Aviva Investors Asks Portfolio Companies for Climate Transition Plans, Nature-Related Reporting
Aviva Investors outlined a series of sustainability-focused expectations for its portfolio companies, including publication of decarbonization-aligned climate transition plans and preparation to disclose on nature-related risks and opportunities.
The expectations were unveiled in Aviva Investors CEO Mark Versey’s annual letter to company Chairs, setting out the £232 billion AUM asset manager’s stewardship priorities for the upcoming year. Versey opens the letter recognizing the political, social and economic turmoil facing businesses resulting from the war in Ukraine and lingering pandemic effects, but underlines the importance of not letting “tactical responses” to these factors undermine the delivery of long-term sustainability objectives.
“Investors, companies, governments and civil society must maintain a transparent and constructive dialogue to chart a path through the current challenges. 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.”
The three priorities outlined in the letter that will shape Aviva Investors’ stewardship activities, according to the letter, include tackling the cost-of-living crisis, transitioning to a low-carbon economy, and reversing nature loss.
To help address the cost of living crisis, Aviva Investors said that it expects companies to “explore all opportunities to deliver cost efficiencies, delay non-essential spending, and leverage their pricing power where appropriate,” while ensuring that the actions do not come at the expense of the most vulnerable stakeholders in the value chain. Boards are also encouraged to commit to paying a living wage for all workers, consider providing additional financial support to their most vulnerable workers, engage with unions to address the impact of high inflation on real wages, uphold human rights, increase executive salaries at levels below that of the wider workforce, and take action to support vulnerable customers.
On the climate front, the letter sets an expectation for all companies to publish “robust and financially viable climate transition plans that will support the decarbonisation of economies in a socially just and inclusive manner.” Companies are specifically encouraged to focus on key components of the UK Transition Plan Taskforce Disclosure Framework, including guidance to describe key impacts of the plan on business models and the financial position of the company, the integration of climate targets into executive and senior management incentive compensation, strategies to engage customers, suppliers and partners to drive value chain decarbonization, and the alignment of corporate government engagement activities with climate commitments.
In order to support the goal to help reverse nature loss, Versey writes that companies need to provide decision-useful disclosure demonstrating “how they are aligning their internal policies and practices with a nature-positive ambition and quantify the financial risks and opportunities associated with their dependencies and impact on nature.” The letter sets an expectation for companies to begin reporting “within a reasonable timeframe” utilizing the Taskforce on Nature-related Financial Disclosures (TNFD) framework, expected to be released this year. Key components of the framework include mapping the location of company value chains to each ecosystem to help determine priority issues and areas, evaluating business dependencies and impacts on nature, along with related risks, opportunities and potential actions, and defining a comprehensive biodiversity strategy, including short-, medium- and long-term targets and action plans to reduce and reverse the business’ impact on nature.
“As a global asset manager with £232 billion of assets under management, we are committed to help create a more sustainable, prosperous and inclusive future for our clients and wider society, while supporting our own ambition to become a net-zero company by 2040.”