The PLSA will also advise schemes to look for evidence that companies are taking their Task Force on Climate-Related Financial Disclosures (TCFD) seriously as part of their investment plans to help address the climate emergency.
In addition to this, companies are also being encouraged to be cautious on how they are attributing pay to their business leaders, especially where they have benefited from Government support, and to ensure their governance arrangements are diverse and inclusive.
The Stewardship and Voting Guidelines 2022 are an important resource for pension trustees, providing practical guidance for schemes considering how to exercise their vote at annual general meetings.
Having undertaken a substantial review of the guidelines in 2020, the PLSA has this year focused on ensuring they remain relevant amid the challenges posed by post-Covid-19 world, a fast-moving regulatory environment and increases in savers’ everyday bills.
Three key areas the new Stewardship and Voting Guidelines cover are:
• Climate change: As pension schemes ramp-up their Task Force on Climate-Related Financial Disclosures (TCFD) reporting, we’re seeking references to the TCFD framework by companies. We are calling for better disclosure from companies of their impact on the environment, including Scope 1 and 2 emissions and, where relevant, Scope 3.
• Executive remuneration: We will be calling for caution to be shown on executive pay proposals, especially where companies have benefitted from Government support during the pandemic, and in light of the increasing cost of living.
• Diversity: We’re seeing significant progress on diversity on boards and welcome the direction of travel. Diversity of thought is a key tool in effective governance. The PLSA will call for a continued focus on ensuring diversity, and FTSE 100 companies that are failing to meet the Parker Review target of ‘no white boards’ by 2021, should expect to see this challenged by investors.
Nigel Peaple, Director of Policy & Advocacy, PLSA, said: “Investors recognise how incredibly tough the past two years have been for companies to navigate. While being empathetic to these issues, AGM season is an opportunity for pension scheme trustees and their asset managers to engage with company directors, to revisit environmental, social and governance policies and seize the chance to build back better than before. As part of this we have strengthened the language on expectations on TCFD disclosures, to which all companies should be held accountable.
“And while Climate Change matters remain vital to address, it’s also important to not forget the other aspects of ESG investing. This is not only the right thing to do but also that numerous studies have shown that companies that uphold the highest ESG standards tend to financially outperform as well, adding value to the millions of pension savers they count among their shareholders.”
To read the Stewardship and Voting Guidelines 2022 click here.
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