Climate stewardship: A guide for effective engagement and voting practices

In the context of urgent climate action, the role of financial institutions is key in supporting the transformation of the biggest emitters and keeping global warming below 1.5 deg. C. Stewardship is one of the tools at their disposal: by using their position as financial supports of the economy, they can influence the companies they support and encourage them to complete their transition. To date, however, the results of financial institutions' climate stewardship have been limited. After five years of existence, the main investor coalition dedicated to climate stewardship, Climate Action 100+, has not succeeded in convincing all the targeted companies to publish a complete transition plan aligned with a 1.5 deg. C objective. Additionally, votes at annual general meetings still do not clearly sanction inadequate climate strategies. Based on these findings, it is essential to bring engagement and voting practices to maturity in order to improve their effectiveness. Reclaim Finance is presenting a guide to help investors define and implement their engagement and voting policies, and publish the associated reporting. The briefing focuses on investor-led shareholder stewardship, but the principles of stewardship can be extended to all financial actors and asset classes. Our key recommendations include: Increase transparency on engagement and voting practices, both in policies and in reporting; Define public and time-bound, sectoral and general demands, and communicate them to companies engaged; Prioritize demands aimed at aligning transition plans with a 1.5 deg. C trajectory, rather than demands relating to the disclosure of transition plans; Implement an escalation strategy that systematically applies sanctions each year if the demands are not met by the companies engaged; Use all the stewardship tools available, and use dedicated tools depending on asset classes