March 10, 2020 / 12:29 PM / 23 days ago

Church investors warn UK firms of tougher line on diversity, modern slavery

* Investors to oppose nomination boards if diversity weak

* Also to reject company accounts if modern slavery plans weak

* Plan to review pay, auditors, lobbying in light of climate

By Simon Jessop

LONDON, March 10 (Reuters) - Investors managing nearly $30 billion on behalf of UK churches have warned Britain’s biggest companies that they plan to take a tougher line on issues such as diversity and modern slavery at this year’s annual shareholder meetings.

The Church Investors Group (CIG), whose members invest on behalf of a number of mainstream Christian denominations, said they would vote against reappointing nomination committee directors who have not ensured a minimum level of gender diversity.

In defining ‘minimum’, CIG, which oversees 21 billion pounds ($27.43 billion) in assets, said it would use the government-backed Davies and Hampton Alexander reviews for guidance, aiming for at least a third of FTSE 350 boards to be female by the end of 2020.

The group said it would also assess improvement in the broader leadership team.

“By looking at gender diversity below board level, we want to encourage lasting change in the companies in our portfolios,” said Stephen Beer, Chief Investment Officer of the Central Finance Board of the Methodist Church.

The group plans to vote on boardroom diversity beyond UK-listed companies. For companies in Europe, the United States, Australia and New Zealand, it expects boards to have at least two female directors. All other boards must have at least one.

It also said it would not back a company’s annual report or accounts if its statement on modern slavery was inadequate, using rankings devised by benchmarking firm Know the Chain and the non-profit Business and Human Rights Resource Centre.

In the wake of the Brumadinho mine tailings dam disaster that killed 270 people in Brazil in 2019, the group said it would vote against the chairs of companies which have failed to respond to engagement on the issue.

“Companies that have not responded to the request for disclosure of the number of tailings dams, safety standards and processes they have in place present a systemic risk to both communities, the environment and to their investors,” said Adam Matthews, Director of the Church of England Pensions Board.

On climate change, the group said it would continue to withhold support for directors of laggard companies and intensify their efforts by taking into account how directors’ pay aligns with the company’s stated approach to the issue.

It would also review auditors’ reports to ensure they had identified and communicated potential climate risks, and analyse companies’ political lobbying and trade associations for any that run counter to its stated position on climate change.

$1 = 0.7655 pounds Reporting by Simon Jessop; Editing by Jan Harvey

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