UK asset manager lays down diversity challenge to top firms

Legal & General Investment Management (LGIM), one of Europe’s biggest asset managers, has written to the CEs of some of the world’s top companies calling for more action on female representation on boards, gender pay gaps and climate change.

LGIM, the fund arm of insurer Legal & General, which manages nearly £1-trillion in assets, has taken a lead in improving corporate governance and its voting intentions are keenly watched, particularly by major corporations, in which it is often a leading shareholder.

In a shot across the bows for a number of companies, LGIM said it would vote against British companies where women did not represent at least a quarter of the board, and wanted a full breakdown of any gender pay gap and plans to close it.

“The vast majority of companies are making significant progress – we simply believe there is more to be done,” Sacha Sadan, director of corporate governance at LGIM, said.

The company also said boards should consider creating an advisory committee of external experts to help challenge consensus views.

LGIM’s tougher stance was backed up by industry trade body the Investment Association, which said it had written a separate letter to 35 FTSE 350 companies it had singled out, calling on them to improve boardroom gender diversity.

They included oil giant BP and Britain’s second-biggest builder, Persimmon.

“The body of research is clear: firms with a diverse management team and pipeline make better decisions and drive innovation,” Investment Association CE Chris Cummings said.

The association’s members manage nearly £7-trillion in assets out of Britain.

LGIM’s April 17 letter and the Investment Association’s letters, sent out between April 11 and April 16, come as annual general meetings get under way and as clients increasingly demand that their investments take into account the effect on returns of environmental, social and governance-related matters.

LGIM’s parent company, Legal & General, has three females on its 10-member group board. In addition to diversity, LGIM said that more needed to be done on climate change, long-term strategy and shareholder rights.

On climate change, LGIM said it wanted to see companies report in line with guidance from the Taskforce on Climate Related Financial Disclosures, which was set up by the Group of 20.

“We also expect you to outline the potential impact on your business, where material, of a rise in world temperatures above the 2ºC target set in the Paris climate accord,” it said, referring to the 2015 deal on global warming.

LGIM also said firms should relate their strategy to the UN’s Sustainable Development Goals, where relevant, referring to a plan to tackle a range of issues including poverty, hunger, illiteracy and disease by 2030.

Firms should also make greater efforts to demonstrate their long-term strategy was sound by showing how sustainability was reflected in their operations, through an analysis of risks and opportunities, target setting and public disclosures.

As more companies look to list with reduced shareholder rights, such as US tech firm Snap did recently, LGIM said it was “increasingly concerned” and would work with regulators to “strengthen the integrity of the market”.

THE VAST MAJORITY OF COMPANIES ARE MAKING SIGNIFICANT PROGRESS – WE SIMPLY BELIEVE THERE IS MORE TO BE DONE