LGPS pool plans to score companies on nature risks

Border to Coast, the Leeds-headquartered Local Government Pension Scheme (LGPS) pool, is planning to bring nature risk to the forefront this proxy season, warning it could vote against executives overseeing pollution and deforestation.

The pool, which is set to manage more than £100bn in assets, is introducing a new Nature Watchlist for the upcoming AGM season. Companies will be assessed on their management of nature-related risks, including pollution and water stress, according to its latest quarterly stewardship update.

The inclusion of water stress and pollution broadens the pool’s approach to nature risk, which was previously focused mainly on deforestation.

Companies that score poorly could face votes against management, the pool warned, signalling a potential escalation in its stewardship approach.

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Border to Coast also said it would continue to vote in favour of shareholder proposals calling on companies to mitigate deforestation risks, taking a “comply or explain” approach and publicly disclosing its rationale where it chooses not to support such resolutions.

“Biodiversity loss is an increasing risk to financial markets. Over half of global GDP is dependent on nature-based services, and looking ten years out, six of the top ten global risks identified by the World Economic Forum are climate and environmental-related,” said Tim Manuel, head of responsible investment at Border to Coast announcing the new strategy last year. 

“Engagement on this issue is a crucial component of our attempt to mitigate the devastating impact of climate change, and we will continue to push for greater action to limit deforestation, improve natural resource management, and manage the risks of climate change,” he added.

The plans come as the UK's water companies face mounting public scrutiny over sewage spills and pollution. United Utilities, the UK's largest listed water firm, is one of the firms which have been accused by environmental campaigners of polluting water. The firm reported close to 100,000 sewage spills in 2023 and has been accused by environmental campaigners of sewage dumbing in Lake Windermere. It is due to hold its AGM in July.

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