TE Connectivity is a US-based manufacturer of electronic components and wireless systems. The company’s main market is the automotive industry where its products are used to improve safety and fuel efficiency through increased levels of automation and electrification. The company does also sell products into industrial and telecommunications markets where they are often used in applications to help improve energy efficiency and safety.
Objective
For TE Connectivity to set net zero carbon (NZC) targets.
Background
For WHEB’s portfolio companies, routine resolutions occur far more frequently than shareholder resolutions relating to ESG issues[1]. WHEB’s voting policy is therefore primarily designed to use our votes on routine proposals to express our views on key governance and sustainability issues. Combined with our approach of writing to company management to explain our reasons for a vote against management, we find this an effective enabler of dialogue on core sustainability issues.
While TE Connectivity’s carbon targets, at the time, to reduce 40% GHG emissions by 2030 were laudable, we believe that greater ambition is required across all companies in the portfolio as set out in our Net Zero Carbon policies[2]. In addition to this, TE Connectivity is one of the top 10 emitters in the portfolio and so is an especially important target for engagement on this issue.
Actions
At the company’s AGM, WHEB voted against the proposal “Elect Director Thomas J. Lynch“, as the Chair of the Board. In our follow up letter, we explained our strict policies on environmental issues and highlighted that this was the second year in a row voting against Mr. Lynch for this reason. We therefore strongly urged the company to set a net zero carbon target to be achieved by 2050 at the latest and to develop science-based targets (SBTi) for GHG reduction covering Scopes 1, 2 & 3.
After a short while of not hearing back, we chased the company for a response given the urgency of the matter and it being a strategic priority for engagement.
Outcome
Milestone 2 – company shares or agrees to disclose information on the issue.
After chasing, TE notified us of its commitment to set near term company-wide emissions reductions in line with climate science that would also be SBTi validated. To fulfill this commitment, the company has increased its target to reduce Scope 1 and Scope 2 emissions to more than 70% on an absolute basis by 2030 and established Scope 3 reduction target of 25% on an absolute basis by 2032. These updated targets and commitments will be further communicated in the company’s annual corporate responsibility report in late spring.
While, crucially, TE is yet to set a net zero carbon target, its decision to improve the ambition of its targets does demonstrate a promising commitment. We will continue to pursue the issue with them.
[1] In 2022 a mere 1% of the resolutions that WHEB voted on were proposed by shareholders and none related to environmental or social issues. This is likely because WHEB’s investee companies tend to avoid major social or environmental controversies and do not therefore attract regular shareholder resolutions.
[2] https://www.whebgroup.com/investing-for-impact/sustainability-policies1
1 In 2022 a mere 1% of the resolutions that WHEB voted on were proposed by shareholders and none related to environmental or social issues. This is likely because WHEB’s investee companies tend to avoid major social or environmental controversies and do not therefore attract regular shareholder resolutions.
2 https://www.whebgroup.com/investing-for-impact/sustainability-policies1