STEWARDSHIP WITHIN THE HL GROWTH FUND
Stewardship and engagement aim to encourage responsible business practice. It can drive positive change within the companies we invest.
Stewardship can be a force for positive change. For example, by applying pressure in the boardroom to set more stretching emission reduction targets, uplift the treatment of workers and suppliers, or improve diversity within management.
The HL Growth Fund is made up of funds provided by Legal & General Investment Management (LGIM), who we have appointed to run the fund to our specification. We delegate the Stewardship of the fund’s holdings to LGIM too.
LGIM has significant experience in investing responsibly. They were awarded a 5-star Stewardship ranking from the United Nations Principles for Responsible Investing (UNPRI) for the strength and depth of their engagement programme.
The Climate Impact Pledge
LGIM has selected around 5,000 companies worldwide who operate in climate-critical sectors. Think Airlines to Aluminium, Food to Forestry. Companies covered by the Climate Impact Pledge (CIP) are subject to targeted engagement, unique to the sector in which they operate.
LGIM set minimum criteria which they expect companies covered by the CIP to meet. These minimum standards are designed to be impactful within the constraints of the company’s sector and are intended to Steward the company toward a more sustainable long-term business model.
If, after a period of engagement, a company is failing to demonstrate progress towards LGIM’s targets under the CIP, they will sell their holding in that company (effectively adding it to the exclusion list) and vote against the company’s management. This way, they hope to be a driving force for change, with excluding a company as a last resort if they do not appear to be committed to tackling the climate crisis.
Engagement Case Studies
Environment Glencore
As one of the world’s largest mining companies, Glencore have a key role to play in facilitating the energy transition. LGIM have teamed up with other investors to request Glencore to disclose how its thermal coal production is aligned with the Paris Agreement objective of limiting the increase in global temperature to 1.5°C. This action follows ongoing concerns surrounding Glencore’s failure to put suitably ambitious and credible transition plans to a shareholder vote, and around the company’s trajectory to net zero. Filing a resolution puts pressure on companies and encourages them to discuss and resolve issues with shareholders.
Social Novo Nordisk and Eli Lilly
Novo Nordisk and Eli Lilly are two large pharmaceuticals companies. Both have recently launched (or are in the process of approving) weight loss drugs which are designed to help fight obesity. However, celebrity attention to the products has generated a buzz on social media and in the press which creates the potential for misuse of the drugs by people who do not truly need them. LGIM recognise the potential for harm this could cause and asked both companies to take more steps to try and educate people about the purpose of these drugs, and to encourage monitoring of their use. As well as the potential health impact of misuse, this is important to reduce the risk of any knock-on impacts on either companies’ reputations or financial outcomes.
Governance Kansai Electric Power
Kansai Electric Power is one of the largest electric utilities companies in Japan. The company was caught up in a bribery scandal in 2020 involving former directors of the business. LGIM have identified and engaged over several areas for improvement such as director independence, restrictions to length of tenure for company advisers and shareholdings in the company by directors of the firm. LGIM believe that through its improvement, Kansai could have a positive influence more broadly upon its sector in Japan. LGIM have also taken the opportunity to engage on climate change, in the hope of encouraging the firm to lay out interim emission reduction targets and a number of related issues.