L&G takes climate protests into the boardroom, but too many of its peers are not doing enough

The fund manager describes climate change as a "catastrophe" in its latest ownership report, and will use its voting clout against companies that fail to take it seriously

Climate protestors in London. L&G says it's taking the fight against a "climate catastrophe" into the boardroom (PA)

As climate protestors step up their activity in London, Legal & General Investment Management (LGIM) is making a noise in the boardroom with the aim of forcing action on what it freely describes as a “catastrophe”.

The language it used this morning - redolent of that of the protestors - is unusual for a big City fund manager. They mostly prefer to rely upon bland self serving twaddle, where they will even respond to issues like the one LGIM raises.

It is both welcome and justified. It isn’t just the protestors LGIM is lining up alongside (sort of). It is science, which clearly shows the fund manager’s assessment of the problem is an accurate one. Climate change will have a devastating impact on the world’s economies and businesses, and thus upon its own business.

But describing the problem is easy. Addressing it requires more than just words.

To give it its due, LGIM recognises this. It says it will vote against company chairs across the entirety of its equity holdings where their companies are deemed to have taken “insufficient action on climate risks”. Given that LGIM oversees £1tn of investments, that matters. It has clout.

The asset manager will also name and shame those big businesses it finds wanting for the second year in a row this summer, and they will be excluded from its Future World range of funds, launched last year.

It is always possible to hold a debate about how one views “sufficient action” and whether the criteria used are sufficiently stringent.

However, the fund manager’s Active Ownership report, published this morning, reveals that LGIM voted against 3,864 company directors globally last year, representing a 37 percent increase over 2017. So the direction of travel is clear.

On a less positive note, the report also serves to highlight the dismal performance of other fund managers that either don’t vote their holdings, or tamely back boards even where they engage in behaviours that are ultimately damaging to the interests of their investors.

LGIM is not alone with its activism but it, and the other groups that take their “stewardship” roles seriously, are still in the minority. That can be seen in the fact that while investor rebellions are more common than they used to be, defeats are still vanishingly rare.

LGIM has also used its voting power in an attempt to drive change when it comes to the auditing of accounts, board effectiveness, the promotion of women, the growing scandal of executives’ bloated pension arrangements.

On some of these it has had a real impact. On others, less so. Oil giant Shell, for example, has linked part of its CEO’s remuneration to climate change targets. What it has not done is move much on the absurd amount of shareholders' cash it hands him.

With its stance, LGIM is serving the interests of the people who pay it to manage their money for them. But there are still too many of its peers that continue to bury their heads in sand that is running out. It is time that both they, and the companies in which the invest, bucked their ideas up.