CDP says pension funds’ ‘Red Lines’ vote guidelines could put chairs at risk

Association of Member Nominated Trustees’ initiative could be a game-changer

(Amends to reflect the final guidance will affect company chairs, not CEOs.)

Environmental data body the CDP says the new pension fund-led “Red Lines” voting guidelines for asset managers could put chairs’ jobs at risk for failing to disclose environmental information.

The UK’s Association of Member Nominated Trustees (AMNT), representing more than £350bn (€490bn), unveiled the comply-or-explain initiative earlier this year.

It involves “Red Lines” for fund managers on environmental social and governance (ESG) voting guidance at companies in what could be a game-changer for responsible investment activity at 2016 corporate annual general meetings (AGMs).

The AMNT is a not-for-profit organisation of 400+ trustees working at the heart of the boards of UK pension schemes. If a company crosses a Red Line, then fund managers running assets for schemes with AMNT trustee members will be expected to comply with the share voting steer (if approved by the pension fund), or explain why not.
The association worked with CDP to evolve five Red Lines for the environment and, at the time, CDP said itwas an “unprecedented opportunity” for pension funds to engage on vital ESG issues with companies.

Now, as it unveils its latest Global Climate Change Report, the CDP reckons the growing momentum among the corporate world is coinciding with increasing engagement on climate change from the investor community.

“If the recently introduced landmark pension fund voting guidelines known as the Red Lines are applied, failure to disclose to CDP may put chairpersons’ jobs at risk,” it says.

Also, the report reveals that an estimated 435 companies this year disclosed using an internal price on carbon, a near tripling of the 150 companies in 2014. Meanwhile, an additional 582 companies say they expect to be using an internal price on carbon in the next two years.

The international not-for-profit CDP issued its report on behalf of 822 investors representing $95trn. The new publication includes the 2015 Climate A List, which comprises those companies identified as A grade for their actions to mitigate climate change.