Our thinking

This Time It’s Personal

4 February, 2022

For the world’s investors, the climate emergency is getting personal. In January, BlackRock CEO Larry Fink urged businesses to embrace stakeholder capitalism, or get left behind. And last week, Aviva Investors (the investment arm of Aviva plc) announced that it will “hold boards and individual directors accountable” if they fail to move fast enough on sustainability.

In an annual letter CEO Mark Versey shared the four stewardship priorities that would shape its voting and engagement activities in 2022: climate change, biodiversity, human rights and executive pay. Within each area, it set out expectations for firms it invests in, from developing biodiversity action plans and setting net-zero targets to ensuring executive compensation reflects sustainability performance.

The letter “acknowledges the magnitude of many of these challenges”, yet also commits to use its shareholder vote to oust directors at firms “where the pace of change does not reflect the urgency required”.

It’s a big statement. ESG performance has long been a priority, but this move also puts the onus on powerful individuals to make sure companies clean up their act. And Aviva Investors has a history of putting its money where its mouth is. Last year, it voted against directors at 137 companies that failed to improve ethnic diversity on company boards: one of its 2021 stewardship priorities.

However, this move from Aviva Investors also ups the stakes for Aviva as a whole. As a plc, Aviva too is subject to shareholder pressure on ESG issues. So far, it’s looking good: in 2021, Aviva became the first major insurer worldwide to commit to becoming a net zero company by 2040. But if it’s prepared to ditch directors who don’t keep up with the pace of change, it’ll need to make sure its own performance lives up to the challenge.

By Sarah Howden