If you are a company chair and fail to ensure your board is diverse you can bet some significant shareholders will now vote against your reappointment.
That’s the message this week from Legal and General Investment Management (LGIM) in a report disclosing its voting activity in 2018.
The report reveals that while LGIM voted against the reappointment of 13 chairs based on a lack of diversity in 2016, last year saw the fund manager vote against more than 100.
“Diversity of thought is crucial for the long-term success of the businesses in which we invest on behalf of our clients,” LGIM says. “We believe that creating gender-balanced teams, in particular, is a strategic and economic imperative.”
Overboarding is also a concern for LGIM. Almost of third (29%) of its votes against directors on UK boards was due to concerns about overboarding. That means the asset manager voted against 138 directors in total for overboarding.
In total LGIM voted against 3,864 directors across international markets in 2018, up 37% on 2017 and a clear sign that the investment manager is stepping up pressure on boards to change.
The top governance themes driving LGIM’s behaviour were board composition, climate change, corporate strategy, remuneration and nominations or succession.
In his foreword to the report, Sacha Sadan, director of corporate governance at LGIM, said that 2018 was a “turning point” for asset managers to turn their attention to the environment and sustainability.
“There was, I believe, a shift in how asset managers approach ESG considerations, which the industry is now taking more seriously,” he said.
LGIM began work on climate engagement in a significant way in 2016, with the launch of the firm’s Climate Action Pledge.
Last year saw 11,000 investee companies assessed under LGIM’s ESG score. A report from the 50/50 Climate Project revealed that LGIM voted on more climate-related resolutions than any of the other 10 largest asset managers in 2019.
The pledge means LGIM is happy to highlight climate-related successes and name and shame laggards. Indeed, LGIM ditched holdings in many companies for climate reasons in 2018, including China Construction Bank, Dominion Energy, Japan Post Holdings, Roseneft Oil and Sysco Corp. Each of the companies contacted LGIM to ask how they could remain in the asset manager’s fund.
LGIM also saw success closer to home after coordinating an open letter from asset managers calling on the oil and gas industry to “take responsibility for its emissions”.
In December last year Shell responded with the introduction of emissions targets linked to executive pay.
