The boss of Aviva Investors has warned companies not to sacrifice long-term sustainability goals in response to near-term challenges posed by energy shocks, supply chain disruption, elevated inflation and the risk of recession.
Mark Versey, chief executive of Aviva Investors, the asset management arm of Aviva PLC, set out the expectation in his annual letter to the chairpersons of companies where Aviva Investors is a shareholder or bondholder.
He said the firm’s stewardship priorities this year will focus on how companies tackle the cost of living crisis, the transition to a low carbon economy and reversing nature loss.
Versey, since 2021 chief of the £232 billion asset manager, which aims to become a net zero company by 2040, said the firm’s stewardship priorities this year will focus on how companies tackle the cost of living crisis, the transition to a low carbon economy and reversing nature loss.
The letter, which was sent to around 1,600 companies in 31 countries, outlined clear ways in which businesses can address these issues.
Aviva Investors will hold boards and individual directors accountable at companies where the pace of change against these priorities is too slow
“Events over the past year have forced us all to revaluate and adjust near-term priorities to navigate the lingering reverberations from the pandemic and the political, social and economic turmoil caused by the war in Ukraine,” Versey wrote.
“However, as we develop strategies to counter energy shocks, supply chain disruptions, elevated inflation, and the risk of recession, it is imperative that tactical responses today do not undermine the delivery of critical longer-term sustainability objectives,” he added.
“These potential conflicts could arise in various ways, including securing reliable energy sources by locking in high-carbon capacity or protecting profit margins by inadvertently damaging the long-term viability of supply chains,” Versey continued.
“Investors, companies, governments and civil society must maintain a transparent and constructive dialogue to chart a path through the current challenges.”Mark Versey
Versey added: “At the same time, there can be no wavering from our collective commitment to build a sustainable future, recognising the long-term success of companies is inextricably linked to a thriving planet and society.”
Aviva’s ESG efforts and record
The annual letter to chairs is part of Aviva Investors’ wider stewardship programme, which aims to help shape change at investee companies.
The firm undertook 1425 substantive engagements in 2022 and voted at 6732 (2021: 6648) shareholder meetings – rejecting 26.2 per cent (2021: 26.6 per cent) of management proposals tabled, the firm revealed.
ShareAction ranked Aviva Investors ninth globally for its voting record on the most significant environmental (88 per cent) and social (96 per cent) shareholder resolutions of last year.
Aviva Investors voted against 134 companies in 2022 for insufficient progress or disclosure on climate change, compared to 165 companies the previous year.
In 2022, Aviva Investors voted againstthe re-election of directors at 107 companies for lack of progress on ethnic diversity and opposed directors at 51 companies due to human rights concerns (2021: 85).
The firm also rejected 35 per cent (2021: 33 per cent) and 73 per cent (2021: 68 per cent) of executive pay proposals in the UK and US, respectively, on concerns over quantum and structure. Aviva Investors voted against directors at 71 companies for insufficient policies and targets on biodiversity.
The asset manager will divest in cases where companies consistently fail to meet its requirements, Versey stressed.
In 2021, Aviva Investors introduced a 1.5 degree centigrade-aligned engagement programme focused on 30 of the world’s worst carbon emitters, with an ultimate sanction of divestment if its expectations are not met over one to three years.