Proxy preview: LGIM's vote on key upcoming resolutions

Traditionally the province of activist investors vying for seats on company boards, the landscape of shareholder resolutions has changed dramatically in recent years. Of 488 shareholder proposals filed at US companies during the last proxy season, 187 were concerned with social and environmental issues[1].

At LGIM, we have been explicit that good management of ESG issues is essential for a company's long-term success, and we have a track record of using our votes to hold companies to account. IIn 2018 LGIM supported more key US resolutions calling for companies to report on climate change and political lobbying than any of the world’s largest 10 asset managers[2].

The devil in the detail

ESG issues are too broad, and company circumstances too varied, for the simple filing of an ESG-related resolution to automatically receive our vote. Sometimes, we prefer to work with the company behind the scenes, rather than initiate a contest in the public arena.

However, there will be many cases where we believe such a vote is in the best interest of our clients and other investors. Some of the world’s largest companies are high emitters of carbon (and also large producers of fossil fuels). As shareholders, we want companies to be successful as the world moves to a low-carbon economy. We also want to know how they are aligning themselves with global efforts to combat climate change. Similarly, if companies decide to spend investors’ money on lobbying governments, we expect them to be transparent about how and why they do it.

Climate change and lobbying in the spotlight

Climate change and lobbying have continued to be important themes during 2019 annual general meetings (AGMs). To gather investor support for more transparency on these key topics, we have decided to announce our decision to vote in favour of resolutions at the following AGMs:

• Chevron Corp. (30 May): Resolution 5 on business plan compliant with the Paris Agreement
• Continental Resources (17 May): Resolution 4 on impact of measures to limit global warming
• Duke Energy Corp. (2 May): Resolution 5 on lobbying expenses
• Fluor Corporation (2 May): Resolution 4 on adopting greenhouse gas reduction targets
• Ford Motor Company (9 May): Resolution 6 on lobbying payments and policy and resolution 7 on political contributions
• General Motors Company (4 June): Resolution 5 on lobbying payments and policy

This is in addition to our decision to co-file our first ever shareholder resolution, calling on oil major BP to report on climate change.

We encourage other shareholders to support the resolutions. They represent an important step in promoting transparent, sustainable markets.

[1] Source: Morningstar, period covering July 2017 to June 2018

[2] Source: Climate 50/50 research report