One of the UK’s largest pensions pools has strengthened its responsible investment (RI) policies to develop, and further embed, environment, social and governance (ESG) factors into its portfolios.
Border to Coast has updated all of its RI policies, including those concerning voting and climate change, as part of its annual review.
The review was carried out in conjunction with its 11 partner funds, which collectively represent more than 1 million members, 2,700 employers and £58bn worth of assets.
Jane Firth, Border to Coast’s head of responsible investment, said: “Our strengthened approach to voting and exclusion thresholds demonstrates our commitment to net zero.
“As long-term investors, we believe it’s critical that the firms we invest in on behalf of our partner funds are appropriately managing the risks of climate change and are adopting robust climate change targets and policies.”
Firth also said that voting is “essential to managing climate risk and an important means of influencing company targets and policies”.
However, she added: “Not every climate resolution will be supportable, so it is important to explain our rationale on those occasions we vote against.”
The new exclusion policy covering coal power generation reflects Border to Coast’s support for a just transition, Firth added, “recognising that countries have differing transition timelines and economic dependencies on coal”.
The strengthened RI policy, Firth revealed, includes a number of principles.
One, Border to Coast will generally vote in favour of shareholder resolutions that are aligned with the objectives of the Paris climate agreement, taking a ‘comply or explain’ approach, “publicly disclosing our rationale if we vote against,” Firth said.
Second, Border to Coast will not invest in organisations where thermal coal power generation is more than 50% of revenue of companies listed in developed markets, and 70% of those in emerging markets and where thermal coal and oil sand production represent more than 25% of revenues.
In addition, Border to Coast will vote against the chair of the board where a company covered by Climate Action 100+ fails indicators of the net-zero benchmark covering emission reduction targets and from the 2024 decarbonisation strategy.
Where management put forward a ‘Say on Climate’ resolution, Firth said Border to Coast will vote against it if, following its analysis, the pensions pool believes it is not aligned with the Paris climate agreement.
Also Border to Coast will vote against the chair of UK nomination committees if less than 40% of directors are women. It will also vote against their chair of FTSE 250 companies if the board does not have at least one person from an ethnic minority background, unless plans to address the issue have been disclosed.
And finally, an exclusion for controversial weapons has been broadened to cover landmines as well as biological and chemical weapons. This covers international treaties and conventions that the UK has either ratified or to which it is a state party.
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