In a letter to the boards of its portfolio companies released today, Aviva Investors CEO Mark Versey outlined the global asset manager’s 2022 stewardship priorities, setting out expectations for the companies on key sustainability areas including climate change, biodiversity, and human rights. Versey said that the firm will hold boards and individual directors accountable for performance in these areas, and that it wants executive compensation and performance targets to reflect sustainability goals.
The letter, which will be sent to 1,500 companies across 30 countries, explains that Aviva invests in companies aligned with Aviva’s sustainability ambitions, including “businesses engaged in developing sustainability solutions, those that maintain the highest standards of sustainability practices, and those on a journey of transition and improvement.,” as it supports its parent company Aviva plc’s ambition to become a net zero company by 2040.
Versey wrote:
“As a global asset manager with over £260 billion of assets under management, the most meaningful and direct impact we can achieve comes from our commitment to fully integrate environmentalEnvironmental criteria consider how a company performs as a steward of nature. More, socialSocial criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. More and governanceGovernance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. More factors across investment strategies, and the targeting of ‘real world’ positive outcomes for the betterment of people, the planet and the climate.”
Aviva investors has been actively engaged in sustainability-related stewardship activities, with nearly 1,300 substantive engagements over the past year, and voting at over 6,600 shareholder meetings. For the upcoming year, Versey set out a broad range of expectations for portfolio companies across the firm’s priority stewardship areas of climate change, biodiversity, human rights, and executive compensation.
On the climate front, the letter includes expectations for companies including working towards Science Based Targets initiative (SBTi) validation of climate targets and plans, and developing climate transition plans including net zero targets across all emissions scopes, integration of net zero objectives into he broader corporate strategy, and ensuring that ‘just transition’ considerations are included in the plan. The firm also provided disclosure expectations, including adding climate reporting to the scope of the annual audit plan of the external auditors, and encouraging companies to voluntarily report against IFRS Climate-Related Disclosure standards (currently in prototype form) as soon as practical.
Biodiversity expectations include the development of biodiversity action plans, with assessments of business dependencies upon nature, target setting aligned with the Task Force on Nature-related Financial Disclosures (TNFD) initiative, and public reporting of performance against targets.
Aviva Investors’ human rights expectations for companies include identifying and assessing human rights risks and impacts of business activities across the value chain, mitigation and remediation of the risks, and public reporting on human rights issues, actions and targets.
Versey’s letter also stresses the importance of executive remuneration structures in aligning with ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More goals, and outlines expectations for executive compensation and performance targets to reflect sustainability goals.
In a statement released with the letter, Aviva investors said that it “will hold boards and individual directors accountable at companies where the pace of change on climate, biodiversity and human rights does not exhibit sufficient urgency,” including voting against directors and divesting from companies that consistently fail to meet its expectations.
Versey said:
“We want to encourage companies to consider the whole picture of sustainability because this is how they will create the greatest return for shareholders, while helping to build a better future for society. Companies must now turn their pledges into concrete and measurable plans of delivery. Our letter sets out clear expectations as to how they should do this, and what those plans must address across climate impact, biodiversity and human rights.”
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