LGIM’s voting intentions for 2024

Voting allows shareholders to appoint the directors that run a company, approve executive pay, agree climate transition strategies, and encourage better reporting on other environmental and social topics, among others. We believe that holding companies and boards to account for their actions through our voting is a fundamental part of being a good steward of our clients’ assets.  

In our view, transparency of our granular voting policies and how we have voted at companies’ annual and special meetings helps us to drive change, as well as hold ourselves and companies accountable. 

Sometimes, we may choose to declare our vote intention ahead of meetings, to clarify our views to the market, clients and other companies to a particular issue, resolution or outcome. The decision to do so can be undertaken as part of an escalation strategy, where we deem the vote to be particularly contentious, or as part of an engagement programme.  

Over 2024, we will be updating this blog on a regular basis to highlight our vote intentions in advance of certain shareholder meetings. For information about our voting actions and rationales, please visit our dedicated website: VDS Dashboard (issgovernance.com)    

More information about our Investment Stewardship activities, policies and engagement activities  can be found on our website: Investment stewardship & governance | LGIM Institutional    

Climate resolutions at North American and Nordic banks

Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, Skandinaviska Enskilda Banken (SEB), Nordea Bank, Danske Bank, Swedbank

Meetings: AGMs in April and May 2024

Summary of resolutions:

1) Green finance ratio: requesting disclosure of the ratio of clean energy supply financing as a proportion of fossil-fuel energy finance

2) Calling on the banks to stop financing fossil fuels

3) Requests for climate lobbying transparency

Background and rationale: Given the sector’s importance in enabling the global energy transition, banks have received a significant number of climate-related shareholder proposals ahead of the 2024 AGM season. We continue to consider that decarbonisation of the banking sector and its clients is key to ensuring that the goals of the Paris Agreement are met. Accordingly, we believe our support of many of these resolutions – depending always on the specifics of their drafting language and advisory or binding nature – is warranted.

1) Green finance ratio

LGIM’s vote stance: FOR the resolution (i.e. against management recommendation) – at Bank of America, Goldman Sachs, Morgan Stanley

 LGIM believes that banks and financial institutions have a significant role to play in shifting financing away from ‘brown’ to funding the transition to ‘green’. LGIM expects companies to be undertaking appropriate analysis and reporting on climate change matters, as we consider this issue to be a material risk to companies.

We are therefore supporting these resolutions.

In a positive development, it is worth noting that some of the TARGETED banks have since agreed to provide this disclosure and the proposals were withdrawn; at JPMorgan Chase, Citigroup and Royal Bank of Canada. 

2) Stop financing fossil fuels

LGIM’s vote stance: AGAINST the resolution (i.e. in line with management recommendation) – Skandinaviska Enskilda Banken (SEB), Nordea Bank, Danske Bank, Swedbank

LGIM expects companies to introduce credible transition plans, consistent with the Paris goals of limiting the global average temperature increase to 1.5°C. This includes the disclosure of Scope 1, 2 and material Scope 3 greenhouse gas (GHG) emissions and short-, medium- and long-term GHG emissions reduction targets consistent with the 1.5°C goal.

While we consider the overall principles of the resolution to be broadly supportable, the drafting of these proposals in such broad terms – demanding a climate strategy that seeks to immediately halt new fossil fuel extraction – Is too prescriptive in limiting banks’ activities towards achieving their stated climate goals. Also, this does not consider the nuances in an orderly transition to a net-zero emissions economy.

While LGIM will not support this type of resolution, we will continue to monitor banks’ activities.

3) Lobbying misalignment

LGIM’s vote stance: FOR the resolution (i.e. against management recommendation) – at Bank of America, Goldman Sachs, Wells Fargo, Morgan Stanley

In line with LGIM’s expectations as laid out in our Climate Impact Pledge Sector Guides, we encourage all companies to report their climate lobbying activity in line with the global standard on responsible corporate climate lobbying to ensure that lobbying activities are in line with the climate commitments of the company.

Woodside Energy Group Ltd.

Meeting: AGM, 24/04/2024

Summary of resolutions:

Resolution 2a – Re-elect Richard Goyder as Director

Resolution 6 – Approve Climate Transition Action Plan and 2023 Progress Report

LGIM’s vote intention:  Against resolutions 2a and 6 (against management recommendation) 

Rationale:

The two resolutions are important on account of their subject matter (climate change, which continues to be a core area of focus for LGIM’s Investment Stewardship team), and the climate-related voting history at the company itself. Resolution 2 illustrates our Climate Impact Pledge vote sanctions in action; this is strongly linked to Resolution 6, pertaining to our ongoing efforts to put pressure on companies to construct suitably ambitious and credible transition plans for reaching net zero.

Our vote against the re-election of Richard Goyder (Resolution 2a) is applied in line with our Climate Impact Pledge engagement escalation, whereby we vote against the (re-)election of the Chair of the Board at companies lagging our minimum expectations on climate change; for the oil and gas sector, these are set out in our net-zero sector guide.

This is the second consecutive year in which we are applying voting sanctions against the company, having voted against the re-election of its most senior director, Ian Macfarlane, at the 2023 AGM, given similar concerns.

In the case of Woodside, in addition, we would state that, despite the significant proportion of shareholder votes (49%) against the company’s climate report at their 2022 AGM, as well as the re-election of Ian Macfarlane at the 2023 AGM (34.7%), we note that no material changes have been incorporated in their most recent climate transition plan, which we view as insufficiently robust, both in terms of disclosure and climate-related targets.

This leads us to Resolution 6. Having published our expectations for companies’ climate transition plans in 2022, we reiterate here that LGIM expects companies to introduce credible transition plans, consistent with the goals of the Paris Agreement on climate change to limit the global average temperature increase to 1.5°C.

While we view in a positive light some of the steps that have been taken by Woodside, primarily around methane, and in better aligning executive compensation to climate-related targets, we remain concerned about the insufficiently robust emissions targets, lack of quantifiable disclosure on climate related risks and the quantum of capital to be allocated to low-carbon solutions.

Nestlé S.A.

Meeting: AGM, 18/04/2024

Summary of resolution: Resolution 7 – An Amendment to the Articles of Association regarding sales of healthier and less healthy foods

LGIM’s vote intention:  For resolution 7 (i.e. against management recommendation) 

Rationale:

We believe nutrition is an important topic for investors because it has a significant impact on the health and well-being of individuals, communities and societies. The interconnected challenges of obesity, undernutrition and micronutrient deficiencies is estimated to be 5% of global income, or $3.5 trillion, per annum.[1] Nutrition is therefore one of our global stewardship sub-themes, under the umbrella of Health.

In this shareholder resolution, which we are co-filing with other investors via ShareAction’s Healthy Markets Initiative, we are calling on Nestlé to:

• Set key performance indicators (KPIs) regarding the absolute and proportional sales figures for food and beverage products according to their healthfulness, as defined by a government-endorsed Nutrient Profiling Model
• Provide a timebound target to increase the proportion of sales derived from these healthier products

Further information on this resolution and our engagement with Nestlé can be found in our blog post.

We will also vote against item 1.2 (approval of the remuneration report) and item 4.3.1 (Elections of the members of the Compensation Committee – Dick Boer), due to our concerns over executive remuneration, since awards are permitted to vest for below-median relative performance, which therefore fails our ‘pay for performance’ expectations. We applied the same votes to last year’s remuneration report.

Apple Inc

Meeting: AGM, 28-02-2024 

Summary of resolution: Resolution 7 – Report on Use of AI 

LGIM’s vote intention:  For resolution 7 (against management recommendation)    

Rationale:   

As artificial intelligence (AI) becomes increasingly embedded in our society, LGIM believes that it presents opportunities to drive long-term value and has the potential to create significant risks, stemming, for example, from data privacy and security, regulatory compliance and workforce transitions. Importantly, we also view societal trust in AI as a material risk.

Market participants are taking steps to ensure the safe development and deployment of AI, from tech companies disclosing approaches to responsible AI principles, to regulators and policymakers increasing AI-related laws around the globe.

As set out in our current baseline expectations on AI, we believe companies should be assessing and mitigating risks associated with AI and providing transparency to the market on their approach; this applies particularly to those companies that develop AI systems and will shape the way it is used in our economy and society. 

Resolution 7 asks Apple to produce a transparency report on the company’s use of AI in its business operations and disclose any ethical guidelines that the company has adopted regarding the company’s use of AI technology. Apple has announced general plans to further develop its use of generative AI and other AI capabilities; however, the company discloses very little about its approach to managing AI-related risks, nor any principles or guidelines to inform how the company uses AI, putting the company behind its peers and increasing exposure potential regulatory and other risks.

We met with the company to discuss these topics, and it did not commit to increasing transparency and disclosures around AI at this time. Apple is among several companies that have outsized influence on the integration of AI into our economy. In line with our expectations, we believe companies like Apple should be transparent in their uses of AI and their risk management processes; therefore, we will be voting FOR this resolution.  

More information on our Investment Stewardship activities can be found on our website:

Investment stewardship & governance | LGIM Institutional

[1] Global Panel on Agriculture and Food Systems for Nutrition (2016) Technical Brief No.3: The Cost of Malnutrition – Why Policy Action is Urgent. London: Global Panel on Agriculture and Food Systems for Nutrition. Available at: https://glopan.org/sites/default/files/pictures/CostOfMalnutrition.pdf