In a new-found era of uncertainty, we believe asset managers (in other words, professionals who run investments on your behalf) have a crucial role to play in tackling era-defining challenges. Seeking to effect positive change through active dialogue with companies has been more important than ever in 2020, as we continue to pursue our vision of ‘investing for good’ by creating a better future through responsible investing. Responsible investing is the umbrella which sits above environmental, social and governance (ESG) factors.
Legal & General Investment Management’s (LGIM’s) 2020 Active Ownership report shines a light on the extent to which our team engaged with companies across the world. For example, we talked with the likes of **Boohoo, **Facebook, **Amazon, **Twitter and **Microsoft on issues including the environment, supply-chain management, pay, diversity and privacy. At company annual general meetings (AGMs), we voted on your behalf on 66,037 resolutions, opposed the election of 4,700 directors due to concerns over how they were managing their companies, engaged with 665 companies and launched a number of associated responsible investment strategies.*
Climate change
In 2020 L&G Group formally added ‘addressing climate change’ as one of six growth drivers. This involves working with LGIM to achieve net-zero emissions by 2050 or sooner across all assets under management, and making our Climate Impact Pledge even more ambitious by expanding it to 1,000 companies, who will be penalised for falling short of our minimum standards.
Last year we were ranked one of the highest among asset managers for our approach to climate change, in a review by ShareAction.1 We also became a founding member of the Net Zero Asset Managers Initiative, pledging to work with you, our clients, to set decarbonisation goals in line with the Paris Agreement’s aim to limit global warming.
One of the companies we engaged with included **Nestlé, which has committed to net-zero emissions, externally verified certifications for water use and raw material sourcing, and 100-per-cent recyclable or reusable packing by 2025; and the board of **Whitehaven Coal, from whom we called for a report on the gradual wind-down of its coal production in line with global climate goals.
Diversity
Taking action to encourage diversity in the workplace has long been on our agenda, and in 2020 we opposed 208 directors in the UK, US, Asia-Pacific region (including Japan) and the European Union due to concerns over board diversity. We were pleased to win the Citywire Gender Diversity Judges’ Choice Award in 2020 for our work on gender diversity and our leading position on ethnicity but continue to recognise much more needs to be done.
Concerned at signs of ‘gender fatigue’, in the US our coalition of investors sent letters to 18 companies with less than 20 per cent female representation on the board. In the UK, the collaborative 30% Club UK Investor Group, which our Senior ESG & Diversity Manager Clare Payn chaired from 2017 to 2020, wrote to 131 companies with only one woman on the board, less than 30 per cent of women on the board or an all-male executive committee. We have also specifically increased our focus in Japan, where we voted against the most senior member of the board, or chair of the nomination committee, at 10 companies, including **Olympus, **Central Japan Railway Company and **Kubota.
Furthermore, in a year where ethnic diversity was at the forefront of business and social action, we launched multiple high-profile diversity campaigns and published our ethnic diversity report, which sets out our strategic priorities, targets and voting policy on this issue.
COVID-19 and healthcare
As a result of the pandemic, our work with healthcare companies inevitably intensified during 2020. We penned a public letter to global pharmaceutical companies, asking them to undertake practical steps to accelerate research and development efforts surrounding COVID-19 medicines and vaccines. We were also co-signatories to a letter that called for fair and impartial access to COVID-19 vaccines and therapies.
Finally, we joined the Investor Action on Antimicrobial Resistance initiative to help combat the spread of drug-resistant superbugs and will continue to collaborate with our peers and engage with policymakers to act on this issue.
Income equality
A vast number of people globally were in work yet suffering from extreme poverty even before the onset of COVID-19, which had a devastating effect on lower-income communities. That’s why we campaigned for all companies in which we invest on your behalf to ensure they are paying a living wage – or the real living wage in the case of UK-based employees, and that their ‘Tier 1’ suppliers are paying the living wage.
Against the backdrop of the pandemic, we feel strongly that it is more important than ever for executive remuneration to adhere to best practice, so we voted against 341 proposals to adopt a new remuneration policy at UK companies where the policies did not meet our pay principles.
Key Risk Warnings
*The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested.
**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.
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Source: ShareAction as at June 2020