Companies' environmental strategies should not face shareholder votes - NBIM

Norges Bank Investment Management (NBIM) has said it does not agree that companies’ strategic plans related to climate change should be subject to shareholder approval.

A letter from the division of the Norwegian Central Bank, which is responsible for investing the Norwegian Government Pension Fund Global, to Institutional Shareholder Services argued that the responsibility was best placed in the hands of the board and management, but added that it would “hold the board to account for managing climate-related risks and opportunities”.

NBIM explained that it would do this by withholding support for the directors’ re-election if the company had experienced material failures in oversight, management or disclosure of climate risks.

A letter from NBIM said: “Where a company’s management or disclosure of climate risks does not meet our expectations, we will consider supporting well-founded shareholder proposals. We will support shareholder proposals that request reasonable disclosure of the company’s governance, strategy, risk exposures, and performance data related to material sustainability risks.

“We will also support shareholder proposals that request the board to develop and implement a policy or framework where its management of a material sustainability risk appears inadequate.”

Furthermore, NBIM outlined its view on CEO remuneration, stating that it preferred for a significant proportion of CEOs’ remuneration to come in the form of shares which are locked in for at least five, but preferably 10, years.

The organisation said it deemed this to be a transparent in which to align the interests of the CEO and shareholders, adding that the strategy could also be compatible with the use of performance conditions in the short-term.

Alongside this insight into how NBIM uses its voting rights, the organisation also impressed the importance of the maintenance of the physical aspect of shareholder meetings despite the rising popularity of hybrid meetings, which provide for remote participation, as the level of accountability offered by in-person events needed to be maintained.

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