PRI chief expects scrutiny of Climate Action 100+ members’ voting practices

The head of the Principles for Responsible Investment (PRI) says she expects scrutiny about the voting practices of the members of the Climate Action 100+ investor initiative.

The initiative – backed by 373 investors representing $35trn assets – launched its first progress report last week (see RI’s report and analysis).

It has faced calls for greater transparency from civil society groups about their engagement activity.

“I expect that at some point we will see scrutiny of voting practices for CA100 + members by one group or another,” PRI Chief Executive Fiona Reynolds said on LinkedIn.

It was part of a thread sparked by RI’s analysis of the CA100+ initiative last week.

She went on to say that in general there needed to be “far more transparency about voting practices in the investment industry- even if it is after the fact”.

“There is far too much talking the talk and not enough walking the walk.”

Reynolds sits on the Steering Committee of the CA100+ initiative, which targets systemically important carbon emitters, and her comments drew responses from responsible investment figures.

Joining the debate, Tim Smith, Senior Vice President of ESG Shareowner Engagement at Walden Asset Management, said she had made an “excellent point”.

“For example this spring both Vanguard and BlackRock voted for only a handful of climate resolutions while companies like Eaton Vance turned a corner and voted for the vast majority of climate resolutions.

“So the way in which major investment managers vote their shares is undoubtedly going to be scrutinized by investors and clients alike.” Eaton Vance acquired SRI firm Calvert in 2016.

James d’Ath, Managing Director of sustainability consultants Sustainix, wondered if the PRI itself could “more aggressively police its membership by publicly shaming/expelling transgressors?”Sarah Wilson of Minerva/Manifest made the point that “all voting, particularly on directors and financial statements is about accountability for long-term sustainable success”.

“Whether it’s ESG linkage with remuneration of quality of public disclosures, informed votes and thoughtful engagement send a powerful message.”

Also on LinkedIn recently, Adam Matthews, Co-Chair of the Transition Pathway Initiative and Director of Ethics & Engagement at the Church of England Pensions Board, said some funds were free-riding on the engagement of others through CA100+ “whilst undermining it by not voting for climate resolutions”.

Meanwhile, CA100+ member Schroders has entered the debate kicked off by Bill Gates about the impact, or lack of it, of fossil fuel divestment. The Microsoft founder was quoted by the Financial Times as saying that divestment has probably reduced about zero tonnes of emissions.

Belinda Gan, Schroders’ Investment Director of Global Sustainability said in a blog: “In reality, the picture is far more complex than a simple link between divestment and carbon emissions. Yes, we agree that divestment is not necessarily the best way to promote positive change. We believe that investors looking to influence fossil fuel companies’ operations can be more effective through other means.”

Instead of divestment, the firm proposes four options. They are: engage with companies; file shareholder resolutions and vote against management; focus on the new supply of capital; and put pressure on public policymakers.

On the third point, Gan says: “To impact the companies’ operations and profitability investors can focus their efforts on credit markets, as well as on the banks that supply capital to, and the insurers who underwrite, the industry. We believe this is more likely to move the needle than divestment.”