Fund management updates
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Fidelity International, the global asset manager, says it will punish directors at more than 1,000 companies globally next year if they fail to tackle the issues of climate change and a lack of boardroom gender diversity.
Large investors have traditionally been reluctant to vote against the re-election of directors at general meetings, but Fidelity said that from 2022, it would hold board members to account when companies are deemed to be making insufficient progress on board diversity or in their response to global warning.
“Ultimately boards need to be held accountable,” said Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International. “It is their responsibility.”
Fidelity, which oversees $787bn in client assets, says it is targeting about 1,000 companies that are large emitters of greenhouse gases at a sector level or contribute heavily to carbon emissions within the asset manager’s own investment portfolios.
It will vote against directors where companies do not have a policy on climate change or do not disclose emissions, with businesses in the most exposed sectors expected to have targets for reducing carbon emissions among other metrics. Based on the current situation at the businesses it is targeting, Fidelity warned it could end up voting against the re-election of directors at 300-400 companies over climate change.
Fidelity also estimated that directors at a third of the 4,000 companies in which it invests face being punished over the diversity of boards. It says it will vote against directors in developed markets where boards are not at least 30 per cent female, or 15 per cent female in markets “where gender standards are still developing”. The asset manager already votes against all-male boards.
Tan said Fidelity hoped that by speaking to boards in the months ahead, it will be able to encourage companies to take stronger action on board diversity and climate change.
“We are hopeful that our policy will help companies . . . to recognise the value of having diverse boards and to ensure they have the right levels of representation,” he said.
He added that the focus on diversity “does not begin and end with board diversity”. In Japan, for example, Fidelity is in the middle of a so-called engagement campaign, where it has asked companies to provide data on female participation in the workforce and at management and board level, as well as their gender pay gap.
Colin Baines, investment engagement manager at Friends Provident Foundation, which has been pushing for fund houses to use their vote on environmental, social and governance issues, said the commitment to vote against the re-election of directors was significant.
“We need to see formal shareholder engagement escalation policies and more forceful stewardship become the sector norm on the most pressing societal challenges and ESG risks like avoiding dangerous levels of climate change,” he added.
BlackRock and Legal and General Investment Management are among the other big asset managers that are targeting directors over inadequate responses to the same issues. BlackRock said it voted against more than 1,850 directors in the year to the end of June 2021 over a lack of board diversity, as well as against 255 directors over climate-related concerns.
Last year, Axa Investment Managers announced it would adopt one of the fund industry’s toughest policies on gender diversity, requiring boards to be at least a third female in developed markets. It also said it would vote against either the head of the nomination committee or against the approval of accounts in emerging markets and Japan if women did not hold at least one seat or make up 10 per cent of larger boards.
Catherine Howarth, chief executive of Share Action, said: “Voting against directors of corporate climate laggards is long overdue and we applaud asset managers for making their voting criteria crystal clear ahead of the 2022 AGM season.”