By Simon Jessop
LONDON (Reuters) - Legal & General Investment Management, one of Europe's biggest asset managers, has written to the chief executives of some of the world's top companies calling for more action on issues including climate change and board diversity.
LGIM, the fund arm of insurer Legal & General (L:LGEN), which manages nearly 1 trillion pounds in assets, has taken a lead in improving corporate governance and its voting intentions are keenly watched, particularly by major corporations, in which it is often a leading shareholder.
Its April 17 letter comes as 2018's annual general meetings get underway and as clients increasingly demand their investments take into account the impact on returns of environmental, social and governance-related matters.
While encouraged by efforts to improve governance, LGIM said more needed to be done and highlighted climate change, diversity, long-term strategy and shareholder rights.
And it said it would vote against British companies where women did not represent at least a quarter of the board.
"It can seem as though many companies are not doing a good job addressing ESG-related matters," Sacha Sadan, Director of Corporate Governance at LGIM, said.
"The vast majority of companies are making significant progress – we simply believe there is more to be done. The same is true of asset managers."
LGIM said it wanted to see companies report in line with guidance from the Taskforce on Climate Related Financial Disclosures, which was set up by the G20.
"We also expect you to outline the potential impact on your business, where material, of a rise in world temperatures above the two degrees Celsius target set in the Paris climate accord," it said, referring to the 2015 deal on global warming.
Companies should also relate their strategy to the U.N.'s Sustainable Development Goals, where relevant, it said, referring to a plan to tackle a range of issues including poverty, hunger, illiteracy and disease by 2030.
DIVERSITY DEMAND
While there had been some shift towards diversity, LGIM said company boards should consider creating an advisory committee of external experts to help challenge consensus views.
LGIM said it expected British companies to disclose the gender breakdown and pay-gap of board directors, managers and employees as well as their plan to close any gap, adding it would begin voting against the chair of any board in the FTSE 350 if women did not make up at least 25 percent of the board.
Companies should also make greater efforts to demonstrate their long-term strategy was sound by showing how sustainability was reflected in their operations, through an analysis of risks and opportunities, target setting and public disclosures.
As more companies look to list with reduced shareholder rights, such as U.S. tech firm Snap (N:SNAP), LGIM said it was "increasingly concerned" and would work with regulators and others to "strengthen the integrity of the market".