Ethical Hub : Ethical Reviews - Ethical Investment Review March 2020


The developing COVID-19 pandemic and the response to it has dominated events this quarter, and also impacted our ethical work. Many companies are receiving government, ultimately taxpayer, subsidies in the form of grants, including to maintain jobs, and guaranteed loans. Companies’ priorities have been ensuring their survival and the well-being of their employees. We recognise that and so we will not for the time being be voting against the re-election of board chairs and executive directors at AGMs, unless there has been particularly poor performance responding to climate change. This temporary policy will be reviewed at the end of Q2.

Looking further out, there will be greater expectations for companies which receive government support, whether direct or indirect, to be good corporate citizens. This includes paying a fair rate of tax, preventing excessive executive pay, and paying the Living Wage.

Climate change – oil & gas companies

We have completed our review of 15 oil and gas companies, examining the extent of the alignment of their business models and investment plans with the Paris Agreement. We assessed climate change scenarios and looked at 25 metrics for each company. The Paris Agreement targets an average temperature rise of ‘well below 2°C’ but we were also mindful of growing calls for a 1.5°C target. A new development was the inclusion of companies’ Scope 3 emissions targets and ambitions in our assessment.

Our assessment was reviewed by the Joint Advisory Committee on the Ethics of Investment. Both our assessment and JACEI’s deliberations have concluded that further oil and gas companies should be excluded from investment on ethical grounds. We will make a further announcement about this soon. We have also committed to further engagement with other oil and gas companies. The Committee’s report will be published in Q2.

During the quarter there were further positive developments in companies’ responses to climate change. The most significant was from BP, with its new CEO announcing an ambition of zero net Scope 3 emissions from upstream operations by 2050. This represents a major step by the company. However, it has yet to provide any details on how it will achieve this aim and it does not currently rank amongst the leading oil and gas companies in our analysis. In the current quarter, Royal Dutch Shell has announced a new ambition for Scope 3 emissions intensity based on a 1.5°C scenario rather than 2°C.

Meat producers

Following the results of the CFB carbon footprint analysis, and in line with our 2009 policy, we have engaged with both Cranswick and Hilton Food Group. These companies were found to have higher than average carbon footprints by Trucost, due to Scope 3 emissions from the meat supply chain. We asked what actions the companies were implementing to reduce supply chain emissions, as well as what measures they were taking to reduce those Scope 1 and 2 emissions within their control. We were encouraged by Cranswick’s response: looking at the impact of animal feed of the animals, steps to reduce waste, and a commitment that all of its owned farms will be carbon neutral by 2030. We look forward to hearing back from Hilton Food Group in due course.


Barclays responded to the shareholder resolution we co-filed through ShareAction by proposing a resolution of its own. The Barclays resolution includes a net zero emissions by 2050 ambition along with a commitment to transition its activities to align with the Paris Agreement. While the management commitment is a welcome step, it does not commit to any targets to phase out lending to fossil fuel industries. We are, therefore, continuing to co-file the shareholder resolution. The AGM is in early May.

Tax justice

In line with our engagement policy on tax justice, we engaged with two of our holdings in the quarter. We spoke to both MJ Gleeson and The Renewables Infrastructure Group about the Fair Tax Mark and encouraged them to seek accreditation. Both companies are considering the Fair Tax Mark and the implications of accreditation further as a result. We look forward to their responses. Separately, our voting policy responds to poor disclosure of management action on tax.

Healthy markets

As part of the Healthy Markets initiative, which we support through ShareAction and Access to Nutrition, we attended a briefing on Supermarkets and the role that they play in tackling obesity. We are looking at new ways we can engage on this topic.

Living wage

We engaged with Segro and DS Smith on the Real Living Wage. ShareAction had contacted both companies previously but they had not become accredited. We asked the companies about barriers to accreditation. Segro told us it paid at least the Real Living Wage to its employees, but to be accredited would also need its supply chain to be Real Living Wage compliant. We look forward to hearing back from DS Smith.

Corporate governance

During the quarter we refreshed our voting policy, working alongside the Church Investors Group, in time for the 2020 voting season. This already holds companies to high standards on executive pay, boardroom gender diversity, climate change, and tax justice. We regularly vote against executive remuneration schemes and against the reappointment of directors when pay schemes are particularly egregious. This year, new measures extend expectations on diversity and hold directors to account on Modern Slavery. Mining companies face additional scrutiny on the issue of the management of tailings dams following the Brumadinho disaster that killed 270 people last year.

During Q1 we voted against 64% of remuneration reports in the UK Equity Fund and 86% in the Epworth Global Equity Fund. Our voting policy also led to the Funds voting against a number of directors.