Aviva Investors, the global asset manager arm of Aviva PLC (LSE:AV.), said it will hold the directors of the companies it invests in accountable if they fail to deliver on sustainability expectations and added that it wants a closer link between executive pay and sustainability goals.
In a letter sent to 1,500 companies in 30 countries, the £262bn asset manager said it has widened its sustainability expectations and that companies will be judged on biodiversity and human rights as much as on climate and executive pay.
The news comes after BlackRock (NYSE:BLK), the world's largest fund, last week called for stronger climate and environmental goals from its investees.
Mark Versey, chief executive of Aviva Investors, said addressing just one area of sustainability was less effective because it might trigger negative impacts that could undermine other aspects of the transition to a sustainable economy.
“Simply cutting emissions but allowing the destruction of the rain forest to continue will do little to reverse global warming. Companies need to adopt an integrated approach for maximum benefit,” he said.
The asset manager expects all its investee companies to target net-zero emissions by 2050 and to work towards Science-Based Targets Initiative (SBTi) validation of their climate targets and plans.
It also said all companies must develop biodiversity action plans and implement human rights due diligence.
Last year, Aviva Investors voted at 6,648 shareholder meetings. It voted against the re-election of directors at 137 companies for lack of progress on ethnic diversity and opposed directors at 85 companies due to human rights concerns.
The firm also rejected 33% and 68% of executive pay proposals in the UK and US respectively.
The asset manager said it will divest companies that consistently fail to meet its requirements.
Mirza Baig, Aviva Investors' head of environmental, social and corporate governance, told the BBC that some companies intentionally set vague targets to avoid being held to account.
He said Aviva would increasingly use its vote as a shareholder to try to oust directors at firms that had a "high impact" on the planet but did little to rectify this.
Last year 280 firms changed their practices after pressure from Aviva Investors, Baig said. However, he urged more big investment firms to use their "loud" and "influential" voices to drive change.
"If there was enough pressure being put on businesses then the world would look very different," he said.
Meanwhile, parent company Aviva PLC (LSE:AV.) is facing pressure to return more cash to its shareholders from Europe’s largest activist investor.
Cevian Capital, an Anglo-Swedish investment firm, has lifted its interest in Aviva from 5% to more than 6%, giving it a stake worth nearly £1bn, the Telegraph reported.
Last summer, Cevian launched a campaign to pressure Aviva to hand out £5bn in excess cash gained on the sale of eight non-core international businesses.
The disposals, which were part of Aviva's plan to concentrate on Britain, Ireland and Canada, raised £7.5bn.
In December, Aviva announced that it would raise its planned share buyback from £750mln to £1bn.
Cevian is Aviva's second-largest shareholder, behind BlackRock (NYSE:BLK). With a stake of more than 5% it is able to call a shareholder meeting and have resolutions included at the AGM.