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Aviva shows consequences of failing to act on ESG

Major UK investment fund Aviva Investors has said it will vote against the election of directors at companies which fail to make good on environmental pledges.

city environmental pledges

The firm, which manages £262 billion in assets, announced it would eject directors who fall short on their commitments on climate change, biodiversity and human rights.

CEO, Mark Versey, wrote in the investor’s annual letter to its 1,500 companies that it will “hold boards and individual directors accountable where the pace of change does not reflect the urgency required.

Keep up or get kicked out

The firm, which has invested in companies across 30 countries, including the UK, has told businesses to show urgency on these issues, by pressuring businesses to set measures to deliver and track progress on key environmental, social and corporate governance issues.

To guarantee Aviva’s continued support, companies will need to publish detailed Net Zero and human-rights related action, with an increased focus on the ‘S’ in ESG and link this to executive pay. 

This comes, perhaps, unsurprisingly – in the past, some companies have intentionally set vague targets on climate change and biodiversity commitments to avoid being held to account.

Therefore, the announcement has been welcomed by action groups who have previously claimed social responsibility has been largely ignored. Aviva aims to not only reflect its core focus on climate change (as with many other investors), but its focus on social stakeholders too, including workers across often lengthy supply chains.

This is all part of the firm’s announced efforts to create a more sustainable, inclusive and low-carbon future.

Don’t risk embarrassment

These demands will no doubt be taken with the utmost gravity by the companies involved, considering that last year the asset manager voted against 26 percent of management proposals tabled due to lack of progress on ethnic diversity.

In addition, they opposed directors at 85 companies due to human rights concerns, whilst 33 percent and 68 percent of executive pay proposals were rejected in the UK and US, respectively, over ‘quantum and structure’ issues.

Pressure is mounting amongst those who want to see people issues (the ‘S’ in ESG) coming to the foreground of the conversation. The pandemic has been a notable indication of companies’ attitudes towards their staff – those that have treated their staff and suppliers well have improved their corporate reputations, and in doing so, have likely gained more business.

However, the opposite happened at certain companies that chose to prioritise profit in light of wavering economies, hence abandoning their declared purpose. In doing so, they have, in many cases, eroded the public and employees’ trust and damaged reputations.

Communicate the steps you’re taking right now

Coming out of a year that played host to COP26 in Glasgow, and starting off a year that will see another climate conference take place, the market is only going in one direction. 

Choosing to simply ‘go with the flow’ without any active engagement, or even worse, moving in the opposite direction, will harm your reputation on top of embarrassing yours and your company’s image. Committing to ESG is pivotal to enhancing your public perception, whilst also producing real change.

Take actions that are achievable and concrete – you are better off succeeding at taking small steps, then failing at taking large ones. Having a big, long-term goal is valuable but can put a lot of pressure on companies, especially if you have put a great deal of your communications work behind it.

Instead, focus your communications on what you are actually doing at that moment, rather than your aspirations.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.