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Allianz Global Investors, one of Europe’s largest asset managers, and activist Cevian Capital are urging investors to join them in voting against companies that fail to link executive pay to climate targets.
Their rallying cry follows public commitments by both firms and comes ahead of the corporate AGM season, in which both executive pay and environmental, social and governance concerns will continue to be at the forefront of investors’ agenda.
“It’s critical that we use executive pay as a key weapon in the battle against the climate crisis,” Harlan Zimmerman, senior partner at Cevian, said in an interview.
AllianzGI, which has €673bn in assets under management, said last week that it would Vote againstIt was a large UK and European company that had invested in it. If they fail to link executive compensation to ESG metrics beginning next year, this would be a serious problem. Similar moveCevian. Europe’s largest activist investor, with around $15bn in assets under management, said it would use its vote at annual meetings to call out groups that did not include ESG metrics in executive pay packages by 2022.
“Climate goals are usually long-term,” said Antje Stobbe, head of stewardship at AllianzGI. “But it’s important that the action happens today — it becomes more costly the wider companies push it out.”
“Net zero” plans by some of the world’s biggest companies have been accused of Not enough. Experts warn that the world must reduce its emissions by 2030 if it is to meet the recommended reductions. More needs to happen — both in terms of new commitments and a more active private sector.
Allianz is a shareholder of every large-cap European company. They vote at more than 10,000 meetings each yearly. AllianzGI is using its power as shareholders to protest against companies that do no link pay to climate promises. This will help to close the gap between emissions targets, which are often very short deadlines, and the decreasing tenure of corporate bosses.
Most corporate bosses will have moved on before net zero targets take effect, giving them little incentive to reach them — and little accountability if they do not.
Cevian and AllianzGI encourage companies to break down their climate targets into shorter-term goals and to tie executive pay to concrete progress.
Stobbe added: “It’s important that company key performance indicators are quantifiable, transparent and in line with what companies have stated as their climate goals.”
Zimmerman added: “It’s a justifiable fear that if ESG metrics are fuzzy, they will be inefficient and result in paying executives no matter what. They must be measurable, transparent and tied to the public pledges that companies have made.”
Institutional Shareholder Services, a shareholder advisory group, released a consultation in November on its voting guidelines for Europe. It proposed that non-financial ESG metrics be evaluated in pay plans in the same way as financial ones.
Zimmerman said: “There is nothing that exists today that’s as powerful, comprehensive and systemic as investors using their power over management pay plans to direct the right outcomes.”
