Investors who topped up their ISAs recently will have been thinking of what companies to add to their portfolio, but this time of year is also when investors have an opportunity to question and push for change at those companies.
April and May are when many major companies hold their annual general meetings (AGMs) and there are several coming up in the coming weeks and months where there are some divisive issues that could see management dealt a proverbial ‘bloody nose’ or even defeated, with mining giant Rio Tinto PLC (LSE:RIO) on Friday followed a host of other miners, banks and oil supermajors.
While pensions fund and other financial institutions have the biggest shareholdings, asset managers are by no means the only important actors during AGM season, says Michael Kind, senior campaigns manager at ShareAction.
“Retail investors also have the power to make a difference in several ways,” he says.
Or, as Lee Wild, head of equity strategy at Interactive Investor says, “no voice is too small to make an impact”.
With UK private investors holding around 12% of all London-listed shares, according to the Office for National Statistics and research from Hardman & Co suggesting the proportion on AIM is well over a third, private investors play an important role in holding companies to account.
Private investors can attend the AGMs of any company in which they are invested and question directors about issues important to them. Or just because, as some regular attendees attest, they can be good fun, and sandwiches or sausage rolls are often on hand.
“Attending these is very straightforward if retail investors hold share certificates, but if shares are held by a nominee, a letter of representation from a broker is required,” says Kind. If you own shares on an investment platform, such as AJ Bell, Interactive Investor or Hargreaves Lansdown, they can process most requests to attend meetings if you give them a week's notice (as well as offering educational material and AGM guides too).
With recent research indicating that more than a third of investors’ decision-making is driven by moral and ethical reasons, it would make sense that close to this number of investors would also want to put whatever pressure they can on the companies in their portfolio to improve their environmental, social and governance (ESG) performance.
“AGMs offer a unique opportunity to level the playing field when it comes to share of voice,” says Wild.
“At these meetings, anyone, an individual shareholder, or a large institution, can directly question the board of that company. As we have emphasised before, other shareholders, as well as the board, may well be glad you asked those difficult questions.
“You’re also getting the added benefit of leaving that meeting with a better understanding of the business you’re invested in – and I think we are all especially keen to know exactly where our money is going, perhaps now more than ever. It really is a win-win.”
“There is strength in numbers. The more we all exercise our right to vote, the more of an impact we will continue to have.”
Inclusivity
One way of giving investors a voice is making sure AGMs are as inclusive as possible. And technology could be an important factor in improving this.
ShareAction has written to all FTSE 100 companies to request they hold hybrid shareholder meetings over fears that in-person meetings are stifling debate.
And Kerry Leighton-Bailey, director of shareholder engagement at Lumi, which provides AGM services to most FTSE 100 companies among its 5,000 global clients, notes that many shareholders are likely to have been excluded from AGMs in the past by the meeting location, the time of day they’re held or even accessibility issues.
“Once you take away the barriers of how people get there, we’re seeing AGMs open up to a different demographic that is keen to participate,” Leighton-Bailey says.
When meetings are virtual or hybrid, Lumi has seen twice as many shareholders attend and ask questions compared to solely in-person events.
However, it should be stressed that investors do not need to attend the AGM to vote in support or against the resolutions tabled at the meeting, which is done either through logging onto your brokerage or investment platform or sending off a proxy form.
“If environmental and social impacts are important to an investor, they should take note of some of the prominent ESG resolutions coming up in 2022, all of which can be found in our resolutions to watch list,” says Kind.
ShareAction, which exists to “harness the power” of investors to help drive social and environmental progress, is running online training session to help give confidence to private investors about asking AGM questions – with the next being tomorrow, Thursday 7 April at 5pm.
If a lot of your investments are managed in funds or investment trusts, you can still ensure your voice is heard on issues that matter, says Kind.
“Asset managers have huge power with regards to businesses in their portfolio as they can own significant percentages of a company. Retail investors can make use of this by writing to their asset manager and encouraging them to vote for key upcoming social and environmental resolutions.”
Viva la resolution
ShareAction has been active already this AGM season, coordinating a coalition of institutional investors and individual investors to file a shareholder resolution for Sainsbury’s to start paying a living wage to all its staff, though the meeting is not until July.
Just around the corner however is the Rio Tinto AGM, on Friday, where last year more than 60% of shareholders opposed the pay deals awarded to departing executives.
This year, Rio has put up its first ‘say on climate’ resolution, though it is non-binding. This includes plans for more energy transition metals such as lithium and copper, as well as reductions in Scope 1 and 2 carbon targets for its own operations.
Another important meeting will be for Standard Chartered PLC (LSE:STAN) on 4 May, where a shareholder resolution has been lodged to get the bank to live up to its net zero rhetoric with action.
The resolution, which has been proposed by campaign group Market Forces and the Friends Provident Foundation, is the first since the IEA’s net zero by 2050 scenario was released and therefore gives the bank’s investors “a choice between action that would align financing with this goal, or the continued financing of new fossil fuel projects and the companies pursuing them, undermining both net-zero by 2050 and the Paris climate goals,” says Adam McGibbon, UK campaign lead at Market Forces.
“Any investor that understands the most basic findings of the IEA’s net-zero by 2050 scenario will be insulted by Standard Chartered’s proposal that allows it to keep funnelling money into an expanding fossil fuel industry.”
There will be similar issues at play at the Barclays PLC (LSE:BARC) meeting at the same day and at HSBC PLC on 29 April, with the pair having topped the list of banks flouting climate targets to fund oil & gas drilling.
Barclays own ‘say on climate’ plan allows it to keep financing companies expanding the fossil fuel industry, McGibbon says, meaning it is “self-defeating" and “not a serious climate policy” as it makes the bank’s own ‘Net Zero by 2050’ goal impossible.
Lloyds Banking Group PLC (LSE:LLOY), meanwhile, was found to have the largest equity exposure to fossil fuel production in a report that examined corporate lending, equity and asset management activities of the largest financial companies and found there was "a stark disconnect between what they say about climate change and what they’re actually doing".
AGMs to watch
8 April - Rio Tinto
19 April - Anglo American PLC
28 April - British American Tobacco PLC (LSE:BATS), Glencore PLC (LSE:GLEN), NatWest Group PLC (LSE:NWG)
29 April - HSBC, AstraZeneca PLC
4 May - Barclays, Standard Chartered, GlaxoSmithKline PLC (LSE:GSK), Unilever PLC (LSE:ULVR)
12 May - BP PLC (LSE:BP.), Lloyds, Rolls-Royce Holdings PLC
24 May - Shell PLC (LSE:SHEL, NYSE:SHEL)
