Investors beef up net-zero voting policy guidance

The Institutional Investors Group on Climate Change (IIGCC), which accounts for more than 400 financial members worth more than $65trn in assets under management, has released its Net Zero Voting Guidance.

The guidance is designed to help shape voting policies and practices across the financial sector in alignment with the net-zero transition. The guidance looks at how investors engage with organisations in their portfolio and how this can be focused on catalysing climate action in line with fiduciary duties.

The IIGCC states the guidance is aligned with the Net Zero Investment Framework to ensure voting policies will support portfolios in achieving net-zero emissions by 2050 at the latest.

Broadly, the guidance aims to align voting practices with an investor’s individual net-zero ambitions, communicates expectations to corporates and supports engagement and investment approaches.

The guidance also builds on other investment frameworks. Any firms that have made commitments through the Net Zero Asset Managers (NZAM) and Paris Aligned Asset Owner (PAAO) initiatives are required to develop stewardship strategies with a clear voting policy.

Historically, investors have not voted in line with climate stewardship.

Analysis at the start of the year from ShareAction found that only 3% of shareholder resolutions aimed at improving corporate sustainability passed in 2023, down from 21% the year prior.

The NGO assessed the voting patterns of 69 of the world’s largest asset managers at annual general meetings in 2023, with a focus on resolutions intended to force businesses to improve ESG outcomes.

Resolutions included those intended to prompt more ambitious and credible climate targets; those forcing enhanced disclosures; those reshaping board and governance structures and those improving social protections for groups including workers and suppliers.

High-profile environmental resolutions in 2023 included a vote against Shell’s board of directors on climate grounds and a rebellion against BP’s weakening of targets to scale back fossil fuel production.

PCAF framework

In related news, the Partnership for Carbon Accounting Financials (PCAF), considered the global GHG accounting & reporting standard for the financial industry, has unveiled plans to launch a new set of accounting standards.

The PCAF has outlined its priority areas for methodology development in 2024, choosing to focus on transition and green finance and changes to absolute GHG inventory – which can fluctuate over time due to differing and updated reporting metrics.

Consultations will be held throughout the year to help shape these.

PCAF’s chair Hetal Patel said: “We’re delighted to share our plans for standard development for the next two years. These are based on a robust process to identify and prioritize the expanding needs of the financial sector for GHG methodologies.”