IIGCC Net Zero Stewardship Toolkit provides ‘systematic framework’ for global investors to help prioritise high-impact corporate engagement and hold laggard companies to account
- Six steps underpinning Net Zero Stewardship along with practical examples outlined.
- Toolkit is aligned with Net Zero Asset Manager and Paris Aligned Asset Owners commitments to implement a Paris-aligned stewardship and engagement strategy.
- Toolkit outlines the range of voting tools available to investors, including director votes and shareholder resolutions, to hold companies to account on transition plans.
The Institutional Investors Group on Climate Change (IIGCC) has today launched the Net Zero Stewardship Toolkit, providing investors with a foundational process to enhance their stewardship practices to deliver the rapid acceleration in decarbonisation required to halve emissions by 2030 and give the world a chance achieving net zero by 2050.
The toolkit is aligned with both the Net Zero Asset Manager and Paris Aligned Asset Owners initiatives and the commitment to implement a stewardship and engagement strategy that is consistent with an ambition for all assets under management to achieve net zero emissions by 2050 or sooner.
The toolkit, published in advance of 2022 AGMs for most major public European and North American companies, places an emphasis on companies to develop and implement credible transition plans and how investors can hold them accountable.
The toolkit provides a framework for Net Zero Stewardship with six key steps. These are:
- Undertake portfolio analysis and use the stewardship framework for prioritisation of key engagements. A process to identify companies in scope for engagement, to prioritise these engagements and allocate resource based on the importance of key companies to achieving portfolio goals and real-world emissions reduction.
- Set net zero alignment criteria, time bound company level objectives and portfolio goals. Development of a framework of company net zero alignment criteria1 to be used to determine if companies can be classified as aligned. Plus, the setting of company level time bound objectives and milestones that drive stewardship priorities and enable measurement of portfolio alignment goals.
- Develop an engagement strategy for priority companies. The establishment and implementation of strategies to increase alignment of priority companies, with clear escalation actions to be used where time bound objectives are not met.
- Develop a baseline engagement (minimum level) and voting policy approach for all companies. The establishment and implementation of baseline engagement and voting approach, to be undertaken as a minimum for the maximum number of companies in material sectors and clear escalation actions to be used where time bound objectives are not met.
- Asset owner and manager alignment and engagement. Guidance to ensure alignment of engagement priorities and objectives to reduce duplication and enhance impact by collaborating where valuable.
- Transparency. A framework to inform disclosures on the net zero stewardship strategy.
Stephanie Pfeifer, CEO, IIGCC, said: “The toolkit provides clear parameters and a systematic framework for what good corporate engagement looks like, including escalation actions, such as filing a shareholder proposal, to be used when time bound objectives are not met. This gives investors a clear process with tangible actions in order to engage companies and pressure laggards where progress on climate-related matters is insufficient.”
“While corporate engagement can be a multi-year process, the toolkit is timely given the imminent AGMs at many of Europe and North America’s largest public companies. For those companies putting forward climate transition plans, including via ‘Say on Climate’ votes, the message is clear: only put forward credible plans or expect investors to vote against you.”
The toolkit was co-authored by IIGCC and Railpen and was developed with the IIGCC Net Zero Stewardship Working Group, whose co-chairs are EOS Federated Hermes, J.P. Morgan Asset Management and Railpen.
Bruce Duguid, Head of Stewardship, EOS at Federated Hermes, said: “Stewardship is the principal way for investors to influence change and deliver a net zero economy. A framework designed to help investors and asset owners enhance their stewardship around decarbonisation and enable them to hold companies to account over transition plans is long overdue. The Net Zero Stewardship Toolkit provides a route map for investors towards the successful delivery of this.”
Yo Takatsuki, Global Head of Investment Stewardship, J.P. Morgan Asset Management, said: “Investment stewardship is a key component of how asset managers and asset owners can help drive the push to net-zero. This new toolkit offers clear and timely guidance on some of the steps which can be adopted to effectively and credibly engage companies on this issue. We welcome IIGCC and the Working Group members’ contributions in trying to resolve one of the critical challenges of our time.”
Chandra Gopinathan, Senior Investment Manager, Sustainable Ownership, Railpen, said: “Railpen is unwavering in its commitment to creating a better future for our members to retire in. We are particularly proud of the collaborative work that delivered this toolkit, which we feel could be instrumental in ensuring that the world achieves net zero by 2050. We have already begun to embed the toolkit into our own stewardship processes.”
“The Net Zero stewardship toolkit emphasises the crucial iterative link between conducting company analysis, where a company might be failing to align to net zero, and the engagement and voting activities that might follow. It provides a standardised foundation for climate-related engagement across listed equities and bonds. This will be expanded to include unlisted assets as well in future versions. It will enable investors to deliver the substantive remedial actions that will drive the change that the world needs to see from us all.”
Additional investors involved in the development of the toolkit include James Hambro & Partners, Irish Life Investment Managers, Allianz Investment Management, WTW – Investments and State Street Global Advisors.
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1 Criteria that can be adopted for assessing alignment of portfolio companies (broadly adapted from the Net Zero Investment Framework and based on the Climate Action 100+ benchmark indicators): Ambition, Targets, Climate Governance, Emissions Performance, Disclosure and Verification, Climate Risk and Accounts, Decarbonisation Strategy and Capital Allocation Alignment. See Box 3 in Net Zero Stewardship Toolkit.
Notes to editors
Ross Gillam, Head of Media Relations, IIGCC
+44 (0)738 850 6013
The Institutional Investors Group on Climate Change (IIGCC) is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low carbon future. IIGCC has more than 375 members, mainly pension funds and asset managers, across 23 countries, with over €51 trillion in assets under management.
IIGCC works to support and help define the public policies, investment practices and corporate behaviours that address the long-term risks and opportunities associated with climate change. For more information visit www.iigcc.org and @iigccnews.