Investment manager Allianz Global Investors (AllianzGI) warned today that it will begin this year to vote against directors of large cap European companies that fail to integrate ESG performance metrics into executive pay policies.

The company also introduced a new stewardship policy to vote against board directors of high-emitting companies that don’t have sufficient net zero goals and strategies or climate-related disclosure, beginning in 2024.

The announcements by AllianzGI were made alongside the release of the investor’s annual analysis of its AGM voting record. According to Matt Christensen, AllianzGI’s Global Head of Sustainable and Impact Investing, the two main topics that stood out in the year included “greater accountability with regards to credible climate transition targets and continued scrutiny of remuneration.”

Christensen added:

“Throughout 2022 we continued to utilise our proxy voting power, to influence companies – this remains one of the most powerful tools we have to effect change. As we look towards the 2023 voting season, we will continue to utilise this form of influence to help to shape a more sustainable future for the companies and society, in the best interests of our clients.”

AllianzGI reported that it voted against 43% of compensation-related resolutions, with companies often failing to implement packages supported by robust targets, or to provide sufficiently transparent KPIs and targets. The voting policy was particularly harsh in the U.S., where AllianzGI voted against 78% of compensation-related resolutions.

Antje Stobbe, Head of Stewardship at Allianz Global Investors commented:

“We often had concerns on transparency, in particular when it came to clearly disclosing the link between performance and pay-out, as well as discretionary pay components that were not backed by performance as well as high pension payments.”

The company said that it will also evaluate generous pay packages relative to pay increases in companies’ wider workforces, and whether companies underwent significant layoffs, restructuring or cut dividends.

Another key focus stewardship area for the company is the expectation for companies to allow investors to vote on climate strategies, or “Say on Climate.”

Stobbe said:

“We expect in particular that high emitters implement a net zero strategy and share it with their owners. Investors should have a Say on Climate!”

AllianzGI warned that it will hold board directors accountable for having net zero targets and credible strategies in place, adding:

“As of 2024, depending on the set-up of the board AllianzGI will vote against the Chairperson of the Sustainability Committee, the Strategy Committee or the Chairperson of the Board of certain high-emitting companies if the net zero ambitions or the Climate-related Financial Disclosures are deemed dissatisfactory. Concerns are high with a number of US companies which are often less advanced than their European peers.”

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