Proxy Voting Policy Language for Director Elections
Majority Action recommends the following model language for adoption into proxy voting guidelines. This language served as the basis for multiple pension funds’ proxy voting policy upgrades in the 2021 shareholder season. It reads:
The physical and financial risks posed by climate change are systemic, portfolio-wide, and undiversifiable. Therefore, the actions of companies that directly or indirectly impact climate outcomes pose risks to the financial system as a whole, and to our entire portfolio. To protect the value of our portfolio as a whole, we will hold boards accountable at portfolio companies that fail to adhere to scientific recommendations needed to limit warming to 1.5°C over preindustrial levels by the end of the century.
We may vote against directors at companies that have failed to set science-based net-zero emissions corporate targets aligned to the goal of limiting warming to 1.5°C or have failed to ensure the implementation of such corporate emissions targets with respect to capital expenditure plans, financial statements, policy influence activities, disclosures, and/or compensation incentives.
As of 2023, institutional investors with over $12 trillion in combined AUM have variations of the above language or their own policy language to enable this mode of corporate accountability. Such policies have been implemented by institutional investors to hold directors accountable for climate risk mitigation failures, as shown in an article published by The Wall Street Journal in 2022, titled “More Investors Vote Against Corporate Directors Over Climate Change.”
Growing Adoption by Institutional Investors
There is a growing appetite from both asset owners and managers for holding directors accountable on company climate performance. Some examples are below:
Connecticut Retirement Plans and Trust Funds Policy (pg 3): "The CRPTF may vote against directors at companies that have failed to align their business plans with the goals of limiting global warming to 1.5 degrees Celsius, as set forth in the Paris Climate Agreement, and/or establishing a plan to achieve net zero emissions by 2050.” (Provision adopted on 3/10/21.)
State of Vermont (pages 7-8): “Votes concerning the entire board of directors and members of key board committees should be examined using the following factors: ...Failure in oversight responsibilities (such as where there is significant corporate misbehavior, repeated financial restatements or inadequate responses to systematic risks including climate change that may have a material impact on performance).”
State Treasurer of Illinois (page 3): “Directors will not be supported where the board has failed in its oversight responsibilities (such as where there is significant corporate misbehavior, repeated financial restatements or inadequate responses to systemic risks including climate change that may have a material impact on performance). We may vote against directors at companies that have failed to set science-based emissions targets aligned to the goal of limiting warming to 1.5°C or failed to disclose material climate risk exposures and how the company governs, manages, and mitigates those risks."
AllianzGI (download link pg 19): “Going forward, for certain high-emitting companies AllianzGI will hold directors accountable if the company does not have credible net zero targets in place. As of 2024, depending on the set-up of the board AllianzGI will vote against the Chairperson of the Sustainability Committee, the Strategy Committee or the Chairperson of the Board of certain high-emitting companies if it does not have net zero targets or GHG reductions targets and TCFD disclosure in place.”
Amundi (pg 8): “[O]n a selection of companies with poor climate strategy while they operate in sectors for which transition is paramount for the alignment with the Paris agreement, our policy will consist in voting against the discharge of the board or management, or the reelection of the Chairman and of some Directors.”
Aviva Investors (download link pg 4): “We will not support the chair of the board or chair of the sustainability committee (or other relevant resolutions) of companies (particularly those that operate in high impact sectors) that have not made sufficient progress in providing the market with investment relevant climate disclosures including not having published or committed to publish science-based targets. We will support climate-related shareholder proposals if similar concerns exist.”
AXA Investment Managers (pg 18): “In companies considered to be in risky sectors, particularly exposed to climate issues, the Board may be held responsible for not taking the necessary measures to address them. A dissenting vote may be cast against the Management, the Board Chairman or the appropriate supervisory element of the governance structure in case risk management shortcomings are proven to have occurred or enough commitments are not made to address issues we raise via our thematic engagements.”
BNP Paribas (pg 8): “Climate-related expectations: We oppose the above mentioned resolutions [Financial Statements / Director and Auditor Reports; Discharge of Board and Management or Board Elections] at companies that do not properly report on their carbon footprint (scope 1, 2, and 3, when appropriate) or communicate nor want to constructively engage with regard to their business strategy on climate adaptation or their climate lobbying strategy. Consistent with our membership in the Climate Action 100+ collaborative engagement and the Net Zero Asset Manager (NZAM) initiative, we expect companies identified as the world's largest corporate greenhouse gas emitters to have set an ambition to achieve net-zero GHG emissions by 2050 or sooner underpinned by credible decarbonisation strategies and intermediary targets, in line with global efforts to limit warming to 1.5 degrees Celsius.”
Border to Coast Pensions Partnership (pg 12): “For companies in high emitting sectors that do not sufficiently address the impact of climate change on their businesses, we will oppose the agenda item most appropriate for that issue. To that end, the nomination of the accountable board member takes precedence. Companies that are not making sufficient progress in mitigating climate risk are identified using recognised industry benchmarks including the Transition Pathway Initiative (TPI) and the Climate Action 100+ (CA100+) Net Zero Benchmark. We will vote against the Chair (or relevant agenda item) where companies are scored 2 or lower by the TPI. In addition, we will vote against the Chair for Oil and Gas companies scoring 3 or lower. Where a company covered by CA100+ Net Zero Benchmark fails indicators of the Benchmark, which includes a net zero by 2050 (or sooner) ambition, and short, medium and long-term emission reduction targets, we will also vote against the Chair of the Board.”
Brunel Pension Partnership (pg 5): “We will vote against the re-election of the company chair where:
a company has not at least reached Level 4 of the TPI framework in Europe
a company has not reached level 3 of the TPI framework for US and Asia, or where the TPI score has fallen from level 4.”
CalPERS (page 2): “On a case-by-case basis, we will withhold votes from relevant committee members (and/or board leadership) who serve on a board that demonstrated a lack of board oversight related to climate-related risks. Consistent with our Climate Action 100+ engagements, we may use the Climate Action 100+ Benchmark to help inform our director votes.”
Canada Post (pg 8): “Vote AGAINST/WITHHOLD from directors individually, on a committee, or potentially the entire board due to: …
Failure to take appropriate action to effectively oversee the company’s relevant climate change related risks, or insufficient progress in providing the market with investment relevant climate disclosures including committing to publish science-based targets (particularly for companies that operate in high impact sectors).”
DWS Investment GmbH (pg 11): “We expect our investees to commit to net zero by 2050 or sooner, set clear and ambitious greenhouse gas (GHG) reduction targets covering scope 1, 2 and material categories of scope 3 emissions, in line with the goals of the Paris Agreement and supported by a reliable science-based methodology. We also expect Investees to align their capital and operational expenditure plans and their lobbying activities with their climate strategies and targets. We may hold boards and management accountable in case they fail to respond adequately to such risks or fail to provide the necessary disclosure.”
Engine No. 1 (pg 3): “Generally we vote against or withhold votes from directors individually, or relevant responsible committee members, due to a failure to adequately address climate-related risks, or capitalize on climate-related opportunities. We believe the entire board is responsible for climate governance processes and reporting.”
HSBC Holdings PLC (download link pg 7-8): “We believe that the board should be responsible for the company's climate change strategy and the oversight of relevant issues. Where the strategy or actions of a company in a carbon intensive sector fall short of that required for low carbon transition we may vote against the re-election of the chair or relevant board director, based on assessments by Transition Pathway Initiative (TPI) and InfluenceMap as below [for developed markets, TPI level 4 and InfluenceMap score D or better].”
Irish Life Investment Management (pg 11): “Competency by a board of directors in the oversight of the management of climate change is a key board governance consideration. Through a targeted voting approach, aimed at the highest risk, highest carbon emitting sectors, ILIM seeks to elevate its concerns on climate change to the board of directors as the decision-making body accountable for the company’s sustainable investment strategy, which includes climate change. The board of directors is where the ultimate responsibility lies for the oversight of a company’s climate transition plan and the management of climate risks and opportunities.”
Legal & General Investment Management:
Global Corporate Governance and Responsible Investment Principles (pg 34): “Companies that fail to meet our minimum standards with regards to climate disclosure will be removed from select funds, including our Future World funds, subject to tracking error constraints. In all other funds where we cannot divest, we will vote against the companies and/or their directors, to ensure we are using one voice across our holdings.”
Climate Impact Pledge Sector Guides for Oil & Gas, Banks and Insurance, and Utilities: “LGIM will vote and implement investment sanctions against companies falling short of our climate expectations.”
Lombard Odier Investment Managers (pg 7): “We may vote against the report and accounts, external auditor, audit committee, remuneration committee, nomination committee, directors, including the chairman, and remuneration resolutions, if we see no evidence of progress in developing climate transition plans and progress in the responsible use, preservation, and protection of natural resources.”
Massachusetts Pension Reserves Investment Management (pg 13): “VOTE WITHHOLD/AGAINST the entire board of directors (except new nominees, who should be considered based on individual circumstances), for the following:
Sustainability and Climate Change: Vote AGAINST directors at companies targeted by the Climate Action 100+, and vote CASE-BY-CASE on directors at companies not included on the Climate Action 100+ action list, that have failed to align their business plans with the goals of limiting global warming to 1.5 degrees Celsius, as set forth in the Paris Climate Agreement, and/or that have failed to establish a plan to achieve net zero emissions by 2050.”
New York State Common Retirement Fund (pg 27): “The Fund may withhold support from a company’s audit, sustainability and environmental, health and safety committee members responsible for climate risk oversight, the board chair, or the entire board in the event that a company: supports public policies that adversely affect the low carbon transition and enhanced corporate climate disclosure;...fails to demonstrate transition strategies.” (Full list of reasons can be found on page 27.)
Norges Bank Investment Management (pg 10): “We will communicate our concerns to boards if they fail to meet our expectations on board oversight, management and disclosure of material climate risks. We may also decide to vote against directors, climate transition plans and/or executive remuneration plans, and file shareholder proposals.”
Sarasin & Partners (pg 14): “For companies with material exposure to climate risks, we will vote AGAINST the Chair where the company has failed to explicitly commit to align the strategy with the Paris Climate Agreement and/or set an appropriate net zero emissions target.”
Trillium Asset Management (pg 2): “Vote against/withhold from the appropriate committee chair, or if none exists, the Board Chair, if the company has not set or committed to set a science-based greenhouse gas emissions reduction target through the Science Based Targets Initiative. In order to help ensure warming stays under 1.5 degrees Celsius, we will hold boards accountable by voting against some or all directors at companies whose policies and practices do not reflect scientific recommendations. As best practices for evaluating alignment with climate science evolve, we will refine our voting policies accordingly.”
UBS Asset Management (download link pg 10): “We may choose to vote against the Board Chairman of a company when we determine that sufficient progress has not been made on specific topics raised during our engagement with companies, in particular in relation to climate change matters discussed as part of our climate related engagement program.”
Union Investment (download link pg 7): “Any repeated or particularly serious failure by a company to fulfil these and other sustainability-related [Paris-inspired] responsibilities will be taken into account by Union Investment in its voting decisions regarding the formal approval of the acts of the relevant company’s management board and supervisory board and (re)appointments of its management and supervisory board members.”
Wespath Investment Management (pg 8): “Wespath may vote against directors at companies that have failed to establish a plan to achieve net zero emissions by 2050 and/or align their business plans with the goals of limiting global warming to 1.5 degrees Celsius with a focus on directors at Climate Action 100+ focus companies. Wespath may oppose the election of directors who have oversight responsibility for governance of climate risk that have failed to ensure the implementation of such corporate emissions targets with respect to capital expenditure plans, financial statements, policy influence activities, disclosures and/or compensation incentives.”