Climate change and diversity are priorities for shareholders and will be “top of mind” for asset managers during this year’s AGM season, according to the Investment Association (IA).
The IA issued the shareholder priorities ahead of the upcoming AGM season.
It said that these outline the “key areas” that investment managers deem to be “critical drivers of long-term value for companies”.
The Institutional Voting Information Service (IVIS) will analyse UK-listed companies against these shareholder priorities and the IA’s broader guidelines with a view to guiding how shareholders vote at company AGMs.
According to the IA, investment managers are looking for businesses to “take immediate action” on the long-term risks posed by climate change, by explaining the potential impacts on them, and methods of mitigation, with firms encouraged to disclose their net-zero plans prior to any government-mandated deadline.
An ‘amber-top’ warning will be given by IVIS to companies that fail to make disclosures against the four pillars of the Task Force on Climate-Related Financial Disclosures.
On diversity, IVIS will issue a ‘red-top’ warning for the first time to FTSE 100 companies that do not comply with the Parker Review target of having a minimum of one ethnically diverse board member, while an ‘amber-top’ warning will be issued to FTSE 250 companies that fail to disclose either the ethnic diversity of their boards, or those without a plan to achieve the Parker Review targets by 2024.
In 2022, FTSE small-cap companies can expect to be ‘red-topped’ in cases where women represent less than or equal to 25% of the board or executive committee.
Andrew Ninian, director of stewardship and corporate governance at the Investment Association, said: “Investment managers want to support companies to deliver long-term, sustainable returns on behalf of savers and pensioners up and down the country.
“Climate change and the transition to net zero is not an issue which can be left for future management teams or boards, investors wish to see the actions the current leadership will be taking, and investment managers will be watching closely this AGM season to ensure they are doing just that.”
Ninian added: “While good progress has been made with greater female representation on boards and in senior leadership across the FTSE, investment managers now want to see this positive momentum include ethnic minority representation on boards, and are calling on all FTSE 100 companies to meet the Parker Review target this year.”
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