20 Dec 2022 3 min read

New year’s resolutions: turning up the heat on our engagements

By Dror Elkayam , Jeannette Andrews , Maria Larsson Ortino

As we shiver our way to 2023, the Investment Stewardship team explains how it escalates engagements by turning up the heat with shareholder resolutions.

Thermostat-dial.jpg

At LGIM, our Investment Stewardship team has several ways of aiming to influence companies, markets and policymakers on key themes. These various approaches help us to escalate our engagement where we feel progress is not being made and where companies continue to lag our expectations.

Regular readers will know LGIM is vocal regarding how we vote on companies. But there is another option for escalation within the sphere of company Annual General Meetings (AGMs): filing a shareholder resolution.

Turning up the heat – how resolutions can drive change

A shareholder resolution can be a powerful way to escalate our engagement with individual companies. Tabling a resolution at an AGM forces the company to address the issue and put it to a vote, and to report publicly on the level of support. If enough shareholders support the resolution, the company will need to consider what action to take.

The process of tabling the resolution itself also draws attention to the issue and can encourage companies to deepen their engagement with us, and to take action before the meeting. This means our sought-after change can occur without the resolution actually being tabled.1

A shareholder resolution is also an opportunity to highlight our expectations on a topic to the wider market, sometimes triggering broader change than just at the company we have escalated. One such example was Sainsbury’s* in 2022.2

Putting on a sweater – why we use resolutions sparingly

Filing a shareholder resolution is not without challenges. It is time-consuming, detailed and must be done significantly in advance of the AGM. Resolutions that do not adhere to strict procedural protocols can be rejected by regulators and companies.

As such, resolutions are used sparingly as engagement tools by LGIM and other large investors. LGIM’s Investment Stewardship team filed its first shareholder resolution in 2019 at BP* and has since filed a small number each year, with the most recent including Sainsbury’s* and Moderna* in 2022.3 

We are deliberate in how and where we file resolutions, thinking long term about our global themes and engagement programmes, and how best to influence individual companies. This year, we published our ‘Say on Climate’ expectations, setting out what we require of companies’ management-proposed climate transition plans in order to support them at their AGMs. We also clarify that as a means of escalation, we may consider filing shareholder resolutions, in conjunction with the CA100+, to put pressure on companies failing to develop credible and ambitious climate transition plans.

We are regularly approached by shareholder organisations about filing resolutions. We do not agree to co-file every resolution that comes our way – instead of turning up the heat, we might just put on a sweater, perhaps by voting in favour of the resolution at the relevant AGM, or by increasing our engagement with the company in the meantime. When we do choose to file shareholder resolutions, however, we have found they have often been an effective way of encouraging positive change at the companies in which we invest.4

Heat up to cool down – our role in tackling climate change

At LGIM, we aim to be transparent about our expectations of companies. In the wake of COP27 and COP15, we believe it is increasingly important that companies take action to tackle climate change. As a large investor, we believe we have a responsibility to push companies to achieve their climate goals by escalating our engagement, in collaboration with our peers.  

Keep an eye on our blog in 2023 for news and updates on our voting, resolutions and insights!

For live information about our voting actions and rationales, please visit our dedicated website.

More information about our Investment Stewardship activities, policies and engagement activities can be found on our website.

 

1. This was the case with the shareholder resolution we filed at Moderna, which is described in our Q1 222 Quarterly Impact Report, here: Q1 2022 ESG Impact report (lgim.com)

2. ShareAction | Shareholders file Living Wage resolution at Sainsbury’s

3. All data is sourced from LGIM’s internal data. For further detail on shareholder resolutions, please read our Q1 2022 ESG Quarterly Impact Report, here: Q1 2022 ESG Impact report (lgim.com)

4. For more detail, please see Q1 2022 ESG Impact report (lgim.com) and p.70 LGIM Active Ownership 2021

 

Key risk

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

Dror Elkayam

Global ESG Analyst, Investment Stewardship

Dror joined the investment stewardship team in 2021 as a Global ESG Analyst, leading engagements with the energy and mining sectors, as well as the development of LGIM’s ESG scores. Dror Joined LGIM from Georgeson, a boutique corporate advisory firm, where he acted as an adviser to investors and corporates on shareholder engagement strategies, in preparation for general meetings, proxy contests and M&A in the UK and globally. Prior to that, Dror had spent nearly five years at Bloomberg as an ESG specialist. Dror graduated from Bar-Ilan University in 2012 with a BA in Economics and Business Management and obtained the CFA chartership in 2019.

Dror Elkayam

Jeannette Andrews

Senior Global ESG Manager

Jeannette has responsibility for implementing LGIM’s corporate-governance strategy across engagement, integration, voting and the development of ESG products. Jeannette represents LGIM on the UK's Company Reporting & Auditing Group. Jeannette joined LGIM in 2015 from USS Investment Management where she held the title of Senior Analyst, Responsible Investment. Jeannette joined USS in 2008, dividing her time between developing and implementing USS's stewardship policies and working as an equity analyst where she was responsible for researching and making stock recommendations for a £420 million global equity income portfolio. Prior to that, she worked for five years as a governance analyst at Manifest Information Services, a proxy voting service provider. Jeannette graduated from Anglia Ruskin University in 2008 and holds the CFA and CAIA charterships. In 2014 Jeannette was recognised by Financial News as one of the 40 under 40 Rising Stars of Asset Management.

Jeannette Andrews

Maria Larsson Ortino

Global ESG Manager

Maria leads the Stewardship team’s efforts on health as well as being responsible for global engagement and voting activities for holdings within the pharmaceutical, biotech, healthcare, chemicals and tobacco sectors. Prior to joining LGIM in 2019, Maria was a member of the ESG teams at Newton Investment Management and State Street Global Advisors. She has also headed up the research team at a start-up corporate governance data company, served as an analyst within the IVIS team, part of the Investment Association, UK. She started her ESG career at PIRC, a proxy adviser, in 2007. Maria has an LLB from Queen Mary College, University of London and a Master’s Degree from the Graduate Institute of International Studies, University of Geneva, Switzerland.

Maria Larsson Ortino