UK pension fund integrates Just Transition in 2024 voting policy

Railways pension scheme will consider backing Just Transition resolutions, implements policies on supplier payments, dual class shares.

Railpen has embedded the Just Transition in its voting policy and strengthened its policies on corporate governance and treatment of suppliers.

The £34 billion ($43 billion; €40 billion) pension scheme for railway employees in the UK said in its updated policy that it will be looking for firms, particularly those in the material sector, to integrate Just Transition considerations into their overall approach to climate as well as disclosures.

Railpen said its Just Transition expectations were based around the framework produced by the Grantham Research Institute on Climate Change and the Environment, which covers areas including supply chain, disclosures and workers.

Just Transition assessments will be included when evaluating climate transition plans and disclosures ahead of votes, Railpen added. It will also consider supporting resolutions that encourage better disclosure on the topic, as well as better management of risks and opportunities.

The phrase “Just Transition” was not mentioned in the fund’s voting policies for 2022 and 2023, but dedicated resolutions on the topic are a relatively recent appearance. According to Climate Action 100+, the first resolution seeking Just Transition reporting and planning came in 2022 at Marathon Petroleum, where it received 16.5 percent support.

A refiled proposal this year received 16.4 percent support, while a similar proposal at Exxon got 16.6 percent backing.

Railpen has been an active and vocal advocate on corporate governance, particularly on dual class share structures. It chairs the Investor Coalition for Equal Votes, a group of UK and US investors engaging on investor voting rights.

In 2024, any company that lists with a dual class share structure and a sunset clause of more than 20 years will see Railpen oppose every board member. Railpen will also oppose the re-election of these board members at any other company they sit on.

Caroline Escott, a senior investment manager at Railpen, said policymakers in the EU and UK are considering “a race to the bottom on corporate governance standards”.

“We will continue to use our voice to advocate for the strong shareholder rights and effective corporate governance, which ultimately benefit both investors and companies,” she added.

Another new policy put in place for the 2024 voting season, which concerns supplier payments.

Railpen said there was a “growing body of evidence demonstrating the financial materiality of a company’s treatment of its key stakeholders” including suppliers, and that a record of late or outstanding payments can increase medium-term operating costs, as well as damaging goodwill among both suppliers and customers.

Where a UK company has been consistently late in paying its suppliers since 2018, Railpen said it would consider a vote against the report and accounts or relevant executive directors.

Other changes include considering votes against responsible directors where efforts to mitigate agricultural commodity-driven deforestation are deemed insufficient, as well as a policy on AI that will allow for voting against directors where there is evidence of “egregious social impact and inadequate governance” around development and deployment of the technology.