Legal & General Investment Management spent the past year focusing more on corporate climate and nature policies, governance issues including dual-class shares and executive pay, health and potential risks of artificial intelligence, according to its active ownership report released April 25.
LGIM manages $1.5 trillion in assets for institutional and retail investors. In 2023, its investment stewardship team cast 149,000 votes at 15,580 meetings to push for systemic change on environmental, social and governance-related risk factors, it said.
On environmental issues, LGIM voted directly against 100 companies for failing to meet deforestation expectations, and another 342 companies through its climate impact pledge policy. It supported 77% of climate-related shareholder proposals and in 2024 expects to ramp up expectations of mining and energy companies, the report said.
On social issues, LGIM pushed for food company action on anti-microbial resistance and nutrition and living wages at 15 large food retailers, along with greater gender and ethnic diversity at board level and below in general.
Governance priorities include making sure that a U.K. proposal to make the capital market there more competitive does not dilute shareholder rights by permitting dual-class shares and other changes.
Globally, LGIM kept a critical eye on executive pay, opposing 52% of pay proposals not meeting its expectations for appropriate long-term performance-based pay. It supported 76% of pay policy votes at U.K. companies but voted against 86.5% of management pay proposals at U.S. companies, up from 77.2% in 2022, over concerns that longer-term performance measurements or conditions were missing.
In 2024, the report said, LGIM “will apply additional voting sanctions on ‘say-on-pay’ proposals” in the U.S. where S&P 500 companies have underperformed relative to index peers and CEO pay ratio exceeds 300 times median earnings.
Artificial intelligence as an emerging stewardship risk also prompted LGIM to publish governance expectations to address risks including data privacy and security; regulatory compliance; operational and critical infrastructure; workforce transitions; and intellectual property.
Companies that make AI systems will receive more scrutiny in 2024, followed by those using the technology. LGIM’s current baseline governance expectations of companies include naming a board member or committee accountable for AI risk oversight and strategy and board education of business-specific AI risks at least annually.
“Should companies fail to meet our expectations, we will escalate our engagement on behalf of our clients, on what may well prove to be a generation-defining issue,” said John Hoeppner, head of U.S. stewardship and sustainable investments, in the report.
