Ethical Hub : Ethical Reviews - Ethical Investment Review December 2020

Climate emergency

During the quarter, we have continued to update our assessment of oil and gas companies in response to the 2018 Notice of Motion at Methodist Conference, and in light of the 2020 Methodist Conference and Council outcome. Climate strategy updates for Equinor and Repsol were released in November, with Equinor announcing its ambition to become a net-zero energy company by 2050, as well as its plans to achieving carbon neutral global operations by 2030 and reducing absolute greenhouse gas emissions in Norway to near zero by 2050. Repsol released its strategic plan for 2021-2025, which notes, among other climate related announcements, the planned expansion of its low carbon generation business, which will have a generation capacity of 7.5 gigawatts by 2025 and 15 gigawatts by 2030.

We continue to engage with companies as part of Climate Action 100+. In December 2020, CA100+ released a progress report outlining company progress across the 160 companies covered. These companies represent over 80% of global industrial emissions. The report shows that while some companies are taking steps to decarbonisation in line with a net-zero emissions by 2050 trajectory, there is a long way to go. Nearly half (43%) of companies have set a net zero by 2050 target or ambition in some form, however only 10% of focus companies have net-zero targets that explicitly cover the companies’ most material scope 3 emissions.

Through IIGCC, and along with other investors, we wrote to the Audit Committee Chair of 36 European companies calling for Paris-aligned Accounts. The paper accompanying the letter which outlines Paris-aligned Accounts noted five steps for directors to take, including an affirmation that the goals of the Paris Agreement have been considered in drawing up the financial statements. It also outlines expectations for auditors to highlight where accounts are ignoring material climate risks and making it clear they should say when accounts are not ‘Paris-aligned’. The companies written to were companies that could face material headwinds from a move onto a 2050 net zero pathway, including oil and gas, and mining companies, transportation companies, and materials companies such as CRH.


We wrote to Rio Tinto regarding the incident at Juukan Gorge, Western Australia where an aboriginal site was blasted. Although Rio Tinto had obtained the legal permissions and engaged with the Puutu Kunit Kurrama and Pinikura (PKKU) peoples throughout a multi-year process, new information on the heritage of the site, which came to light prior to the blast, did not result in the blast being halted or postponed. Rio Tinto has apologised for this failure, and the CEO and other senior executives have stepped down. This engagement aimed to understand the long term changes taken place at Rio Tinto to ensure an incident of this nature does not happen again, and to learn more about the cultural heritage management and relations with the Traditional Owners.

We received a comprehensive response, which noted the creation of a new role of chief advisor, Indigenous Affairs, who has a direct reporting line to the Chief Executive. This role is to be filled by a senior Indigenous leader. There is also ongoing consultation about a proposal to establish an Indigenous Advisory Group to help the company better incorporate Traditional Owners’ views and concerns into its operations. The company has also committed, among other things, to reassess any activity that has the potential to impact heritage sites, with an immediate focus on locations that could be impacted over the next 18-24 months.

Along with other investors, we also wrote to mining companies including Anglo American and BHP Group regarding the incident at the Juukan Gorge, asking for: assurance of their policies and procedures on their approach to relationships with Traditional Owners; information regarding the governance frameworks and Board oversight of the issues; specific action or actions that company has taken to identify and manage the risks across its business; and how the company intends to disclose in relation to issues. We look forward to hearing back from these companies in due course.

COVID-19 and food producers

Following on from news articles and previous engagement, we wrote to five food producing companies, asking about their policies and processes when responding to any possible outbreak of COVID-19 in food manufacturing plants, as well as in regard to sick leave and pay for staff who have to self-isolate due to the Coronavirus. So far, we have heard back from three (Hilton Food Group, Cranswick, and AB Foods) out of the five, and will continue to engage with these companies. We were particularly impressed with the response from Hilton Food Group.

Fair Tax Mark

We wrote to a number of companies including Softcat and Howden Joinery to highlight the Fair Tax Mark, and to encourage companies to become accredited. The Fair Tax Mark recognises businesses which transparently pay the appropriate amount of tax, in the appropriate place, at the appropriate time. We believe this is a vital component of a fair and equal society, where business supports the upkeep of the economic and social environment in which it operates. We know that this isn’t a quick process for companies to complete, and therefore expect this engagement to be over the longer term. Encouragingly, we have heard back from one company already, noting the steps it is taking to prepare for a potential application.

Executive remuneration

We have engaged with Brooks Macdonald and MJ Gleeson on remuneration, giving feedback where we have voted against the remuneration report in line with our policy. We inform companies of our voting policy at the start of every voting season, and encourage dialogue with companies on it.

Corporate governance and voting

It was a quiet quarter for voting. We voted against the majority of remuneration reports at UK meetings. We voted against the entire Remuneration Committee at Ferguson as the remuneration report breaches multiple principles in our template. We supported shareholder resolutions at two Australian banks which called for climate emergency transition planning disclosure.