From bringing out 60 employees from across the company for an award-winning investor day to its ambitious net-zero goals, Severn Trent is a company that does ESG well. It is also a company that put its climate action plan on the ballot at its AGM this year.
‘If you’re going to say sustainability and ESG are core to what you do, then you need to live and breathe that through the way you talk – and the way you report,’ says Richard Eadie, who led the company’s IR team until earlier this year when he moved to head up its corporate strategy, sustainability and group transformation.
The UK water utility got a resounding thumbs-up from its investors, with 99.4 percent voting in support of its climate change plans. But why now? Or why at all, for that matter?
The idea of a say-on-climate vote was started by UK hedge fund The Children’s Investment Fund (TCI), which manages around $30 bn, with Spanish airport operator Aena becoming the fund’s first climate-vote success story in early 2020. The hedge fund has since taken its campaign global, while investor groups have added their own pressure and a growing number of companies have taken their own steps to add such a vote to the ballot themselves.
Back in 2019, Severn Trent made its ‘triple-carbon pledge’ – an ambitious 10-year plan to become a company that uses 100 percent renewable energy, 100 percent electric vehicles and is net-zero by 2030. ‘That's earlier than a lot of other companies are aiming for,’ notes Eadie. ‘So it makes sense to take a temperature check and ensure investors are comfortable with what we’re doing.’
Not a rubber stamp
Severn Trent’s say-on-climate vote is a non-advisory vote that will happen every three years. What it isn’t, says Eadie, is an opportunity for investors to voice opinions on wider company strategy – something they already do when approving management or board members. He also stresses that the vote is ‘not a rubber stamp for what you’re doing around climate’. The real work, he says, comes after. You have to think about and communicate your plans – and keep showing your commitment to tackle climate change.
For Severn Trent, putting its climate action report up for an investor vote has ‘made it incumbent on us to talk about climate change’ more regularly, explains Eadie.
In a paper published in June this year, consultancy SquareWell Partners described say-on-climate as ‘one of the most contentious topics’ of the 2021 AGM season. It noted a growing trend for management-sponsored proposals, but warned that there is no unified approach to such votes. Even investors have opposing – and generally strong – opinions on the idea of a say-on-climate vote.
‘Some investors, such as CalPERS, have expressed concerns over the campaign’s impact on board accountability and the effectiveness of such a mechanism,’ SquareWell said at the time. ‘European asset managers, like Legal & General Investment Management and BNP Paribas Asset Management, on the other hand, have publicly expressed support for the say-on-climate vote.’
Perhaps most worrying, however, was the idea put forward by SquareWell that some firms have been adding their climate plans to the ballot only to give the appearance of being progressive on climate change – essentially the latest form of greenwashing.
This is an extract of an article that was published in the Winter 2021 issue of IR Magazine. Click here to read the full article.