Agenda item

This report updates the Committee on engagement activity undertaken by LAPFF (the Local Authority Pension Fund Forum) on behalf of the Fund.

George Patsalides (Finance Analyst, Brent Council) presented a report that updated the Committee on engagement activity undertaken by the Local Authority Pension Fund Forum (LAPFF) on behalf of the Fund during Q1 2023. It was explained that the commitment with LAPFF demonstrated the Fund’s commitment to Responsible Investment (RI) and recognition that engagement was a way to achieve RI objectives.

In summarising LAPFF’s engagement activity, the Committee noted the following:

• LAPFF sent a joint letter to the FTSE All-Share ahead of the 2022 AGM season, requesting that boards provided the opportunity for shareholders to support their greenhouse emission reduction strategies with an appropriate resolution on AGM agendas. This included a ‘Say on Climate’ vote, an initiative for firms to establish robust net zero transition plans with shareholder feedback. In response to the letter, most firms expressed their intention to not hold a Say on Climate vote, outlining their existing climate plans and shareholder engagement, however, other firms stated their intention to hold a vote every three years to approve their triennial climate plan.

• LAPFF met with McDonald’s as part of a coalition of investors to discuss the company’s approach to managing environmental risks across its agricultural supply chain. The Valuing Water Finance Initiative (VWFI) had identified McDonald’s as a company with significant exposure to water-related risks, prompting a water risk assessment which the company had undertaken in 2020. To date, McDonald’s had failed to disclose the results of their investigation. LAPFF had since pushed McDonald’s to disclose their findings, with the aim of providing key stakeholders with a better understanding of material risks facing the company.

• Chair of Nestlé, Paul Bulcke, hosted a roundtable with investors in March, providing a high-level overview of the company’s financial and ESG strategies. LAPFF would continue to monitor Nestlé’s progress in these areas and would continue to support ShareAction’s Healthy Markets engagement as it progressed.

• Amazon had faced criticism in the press for not upholding adequate standards on freedom of association, which holds the right of everyone to form and to join trade unions for the protection of their mutual interests. Consequently, LAPFF signed a joint investor letter initiated by Canadian shareholder organisation, SHARE, to request that Amazon took steps to meet the requests on freedom of association set out in SHARE’s shareholder resolution to Amazon’s 2022 AGM.

• As road transportation was a major contributor to global emissions and faced tightening regulations on emissions standards, investors sought to ensure that car companies were managing these risks effectively by setting targets and taking action to shift production to electric vehicles. Consequently, LAPFF participated in a CA100+ meeting with General Motors (GM) which addressed the impact of the US Inflation Reduction Act and how GM would reach its targets in line with public policy which included having capacity in excess of one million electric vehicle units in both North America and China by 2025.

Following the update, the Chair invited members to raise any questions or concerns, with contributions and replies summarised below:

• In highlighting concern at the lack of positive actions and responses from organisations, the Committee were reminded of the difficulties in seeking to engage with such large companies given the relatively small share of the overall value of the companies highlighted held by the Local Government Pension Scheme.  Given these challenges the response and acknowledgement achieved through the LAPFF was felt to represent an achievement with the need to retain confidentiality in how the engagement with businesses was undertaken also needing to be respected.

• Whilst recognising the achievements accomplished to date, the Committee raised concerns regarding the effectiveness of LAPFF due to the omission of engagement with several large companies and the length of time that organisations took to reply. In response, the Committee were informed that, as shareholders, the Fund could only propose resolutions at LAPFF AGM’s, with members suggesting the potential of attending AGM’s in order to do so. It was also detailed that the Fund maintained regular contact with London CIV regarding any concerns with how LAPFF voted at AGM’s. In addition, the Committee noted that members were welcome to attend LAPFF business updates throughout the year and, if deemed necessary, the Committee could also invite LAPFF to a future meeting to question them on their activity.

With no further comments and in welcoming the update, the Committee RESOLVED to note the report.