Nest has updated its voting policy to highlight it can vote against board chairs when companies materially scale back their climate strategies without “adequate explanation”.

The update aims to more clearly state how the pension scheme assesses significant changes to climate-related targets, investment plans, or transition timelines, and reinforce expectations on companies to maintain credible and transparent transition strategies.

When companies make adjustments, Nest expects them to provide clear and evidence-based justifications to shareholders.

Nest said that, by being explicit in its voting approach, it is aiming to support constructive dialogue with companies and provide greater certainty about how it will exercise its voting rights.

It argued that companies run in sustainable ways were more likely to deliver strong long-term returns, as they were more resilient and better equipped to create lasting value for shareholders by proactively addressing climate risks and reducing exposure to stranded asset risks.

“This policy update builds on our existing approach,” commented Nest director of responsible investment, Diandra Soobiah.

“We have engaged — and where necessary, voted against — companies that weaken their climate plans and do not provide adequate transparency to shareholders.

“We also expect companies to put material changes to their climate strategy or transition plan to a shareholder vote.

“We believe being explicit about how we evaluate these issues supports constructive dialogue with companies. Clearer guidance gives boards greater certainty about how we will approach our voting decisions.

“Our priority remains safeguarding our members’ long-term interests by encouraging responsible management of climate-related risks.”

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