Scottish Widows is a significant shareholder in many of the world’s companies. We hold shares on behalf of customers who invest with us. As a result, we’re the stewards of these investments and have a responsibility to manage and protect them in the best way possible.
It’s our responsibility to use our influence - and shareholder voting rights - to encourage transparency and high quality governance in the way companies are directed and controlled. This underpins their long-term success and creates shareholder value.
As a shareholder, we own a part of the companies we invest in. One of our key rights as a shareholder is the right to vote on a company’s policies. Shareholder voting rights give us the power to elect directors at annual or special meetings and make our views known to company management and directors on significant issues that may affect the value of our shares.
Most of our customers will invest with us for decades and major risks that are on the horizon will impact their savings if we don’t take action now. We’re a long-standing signatory of the UN Principles for Responsible Investment** and are committed to being responsible stewards of the assets we oversee on our customers’ behalf.
We focus our stewardship activity on companies which are failing to address climate change risks. This is in line with our aspirations as a member of the Institutional Investors Group on Climate Change**. We challenge them to report on the financial impact of climate change on their business, to improve their business practices and reduce their carbon footprint.
We delegate most of our shareholder voting to our fund manager partners. We work with them to understand their voting practices and monitor their voting activities. This ensures their approach to issues, like climate change, preserves or enhances the value of investments. We will take action if we have material concerns.
We aim to influence the companies we invest in to make positive changes. When we’ve a significant investment in a company and have concerns about their practices, we’ll always engage with them first. Where we don’t see material progress, we’ll use our shareholder rights to challenge the company, and will sell our shares where it is clear that progress won’t be made.
When implementing our exclusions policy, we recognise that removing all bad performers on material Environmental, Social and Governance (ESG) factors would mean we lose the opportunity to drive positive changes by engaging with these companies. So, we restrict our exclusions to companies involved in controversial activities like cluster munitions, landmines or chemical weapons, where engagement would make no difference.
When selecting fund managers, we pay particular attention to their abilities to identify ESG risks and opportunities and to engage with companies they invest in on important issues. We hold them to account, insisting that they demonstrate that they’re doing what they have committed to.
Our Stewardship Policy provides more detail on what we do and how we do it.
**Principles of Responsible Investment: United Nations-supported international network of investors which works together to put into practice Principles for incorporating ESG issues into investment.
Institutional Investors Group on Climate Change: The European body for collaboration between institutional investors on climate change.
Through our membership as part of the IIGCC, Scottish Widows recently led a consortium of investors and shareholders, which approached BP calling for the business to become more transparent in the way it is managing climate change risk. As one of the original co-filers of the resolution, we helped to ensure the filing reached the necessary 10% of shareholder threshold to be voted on at BP’s 2019 Annual General Meeting, where it was accepted by 99% of BP shareholders.
Under the resolution put forward by Scottish Widows and other investors, BP will now provide a detailed strategy as to how it will meet the requirements of the Paris Climate Change Agreement, and how it will work to ensure the company represents a low-risk investment for our customers.