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Georgeson Monthly Roundup - August 2021
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Australia - Emerging Governance Trends in 2021 Georgeson released its Emerging Governance Trends 2021. The report explores the trends and insights from the AGMs conducted in the first half of 2021.
With 55 ASX300 companies having presented their full year results and company strategy to shareholders at AGMs between January and June 2021, we saw three key trends emerge, including director elections, remuneration and shareholder activism, especially climate change.
Read the full report here.
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UK & Europe - Georgeson's Daniele Vitale penned an article for Governance magazine on Understanding Investors’ ESG integration.
In this article published in issue no. 323 of Governance, Georgeson's Daniele Vitale reflects on our recent report which analysed the ESG practices of 400 of the largest institutional investors in more than 29 countries.
Read the full article here.
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US - Georgeson's Hannah Orowitz was quoted in Equilar's report on Gender Parity across the Russell 3000.
Discussing the results of Equilar's report Hannah Orowitz is quote saying that "Progressive and ultimately sustained board gender diversity requires that workforce diversity also improves," and that "[t]he focus on workforce diversity as a key issue over the last year has led companies to develop strategies and initiatives to increase diverse representation in senior positions, which will further expand the pipeline of board-ready women."
Read more about it here. For the full report click here.
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US - Georgeson's Hannah Orowitz was featured by practicalESG.com on ESG Integration and the Practices of Institutional Investors.
Discussing the results of a recent analysis carried out by Georgeson on ESG Integration and Institutional Investors, Georgeson's Hannah Orowitz discusses our findings. Amongst other things, the report found that proliferating use of third party ESG data requires careful attention to information and scores published by those data providers.
Read the full article here.
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US - 2021 BDC Roundtable.
Georgeson's Hannah Orowitz will join the 2021 BDC Roundtable co-hosted by Eversheds Sutherland and Small Business Investor Alliance. The forum provides an opportunity for Business Development Company (BDC) executives, fund sponsors, industry service providers and regulators to explore the current environment for BDCs and other alternative fund models.
On-demand sessions will be available in mid-August, and live sessions will be held September 9 & 10.
Register for the event here.
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- The Financial Times reports that Big investors demand annual vote on companies’ net zero plans: https://www.ft.com/content/a1ab86dd-edbc-45f8-a4d0-53f7dc3ccc67 “More than 50 asset managers including JPMorgan and M&G want clearer progress.” Read the full announcement from the IIGCC here: https://www.iigcc.org/news/usd-14-trillion-investors-call-for-consistency-on-corporate-net-zero-alignment-plans/ “’In order for investors to do their job as stewards of capital, companies must establish effective mechanisms to demonstrate their net zero transition plans to shareholders and outline how they will be achieved,’ explains Stephanie Pfeifer, Chief Executive, IIGCC. ‘It is clear that shareholder voting and director oversight is needed to hold companies to account on their commitments to achieving a net zero future.’”
- The Wall Street Journal reports that BlackRock, Other Investors Target Climate Issues, Covid-19 Response and Board Seats in Shareholder Votes: https://www.wsj.com/articles/blackrock-other-investors-wield-growing-board-shareholder-vote-clout-11628766001 “Strength of index-tracking funds sets the stage for future showdowns over issues from director seats to climate-change disclosure.”
- Reuters published an Analysis: Virtually forever? Switch to online AGMs gains pace despite concerns: https://www.reuters.com/business/virtually-forever-switch-online-agms-gains-pace-despite-concerns-2021-08-09/ “A mass corporate switch in Europe to holding virtual annual shareholder meetings or AGMs has picked up pace this year, raising concern among investors that some companies will try to ditch the physical version permanently. The pandemic prompted an overhaul of the way companies meet investors, with those in Britain relying on emergency laws to allow them to hold online AGMs in the 2020 season. But in the second year of the pandemic, there are concerns that permanently virtual meetings could limit investors' ability to hold executives to account. From January through July, 40% of AGMs globally were fully virtual, compared with 27% in the whole of 2020, data from Computershare showed. In continental Europe the jump was particularly high, with 753 of 878 going fully virtual in the first seven months of 2021, compared with 548 of 918 in 2020. The United States did not see the same shift - around half of the 2021 meetings up to July were virtual, a similar proportion to all of 2020.”
- Medium reports on The Secret Diary of a ‘Sustainable Investor’: https://medium.com/@sosofancy/the-secret-diary-of-a-sustainable-investor-part-1-70b6987fa139 “There’s no doubt in my mind that organizing politically to enact aggressive climate legislation is a better route to fighting climate change than buying a low carbon ETF.”
- The Financial Times reports that Prime time for sustainable investing reporting is delayed to 2023: https://www.ft.com/content/bf588832-b9f3-41c7-ab9f-10550a1f98ff “A debacle at PRI risks emboldening ESG’s doubters.” Read the full UNPRI udpate here: https://www.unpri.org/reporting-and-assessment/reporting-framework-pilot-next-steps-for-signatories/8159.article “The development and launch of a new system of this complexity has proven a significant undertaking. We worked very hard to deliver a redesigned pilot for signatories this year. However, it’s clear that we were too ambitious and as a result we were not able to achieve the standard which we should have, and which our signatories expected. […] Given these delays and the extent of the feedback we have received, after careful consideration, we had to make the difficult decision to delay the opening of the next reporting period until early 2023.”
- Market Watch published an Opinion: What happens when companies cater to customers, reward employees and partner with suppliers? Investors profit.: https://www.marketwatch.com/story/what-happens-when-companies-cater-to-customers-reward-employees-and-partner-with-suppliers-investors-profit-11630017619 “CEO pledge may have put shareholders last, but being model corporate citizens is good business.”
- The Financial Times reports that ESG must learn from the tech bubble — returns matter: https://www.ft.com/content/81e04951-b91b-4f40-9253-ebf1bcea18ea “Whether investing on environmental, social and governance (ESG) criteria amounts to a bubble or not, ESG investors should keep sight of their financial objectives.”
- The Wall Street Journal reports that ‘Stakeholder’ Talk Proves Empty Again: https://www.wsj.com/articles/stakeholder-capitalism-esg-business-roundtable-diversity-and-inclusion-green-washing-11629313759 "Two years after signing the Business Roundtable statement, companies still prioritize shareholders."
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Pan-European developments
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- Het Financieele Dagblad reports that Hoekstra onderzoekt trustkantoren vanwege misstanden (“Hoekstra investigates trust offices for abuses”) (in Dutch): https://fd.nl/ondernemen/1408611/hoekstra-onderzoekt-verbod-op-trustkantoren-vanwege-misstanden-jwh1caTAhuTG “In a letter to parliament, resigning minister of finance Hoekstra writes that he is investigating a ban on trust offices due to abuses based on the results of a recent research. He states that he has ‘doubts about the added value of a sector that poses a very high integrity risk and has great difficulty in complying with legislation’. Trust offices have been involved in money laundering and tax evasion scandals in recent years, revealed in the Panama Papers, among other things. A decision about the matter is up to the next cabinet.”
- The AFM issued an Update on the consultation of the new Regulation on Sound Remuneration Policies 2021: https://www.afm.nl/en/nieuws/2021/augustus/uitkomsten-consultatie-beloningsbeleid “The consultation of the Regulation on Sound Remuneration Policies (Regeling beheerst beloningsbeleid Wft 2021 – Rbb 2021) did not result in any changes to the regulation. However, it was clarified after the consultation that the Authority for Financial Markets (AFM) is the supervisor that decides on requests for an alternative arrangement.”
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- La Repubblica reports on Generali: Generali, conti e governance sul tavolo, tra i mal di pancia dei soci (“Generali, accounts and governance on the table, amidst shareholder grievances”) (In Italian): https://www.repubblica.it/economia/finanza/2021/08/02/news/generali_alla_prova_dei_conti_e_della_governance-312703102/ “Today's board meeting, called to approve the half-yearly report, could also discuss the presentation of the board's list, with the reappointment or otherwise of CEO Philippe Donnet, on which the main shareholders are divided. In the meantime, Axa has increased its profits by 180% and the board is reappointing CEO Buberl for the next mandate.”
- Milano Finanza reports on ESG: I 25 titoli più green di Piazza Affari dove si concentreranno gli investimenti (“The 25 greenest stocks in the Italian stock market where investments will be concentrated”) (in Italian): https://www.milanofinanza.it/news/i-25-titoli-piu-green-di-piazza-affari-dove-si-concentreranno-gli-investimenti-202108161232319611 “The ranking was compiled by Refinitiv, the large database recently taken over by the London Stock Exchange group. The low-carbon investment world is already worth $2,243 billion and grew 12% in the second quarter.”
- Radiocor reports on Atlantia: cda approva nuova linee guida su diversita', uguaglianza e inclusione (“Atlantia: Board of Directors approves new guidelines on diversity, equality and inclusion”) (In Italian): https://www.borsaitaliana.it/borsa/notizie/radiocor/finanza/dettaglio/atlantia-cda-approva-nuova-linee-guida-su-diversita--uguaglianza-e-inclusione-nRC_04082021_1834_637149519.html “The document formally commits the company, through objective and periodically measurable parameters, to fostering and promoting a culture of diversity as a founding value of its business model, guaranteeing each employee equal conditions and opportunities, without distinction of any kind with regard to age, sex/gender and gender identity, sexual orientation and opinion, ethnicity/culture, religion, physical and economic condition.”
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- The Deal reports that FTC Enforcers Quietly Expand Scope of Deal Reviews: https://pipeline.thedeal.com/article/28y7uilygcqd8ugzivytc/deal-news/regulation/ftc-enforcers-quietly-expand-scope-of-deal-reviews. “FTC staff continue to inquire about possible harm to consumers or competitors, especially in the form of higher prices that can result from a transaction, a key focus of the standard. But the agency now supplements that line of questioning with inquiries about impacts on jobs, equality, women, minorities, small- and medium-sized businesses, and environmental, social, and corporate governance[…]”.
- TheCorporateCounsel.net reports the SEC Rejects NYSE’s Proposal to Shed Responsibility for Proxy Distribution Fee Schedule: https://www.thecorporatecounsel.net/blog/2021/08/sec-rejects-nyses-proposal-to-shed-responsibility-for-proxy-distribution-fee-schedule.html. “Yesterday, the SEC issued this order to disapprove the proposed rule change. The order basically says the NYSE is doing too good of a job here, and it bears the burden of showing that a change to the status quo would still allow issuers’ interests to be continued to be fairly considered.”
- The SEC Enhances Access to Financial Disclosure Data: https://www.sec.gov/news/press-release/2021-159. “The SEC is releasing for the first time Application Programming Interfaces (APIs) that aggregate financial statement data, making corporate disclosures quicker and easier for developers and third-party services to use. APIs will allow developers to create web or mobile apps that directly serve retail investors.”
- CorporateSecretary reports ESG keywords on the rise in corporate event transcripts: https://www.corporatesecretary.com/articles/shareholders/32677/esg-keywords-rise-corporate-event-transcripts. “As the importance of ESG continues to grow for investors, issuers are ramping up their inclusion of certain key ESG words and phrases in corporate events, according to analysis of transcripts by Sentieo. In June of this year, there were 1,200 transcripts with mentions of ESG during conference calls – the largest number on record. This was a 216.6 percent increase on same month in 2020, when ESG appeared in 379 transcripts.”
- IR Magazine reports that US issuers still split on ESG standard and framework preferences, study finds: https://www.irmagazine.com/esg/us-issuers-still-split-esg-standard-and-framework-preferences-study-finds. “Half of US public companies say that third-party ESG standards are difficult understand, address immaterial information and lack transparency, according to a report by the US Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC).”
- Reuters reports Robinhood to buy fintech firm Say Technologies for $140 million: https://www.reuters.com/article/us-say-tech-m-a-robinhood/robinhood-to-buy-fintech-firm-say-technologies-for-140-million-idUSKBN2FB19K. “Robinhood Markets Inc said on Tuesday it would buy fintech startup Say Technologies for $140 million in an all-cash deal, weeks after the online brokerage’s stock market listing. New York-based Say, founded in 2017, has built a communication platform that crowdsources questions from retail investors and allows them to interact with the companies they invest in during annual meetings, earnings calls and other events. Say also offers shareholders proxy-voting and polling services.”
- Financial Times reports T Rowe Price incoming chief vows to prioritise impact investing move: https://www.ft.com/content/d8974822-2a98-4652-b9b4-1a69159bd682. “When Rob Sharps, T Rowe Price’s group chief investment officer, takes over as the company’s chief executive in January, he will be taking the reins at a time when the manager is seeking to further define its impact investing framework and roll out a new slate of fixed-income ETFs.”
- IR Magazine reports that Gensler expects climate disclosure proposal by year-end: https://www.irmagazine.com/regulation/gensler-expects-climate-disclosure-proposal-year-end. “SEC chair Gary Gensler has given issuers a heads up on when they can expect to see the agency’s plans for requiring companies to report on climate risk and what that may entail. In remarks to the Principles for Responsible Investment last week, Gensler said he has asked the SEC staff to develop a mandatory climate risk disclosure rule proposal by the end of the year. He outlined elements he wishes to see in such disclosures, including that they are consistent and comparable.”
- The Wall Street Journal reports that Nasdaq’s Board-Diversity Proposal Wins SEC Approval: https://www.wsj.com/articles/nasdaqs-board-diversity-proposal-faces-sec-decision-11628242202. “In an order released Friday afternoon, the Securities and Exchange Commission agreed to Nasdaq’s proposed rule changes. But in a sign of the political divisions over the proposal, the SEC’s two Republican commissioners registered their opposition, with one voting against the decision and the other giving only partial support. Under the proposal, Nasdaq-listed companies would need to meet certain minimum targets for the gender and ethnic diversity of their boards or explain in writing why they aren’t doing so.”
- The Financial Times reports that Exxon plans no ‘huge shifts in strategy’ after losing board fight: https://www.ft.com/content/52bd680a-696f-4d06-a019-954e2fd0b628 “US oil supermajor and rival Chevron report billions in profits as energy prices rise.”
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- The Securities and Futures Commission (SFC) published its latest Quarterly Report: https://www.sfc.hk/-/media/EN/files/COM/QR-Reports/202104-06/0SFC-Quarterly-Report-AprJun-2021.pdf which summarises key developments from April to June 2021. During the quarter, the SFC provided asset managers with further guidance on disclosures for environmental, social and governance funds, especially those with a climate-related focus, to help investors better understand these products and combat greenwashing (Note 1). In July, Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group, co-chaired by the SFC and the Hong Kong Monetary Authority, announced the next steps in its collaborative strategy to transition the financial ecosystem towards carbon neutrality.
- SCMP reports that Attitudes towards sustainable investing are changing in Asia, family office leaders say: https://www.scmp.com/business/banking-finance/article/3145444/attitudes-towards-sustainable-investing-are-changing-asia Younger generations and public pressure are helping to drive change in portfolio construction. Momentum is growing among public and private investors for impact and sustainable investments.
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- Bloomberg reports that ESG funds in China are outperforming the broader market amid an equity rout, as fresh inflows into sustainable assets across Asia boost returns: https://www.bloomberg.com/news/articles/2021-07-28/china-esg-funds-sidestep-stock-market-sell-off-on-fresh-inflows "Exchange-traded funds that invest in renewable energy, electric vehicles and other green assets have posted gains as high as 35% this year, even as China’s benchmark index declines amid government crackdowns on the technology, education and real estate sectors. Across Asia, ESG funds are also outperforming the main benchmark as money continues to flow into environmental and sustainable themes."
- Reuters reports that U.S. SEC says Chinese IPO hopefuls must provide additional risk disclosures: https://www.reuters.com/business/finance/exclusive-us-regulator-freezes-chinese-company-ipos-over-risk-disclosures-2021-07-30/ "The U.S. securities regulator will not allow Chinese companies to raise money in the United States unless they fully explain their legal structures and disclose the risk of Beijing interfering in their businesses, the agency said, confirming an exclusive report by Reuters."
- Financial Times reports that China to tighten competition rules for internet groups: https://www.ft.com/content/7ccf409d-489b-411a-8b4f-4b5d8b8ed0b1?segmentId=933f0c4f-25db-597a-cd3a-423ed8ffe012 "The State Administration for Market Regulation, China’s antitrust watchdog, released draft rules on Tuesday that banned unfair competition among internet companies and could come into force this year."
- Pension and Investments reports that Beijing’s regulatory moves reflect China’s ESG goals: https://www.pionline.com/esg/beijings-regulatory-moves-reflect-chinas-esg-goals "Investors looking to boost their exposure to mainland stocks would do well to take a crash course in ESG with Chinese characteristics."
- Proxy Insight (https://www.proxyinsight.com/) reports that Blackrock’s recent letter to the China Securities and Regulatory Commission (CSRC), "welcomed" CSRC's decision to encourage Chinese-listed companies to voluntarily disclose their environmental data but noted that "at present, the quality of sustainability reports or corporate social responsibility reports in China varies." In order to ensure such disclosure is comparable, BlackRock recommended companies voluntarily disclose their short- and medium-term carbon reduction targets, in addition to any "carbon reduction initiatives undertaken during the last reporting cycle."
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- FS Sustainability reports that Gender pay gaps “sabotage” diversity, profits: UniSA: https://www.fssustainability.com.au/gender-pay-gaps-sabotage-diversity-profits-unisa “A study from the University of South Australia found that in Australia, executive men receive salaries 30-35% higher than women.”
- The Australian Financial Review reports that Woodside loses out to BHP on ESG: https://www.afr.com/policy/energy-and-climate/woodside-edges-to-left-as-bhp-basks-in-esg-glow-20210818-p58jrd “The proposed merger between Woodside and BHP ‘will increase the weighting of oil in Woodside’s expanded portfolio compared to lower-carbon gas, while for BHP, exiting from petroleum is clearly positive from an ESG standpoint and could open the stock up to a broader investor base.’”
- FS Sustainability reports that Companies have duty to act on climate conclusions of IPCC report: https://www.fssustainability.com.au/companies-have-responsibility-to-act-on-conclusions-of-ipcc-report The latest IPCC report highlights the need for urgent action in Australia to transition to net-zero emissions. “Companies have an obligation and a capacity to be planning for more risk of physical risks of climate change now, and the pathways to achieve sufficient decarbonisation to cap global warming to less than 2°C have also moved.”
- UniSuper released an updated report titled, Climate risk and our investments: https://www.unisuper.com.au/-/media/files/investments/climate-risk-and-our-investments-2021.pdf "The super fund and Chief Investment Officer John Pearce undertake to explain the approach and progress on the decarbonisation of their portfolio: “Our look-through exposure to fossil fuel exploration and production represents only 0.4% of our total funds under management.”
- ACSI released the annual Promises, Pathways and Performance climate change disclosure report analysing the carbon commitments of the ASX200: https://acsi.org.au/wp-content/uploads/2021/08/Climate-Change-Disclosure-in-ASX200.Aug21.pdf “ACSI CEO Louise Davidson said the fact that corporate Australia has more than doubled its net zero commitments shows that many companies are adapting to a low carbon future.”
- The Australian Financial Review reports that ESG makes business sense in tackling tomorrow’s problems today: https://www.afr.com/companies/energy/esg-makes-business-sense-in-tackling-tomorrow-s-problems-today-20210812-p58i9p “Addressing climate change is an enormous investment opportunity that could create many winners among governments, businesses and individuals.”
- The AFR report, Worley, Princeton plot ‘radical rethink’ for net zero: https://www.afr.com/companies/mining/worley-princeton-plot-radical-rethink-for-net-zero-20210802-p58f1r “A major report released by Worley and Princeton University estimates the cost of “tens of thousands of new assets” required to reach net zero by 2050 at up to $US12 trillion ($16.33 trillion) for the US alone.”
- The Guardian reports, Melbourne student and climate activist runs for board seats at energy giant AGL: https://www.theguardian.com/australia-news/2021/aug/16/melbourne-student-and-climate-activist-runs-for-board-seat-at-energy-giant-agl “Ashjayeen Sharif, from Melbourne, wants the company to phase out its “dirty coal-burning power stations” by 2030 and replace them with 100% renewable energy.”
- The Sydney Morning Herald reports that Santos hit with climate lawsuit over ‘net zero’ claims: https://www.smh.com.au/business/companies/santos-hit-with-climate-lawsuit-over-net-zero-claims-20210826-p58m79.html “Oil and gas giant Santos has been hit with a lawsuit over allegedly misleading and deceptive claims about its environmental credentials, including that the company has a clear plan to achieve net zero emissions by 2040 and that natural gas is a ‘clean fuel’.”
- The NBR report, Director fees jump as time spent on board matters falls: https://www.nbr.co.nz/story/director-fees-jump-time-spent-board-matters-falls?utm_medium=email&utm_source=Heads%20Up “After flatlining in 2020 due to Covid, median director fees had their sharpest annual rise in seven years, while directors are spending less time on board matters than they did in 2019.”
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Daniele Vitale
Georgeson
Head of Governance UK & Europe > Corporate Advisory
daniele.vitale@georgeson.com
T +44 (0)20 7019 7034 M +44 (0)7747 697 136 F +44 (0)870 702 0158
Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom
www.georgeson.com
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