Wesleyan is committed to sustainable investing and has a dedicated Sustainable Investment (SI) Team whose role it is to ensure this commitment is upheld. Here, the team answers questions about what they do and how they steer Wesleyan's resolve for ongoing sustainable investment.
Q: What do you do if a company breaches your policy’s exclusions? For example, would you divest from them?
A: Yes. Our Sustainable Investing Policy is very clear on this. Under our ‘reducing harm’ pillar, for example, we introduced new requirements for oil and gas companies. One of which was for them to have comprehensive public plans to reduce their climate impact and have a commitment to be net zero by 2050.
We had already started looking at this prior to launching our policy, as our oil and gas sector Investment Analyst had evaluated all companies we had exposure to. We found that some were not as far along the ‘net zero’ path as we wanted them to be. So, we sold our full holding in them – worth a combined £15m – to align with our ‘Reducing harm’ pillar.
Q: Do you ever look to reinvest with a company you have previously divested from?
A: We never say ‘never’. We annually review all companies we’ve divested from, to see if they’ve made sufficient improvements and are no longer breaching any of our exclusions. If we feel they are making progress, we can look to invest in them once again.
Q: Many countries have recognised the need to phase out coal in the 2030s. If you identify a company you believe is set to continue generating power from coal in 2030, what actions does the team take and how do you convey your concerns to Fund Managers investing our customers’ money?
A: Before we put our policy in place back in 2021, we had already identified companies that we believed we would need to divest from to satisfy the policy’s exclusions. This included a utility firm that was producing electricity from coal and didn’t have a credible plan to reduce this to nil by 2030. As a result, our Fund Managers sold all the financial holdings we had in the company.
Q: What is Wesleyan’s view on ‘green energy’ companies?
A: Even prior to the launch of our policy we held more than £50m invested in companies involved in ‘green energy’ infrastructure production and have continued to invest in them, which aligns with our ‘Positive impact’ pillar.
Alongside investing further in existing ‘green energy’ companies, since launch, we’ve invested in the initial public offering of two new companies: one that’s involved in renewable energy assets (such as solar panels installed on public buildings) and another which invests in commercial-scale energy storage.
We’re also proud signatories of the internationally-recognised UN-sponsored Principles for Responsible Investment and Climate Action 100+, which is an organisation focused on ensuring the world’s largest greenhouse gas emitters take necessary action on climate change. Take a look at the other sustainable organisations we’ve signed up to.
Q: As part of the team’s stewardship and engagement work, how do they tackle gender diversity, and do they have enough influence to instigate change?
A: Gender diversity is something we feel passionate about. As an example, in 2021, we reviewed a company’s AGM (Annual General Meeting) items and noted that the non-executive director was stepping down from the Board, meaning it would no longer demonstrate gender diversity.
As we have a large holding in the business, we wrote to them to understand what steps they were taking to level the playing field and find out how they were encouraging under-represented groups to consider a role on their Board.
The answer we received didn’t satisfy our concerns, so we voted against the re-election of the Nomination Committee Chair (NCC), alongside other investors. Although the NCC remained in post, we felt this sent a clear message, so much so that some months later the company employed two new directors that improved the Board’s overall diversity.
Q: Remuneration, particularly Board member bonuses, can be contentious. How does the team tackle this sensitive subject if a company’s executive team’s pay policy doesn’t align with your ‘Driving change’ pillar?
A: We’ll not hesitate to vote against a company’s executive team’s pay policy if we feel the rationale provided for bonuses paid is limited. For example, we formally raise questions and give challenging feedback if we see that Board members are being rewarded under ‘business as usual’ tasks rather than ‘aspirational and stretching’ targets. In the past, we’ve been approached by management teams to provide our views and guidance on proposed changes to their pay policies. In those instances, we’ve provided valuable feedback prior to us voting officially.