Climate change, diversity and remuneration to dominate AGMs

Institutional investors will be looking to companies to address concerns around climate change, board diversity and executive remuneration in this year’s AGM season, according to fund manager Hermes.

Hermes Investment Management head of stewardship and engagement, Dr Hans-Christoph Hirt, said that climate change will be top of investors’ agendas in 2018. “For companies where the materiality of climate change is likely to be high, we expect to see comprehensive reporting against the guidelines produced by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). This should include the results of testing the resilience of a company’s strategy against a range of climate change scenarios.” Hirt added that a global coalition of investors will be pushing for more standardised disclosures, through the Climate Action 100+ initiative.

On board diversity, Hirt said that Hermes expects UK boards to have achieved a minimum of 30% female representation. He added: “We will vote against the election of nomination committee chairs of companies, if boards fall significantly short of the 2015 Davies’ review target of a quarter of their directors being women and cannot demonstrate credible plans to achieve the goal of 33% women directors by 2020.”

On executive remuneration, Hirt said that remuneration is an important factor in aligning the activities of executives with a company’s purpose, strategy and performance. He said there were signs of progress on this in 2017 but more need to be done. “To keep up the momentum, we will continue to push for changes in pay policies and practice at companies around the world,” Hirt said.