InvestmentsDec 13 2021

Growth in shareholder activism as climate resolutions rise

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Growth in shareholder activism as climate resolutions rise

Shareholder activism grew in the past year, as the number of climate-related shareholder resolutions at FTSE 350 companies rose.

During 2021 there were 16 resolutions proposed, compared with five in 2020 and three in 2019.

Around 60 per cent of FTSE 100 companies now include ESG measures as part of their executive incentive plans.

Meanwhile the number of directors receiving substantial votes against their re-election rose by 29 per cent this year compared with 2020.

In total, 42 directors of FTSE 350 companies were subject to major dissenting votes against their re-election, compared to 30 in 2020, according to Thomson Retuers’ report called ‘What’s Market: AGMs FTSE 350 2021’.

Of these directors, 29 were members or chairs of nomination committees and 24 were members or chairs of remuneration committees.

Some 17 of those who received substantial votes against their re-election were members or chairs of audit committees.

Hilary Owens Gray, director of practical law at Thomson Reuters said: “Those who run the UK’s largest companies are finding themselves under increased scrutiny from investors. 

“Shareholders are becoming more vocal in making sure companies set sensible remuneration targets for directors and address how they are going to play their part in tackling climate change.”

“With investors placing increasingly greater focus on ESG criteria, if companies don’t map out how they are going to meet expectations on ESG, we can expect the trend of heightened shareholder engagement to only increase further in 2022.”

Experts recently said that ESG ratings should not be viewed as objective, but as opinions.

Will Collins-Dean, and Eric Geffroy, a senior portfolio manager and investment strategist respectively at Dimensional Fund Advisers, said given the “subjectivity inherent in ESG ratings”, they should be viewed as opinions, similar to the buy, hold or sell opinions used by sell-side analysts.

“When using ESG ratings from one provider to allocate assets, investors should be aware that other ratings providers may have dramatically different opinions and ratings," they said.