Leading British asset manager Aviva Investors plans to push boards for greater action on biodiversity and human rights so that companies consider "the whole picture of sustainability".
Alongside climate change, a core focus for most investors, Aviva's move reflects growing concern over the corporate world's impact on nature and the treatment of social stakeholders, including workers, across often lengthy supply chains.
Insurance group Aviva's (AV.L) asset-management arm, which handles 262 billion pounds ($354.62 billion) of assets, will now rank human rights and biodiversity alongside climate and executive pay when it selects investments.
The volume of cash going into ethical funds focused on environmental, social and governance (ESG) issues has surged, with investors successfully pushing companies to make changes in these areas.
Aviva Investors CEO Mark Versey wrote in his annual letter to 1,500 companies in 30 countries that bonuses awarded to company executives should also reflect how well sustainability targets have been met, warning that laggard boards would be held accountable.
"Simply cutting emissions but allowing the destruction of the rain forest to continue will do little to reverse global warming," Versey said. "Companies need to adopt an integrated approach for maximum benefit.”
"It is often said that investor engagement on the ‘S’ in ESG topics is lagging behind a focus on the environment. As a result this inclusion is most welcome," said ShareAction, which campaigns for responsible investing.
On climate change, all companies would be asked to develop a climate transition plan "and companies in higher-impact sectors should present these for shareholder approval", Versey said.
Companies should begin making voluntary disclosures based on climate-related standards being drawn up by the new International Sustainability Standards Board, which was launched at the COP26 global summit last November, he added.
"We recognise the standard is still to be fully developed and would support a phased approach to reporting, with full compliance by 2024," Versey said.
Company executive bonus plans should include "robust, stretching and externally validated sustainability targets" that are clearly linked to commercial strategy, he added.
Separately on Monday, the European arm of fellow investor BMO Global Asset Management, part of United States-based Columbia Threadneedle, a unit of Ameriprise Financial (AMP.N), said it, too, would push companies on issues including human rights.
“The events of the past year, including the ongoing COVID
-19 pandemic and extreme weather events, have reinforced the importance of creating a more resilient future," said Claudia Wearmouth, co-head of the company's Responsible Investment team.
"Climate change, biodiversity loss and human rights are all issues that require urgent action."
Last June Axa Investment Managers said it was expanding its palm oil investment strategy to exclude companies involved in major land use controversies or in causing biodiversity loss due to soy, cattle and timber.
($1 = 0.7388 pounds)