More say-on-climate voting will take place in next year’s AGM season as companies respond to the increasingly urgent attention from investors on the climate crisis.

The conclusion came as part of a special Diligent and Board Agenda webinar reviewing AGMs in 2022 and looking ahead to next year’s season.

Daniele Vitale, head of governance at Georgeson, the shareholder advisory firm, said interest in say-on-climate (voluntary shareholder votes on company transition plans) will ramp up, in particular with efforts in some places to formalise the process. “We are certainly expecting more companies to do say-on-climate votes than has taken place in 2022.

‘Best practice’ advice

“It’s difficult to predict how many, and how this will develop in some European markets; some regulators and other associations are starting to put out best practices around how these votes should be structured. That will give some comfort to companies about what they should be putting forward and what people want to vote.”

Vitale added that ESG in general will remain a “hot topic”, with more attention from investors on the metrics used by companies. Vitale also expects investors to maintain pressure on the election of directors and executive pay. “I’ve been around in the governance space for 20 years and the expectations from investors always seem to ratchet up.”

The webinar revealed that votes for director elections are traditionally used to lodge concerns about overboarding or the independence of specific directors. Increasingly, they are also used to register worries with nominations committee chairs about boardroom diversity, or about pay issues with remuneration committee leaders.

Post-Covid leap on top pay

Edna Frimpong, director and head of international research at Diligent, said that executive pay levels had made a comeback after restraint during the Covid crisis.

Analysis showed, she said, that Covid pay cuts in the US were mostly “window dressing” and that average chief executive pay had risen 170% from 2019, largely due to changes in long term incentive payouts.

Other jurisdictions, Australia or the UK for example, have witnessed more conservative pay policies but levels have crept back to pre-pandemic levels. “So, we are likely to see more dissenting votes from investors if these trends continue,” said Frimpong.

Looking to next season, Stuart Morgan, head of investor relations at Capita, said that, depending on the company, much work goes into identifying and understanding investor concerns ahead of an AGM.

“By the time you come to the vote, everybody should be very clear on what the issues are and what the outcomes, frankly, should be.”

Watch the full Diligent and Board Agenda AGM season review webinar