BORDER TO COAST OUTLINES 2022 VOTING AND ENGAGEMENT PRIORITIES
Posted on January 18th, 2022
Border to Coast Pensions Partnership (“Border to Coast”), one of the UK’s largest pension pools, has published its revised responsible investment policies which further strengthen its voting approach and outline how it will engage to push for positive change in its portfolio companies. As a steward of £34bn of Partner Funds’ assets, the policies make clear Border to Coast’s approach to long-term engagement and active ownership.
The revised policies – the Responsible Investment Policy and the Corporate Governance and Voting Guidelines – clarify and strengthen Border to Coast’s voting position on issues such as climate change and diversity ahead of the 2022 AGM season. They also outline four key themes which will form a vital part of its engagement in the years ahead.
The themes, updated in recognition of the evolving nature of environmental, social, and governance (ESG) risks that could impact corporate value, will help shape how Border to Coast engages with portfolio companies, demonstrating its priorities as an active steward of its Partner Fund assets. The four themes are:
- Low Carbon Transition
- Waste and Water Management
- Social Inclusion and Labour Management
- Diversity of Thought
Jane Firth, Head of Responsible Investment at Border to Coast, said: “Responsible investment and sustainability are central to Border to Coast’s ethos and a key part of delivering our partner funds’ objectives. Now, more than three years since our founding, it is important that we continue to evolve and update our approach to engagement, including our priority themes, to ensure we continue to work effectively as an active owner. Our engagement themes support us in focusing our efforts on areas we can have a real impact. Alongside this we have strengthened our voting guidelines on issues such as climate change and diversity where we expect greater progress to have been made.
“We know that we are stronger when we work together, collaborating with other institutional investors and partner organisations such as Robeco to make our voice heard. By continually evolving our approach to responsible investment we can ensure we make a difference both in the wider world, as well as for our Partner Funds in the LGPS.”
In line with its commitment to achieving net zero emissions across its portfolios by 2050 or sooner and as a supporter of the investor group Climate Action 100+, Border to Coast has further strengthened its stance on climate change. It will now vote against the Chair of the board where a company in high-emitting sectors fails the first four indicators of the Climate Action 100+ Net Zero Benchmark.
Border to Coast has also strengthened its stance on boardroom diversity and will challenge FTSE 100 companies where there is not at least one director of colour on the Board, unless mitigating factors or plans to ensure it is met have been disclosed. This follows recommendations by the Parker Review of ethnic diversity on UK boards four years ago which laid out expectations for all boards to have improved representation by 2021. As members of the 30% club investor group, Border to Coast will also engage with FTSE 350 companies where there is less than 33% of female representation on the Board.
New Priority Engagement themes
- Low Carbon Transition: Further to Border to Coast’s commitment to achieving net zero across its portfolios by 2050 or sooner it will continue to engage to support and facilitate the low carbon transition. It recognises that climate change is a systemic risk with the potential to significantly impact portfolio companies and will engage to encourage portfolio companies to make real steps towards reducing emissions, setting reduction targets, and reducing the carbon intensity of operations.
- Waste and Water Management: Water is becoming an increasingly scarce and costly resource and is a material financial risk for companies and investors. Border to Coast will engage with portfolio companies that have water-intensive operations, and that produce high levels of packaging waste, to encourage them to develop policies and initiatives to address the issue – for example via disclosing data on water consumption and plastic reduction strategies.
- Social Inclusion and Labour Management: Human capital management and supply chain issues are recognised as financial risks which have been emphasised by the pandemic. Border to Coast will engage with companies on the need to improve how they develop and train their workers and on the implementation of effective modern slavery policies. It aims to promote increased productivity and growth, improve inclusion and working conditions, and eliminate child labour in supply chains.
- Diversity of Thought: Diversity in senior leadership is vital to reduce ‘group think’ and ensure the long-term sustainability of companies. As members of the 30% club investor group, Border to Coast will engage with FTSE 350 companies where there is less than 33% of female representation on boards and with FTSE 100 companies that haven’t met the Parker Review recommendation of having at least one director of colour on the board by 2021. It will also encourage companies to have a Diversity and Inclusion policy and disclose relevant data and metrics.
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