The Church of England has sent a warning shot to company bosses, threatening to vote down key appointments if firms fail to tackle excessive executive pay, climate change or promote gender diversity.
The Church Investors Group, whose members manage more than £17bn of assets, has written to FTSE 350 firms ahead of this year’s annual general meeting (AGM) season, saying it will take a “harder line” against firms who are “out of line with best practice”.
The move will include tightening its voting policy on three issues, including executive pay where it will “withdraw support” for remuneration reports if the company fails to disclose pay ratios, if chief executive pensions are deemed “excessive” or if financial services or pharma firms fail to pay the living wage.
The CIG – which represents a number of organisations including the investing bodies of the Church of England and Methodist Church – is also taking a stance on gender representation on company boards, saying members will vote against the re-election of the nomination committee chair if women make up less than 33 per cent of a company’s board.
It will go on to vote against all directors on the nomination committee where women make up less than 25 per cent of top tier bosses.
That is on top of plans to oppose the re-election of a company’s chair if the firm is seen as making “little progress to transition to a low carbon world”, based on scores from the Transition Pathway Initiative – a project established by the Church of England.
Carlota Garcia-Manas, deputy head of engagement for the Church Commissioners and Church of England pensions board, said: “In 2018, we will not support the re-election of the company chair if the company has received a low grade on the Transition Pathway Initiative, indicating a lack of awareness and action on climate transition risk.
“We continue to see climate change as a key issue and encourage other investors to partner with us in ensuring we hold companies accountable to the highest standards and adapting their activities to fit with the Paris Agreement.”
It is not the first time that the church investors have taken aim at some of Britain’s largest listed firms, with the CIG having warned against excessive pay deals ahead of a flurry of AGMs last year.
The Church of England made headlines back in 2015 when it formed a new climate change policy and pledged to no longer make any direct investments in companies that generate more than 10% of their revenue from extracting thermal coal or producing oil from tar sands.
Late last year, the Church also threatened to pull investment from mining companies that fail to “uphold high standards”, saying the industry is “particularly vulnerable” to poor governance.
It has already divested from two companies amid ethical and corporate governance concerns, that failed to improve despite an “extensive programme of engagement” – resulting in the Church pulling investments from mining firm Vedanta in 2010 and Soco International in 2015.
Commenting on the CIG’s tightened voting policy, CIG chair Reverend Canon Edward Carter said: “The best companies contribute to the common good through their products and services and the way they treat their employees.
“Their directors understand that if they are not doing something about fairness and about the risks facing us today, they are part of the problem and risk losing the confidence of the public and ultimately their licence to operate.”