financial Disclosures (TNFD). Where those companies are additionally operating in biologically sensitive areas, lack a biodiversity policy and have been involved in recent biodiversity-related controversies, we will look to escalate our vote against the relevant board member.
Over the course of the upcoming proxy voting season, we will use our influence to promote positive changes through our voting practices. Our dedication to these core values underscores our belief that ethical business practices are fundamental to long-term success.
