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These proposals are generally in line with the expectations of many ESG-conscious institutional investors. In a recent , Legal & General Investment Management reemphasised its commitment to ‘apply pressure on companies to provide climate accountability; and achieve net-zero emissions; focus on biodiversity and deforestation; as well as to expand its programme of deeper engagement’.

Aviva’s new approach to human rights is also outlined, with the asset manager asking the companies in which it invests to state publicly their commitment to human rights, identify and assess the actual and potential human rights risks and impacts on their business activities, implement mitigation and remediation efforts, and report publicly on their human rights issues, actions and targets.

Aviva Investors is not the only investor to adopt this broader conception of sustainability. BMO Global Asset Management (EMEA) recently its own engagement priorities for 2022, which confirms that while climate change and biodiversity will remain a ‘core focus’ for the asset manager this year, it intends to engage with companies ‘on implementing human rights due diligence across supply chains, as part of efforts to protect human rights, and enhance business continuity and general supply chain management practices’.

This broadening of ESG concerns is also evident in the UK voting policies of the world’s largest proxy advisers. Glass Lewis recently expanded in its its ‘discussion of environmental, social & governance initiatives in a new section titled Overall Approach to ESG’, which provides additional details in relation to how the proxy adviser evaluates these topics. Similarly, the ESG section in Institutional Shareholder Services’ (ISS) 2022 UK has been expanded to outline how the proxy adviser votes on Say on Climate resolutions.

Aviva Investors’ extended approach to sustainability has been well received. It was welcomed by responsible investment and ESG charity, ShareAction, who urged other fund managers to follow its example. 

Alex Cooper, Corporate/Finance and Climate Change Lawyer for the Commonwealth Climate and Law Initiative (CCLI),* comments:

'Aviva Investors’ requests in this year’s letter to company chairpersons are more than simply ‘best practice’. Directors around the world need to address the defining risks of our century in order to fulfil their legal duties…Aviva’s asks on biodiversity and human rights issues show just how much investors’ understanding of financial risk and opportunity has evolved in recent years and boards must interrogate management and their advisers on these emerging issues.

As we have shown in a recent  in the US context, there is a scale of personal exposure to directors. When boards fail to meet standards of best practice and good governance, they face a sliding scale of personal exposure—from investors’ increasing willingness to hold directors accountable, as demonstrated by the proxy fight at ExxonMobil’s 2021 , through to the risk of litigation and ultimately personal liability.’

Data compiled by Market Tracker reveals that during the 2021 AGM season (including all FTSE 350 companies with a financial year end from 1 April 2020 to 31 March 2021) three AGM notices (Royal Dutch Shell plc, Barclays plc and BP plc) included shareholder requisitioned resolutions on the subject of climate change targets that fell short of the required majority support to pass, two of them being in the oil & gas industrial sector. However, not all shareholder efforts were in vain. HSBC Holdings plc put forward its own climate change resolution, setting out the actions it proposed to take ‘in pursuing its net zero ambition’. This was after HSBC’s shareholders forced the company’s hand, with responsible investment charity ShareAction, along with a number of other investor ‘co-filers’,  their own shareholder requisitioned resolution on climate change after a ‘constructive and extensive dialogue and engagement’ with HSBC.

Market Tracker will review the voting trends emerging from the 2021 AGM season in its upcoming trend report, to be released next month.

*The  is a project examining the legal basis for directors and trustees to take account of physical climate change risk and societal responses to climate change under prevailing statutory and common laws in Australia, Canada, South Africa, and the UK.