Comment by Abbie Curtis for February / March CCB 116
This edition comes in the run up to the AGM season as institutional investors on both sides of the Atlantic get ready to exercise their shareholder rights over companies. The stories here highlight a recent surge of investor demands during this period for greater disclosure regarding social, environmental and governance (SEG) issues.
Large institutional investor groups, Allianz Group, Aviva Investors and the Co-operative Group among others, representing trillions of dollars worth of assets, have been urging companies for increased disclosure of water usage and carbon emissions. The same groups have also signed a request for stock exchanges to require non-financial reporting as part of the listing rules for companies, alongside existing regulations on corporate governance and financial reporting.
These demands by investor groups for greater transparency on SEG issues are driven by a desire for the share price to more accurately reflect the full value of a company and account for potential risks presented by SEG factors. This is a step change from traditional socially responsible investment where investments were targeted or avoided according to their SEG credentials. It highlights a mainstreaming of responsible investment, where SEG factors are considered alongside financial risks and opportunities.
These proactive investor groups, primarily led by the needs of pension funds, have realised that long term optimisation is key and that open and responsible businesses are better placed to provide long term sustainable wealth creation. As a result, they’re making demands on companies and stock exchanges to provide the information they need to pick winners.
This is not a case of moral imperatives triumphing over financial drivers. Rather it is the sensible conclusion that sustainable long term profit requires responsible and transparent business. Responsible investment has moved into the mainstream and looks like it’s here to stay.
Abbie Curtis has an MSc in Business & Community. She is currently on an internship at Corporate Citizenship.
Responsible Investment
Water issues a growing investment concern
The Carbon Disclosure Project (CDP) has announced a surge of investor support for corporate disclosure on water issues in 2010. CDP makes annual requests to the world’s largest companies for information on their water usage, as well as on their carbon emissions. This year, 354 institutional investors signed the Project’s request for water information, up from 137 in 2010, a rise of over 150%. This support represents assets worth a total of $43 trillion. Some of the institutional investors that are signatories to the CDP’s water information requests include Allianz Group, Aviva, BBVA, HSBC Holdings plc, ING and National Australia Bank. The request for disclosure was sent to the 400 most water intensive companies from the FTSE Global 500.
Investors attack corporate support of US Chamber of Commerce
US investor organizations representing assets of around $43 billion have urged 35 companies serving on the Board of the US Chamber of Commerce to evaluate their role on the Board and to assess the risks and benefits of Board membership. Open letters were sent to the CEOs of companies including Accenture, IBM, Pepsi and Pfizer, led by Walden Asset Management. Letters highlighted criticism against the Chamber for its “obstructive” positions on climate change, healthcare, gender equality, financial reform and most recently, for its partisan political spending. Letters attacked an apparent “misalignment” between companies’ sustainability commitments and their support of the Chamber’s policies. In recent years Nike, Apple, Exelon and PG&E, among others, have withdrawn support for the Chamber over its climate change position.
Energy companies see 50% increase in climate change resolutions
The 2011 US proxy season sees 66 shareholder resolutions related to climate and energy filed with 41 different oil, coal and power companies. This is 50% above last year’s figures as 44 resolutions were filed in 2010, with 31 energy companies. The total number of climate-related resolutions filed against all US companies in 2011, however, comes to 96, below the 101 filed last year, according to Ceres’ Investor Network on Climate Risk (INCR). This year’s resolutions cover a wide range of issues including the risks and opportunities around water scarcity, palm oil sourcing, greenhouse gas emissions, renewable energy, US hydraulic fracturing and Canadian oil sands extraction. According to INCR, investors have also filed 11 resolutions requesting that executive compensation be directly linked to sustainability metrics.
Contact: Ceres’ Investor Network on Climate Risk www.incr.com
Investors appeal to stock exchanges for non-financial reporting requirements
Non-financial corporate reporting is the subject of a recent letter from 24 institutional investors to 30 of the world’s largest stock exchanges. Investors including Aviva Investors London, Allianz Global Investors Investments Europe and the Co-operative Asset Management, totaling a value of over $1.6 trillion, have appealed to stock exchanges to amend their listing rules to make sustainability reporting mandatory. Letters further proposed requirements for companies to consider how responsible and sustainable their business model is and to put forward-looking sustainability strategies to the vote at AGMs. Aviva Investors state that the purpose of the proposed requirements would be to “create the right kind of discussions within the boardrooms of listed companies around the world, and then between the company and its shareholders”.
New Journal of Sustainable Finance & Investment launches
A new academic journal has been launched, focusing on sustainable investment. The Journal of Sustainable Finance and Investment, launched by Earthscan, is the first of its kind and provides a broad debate on the role of investment and financial markets to sustainability. The peer-reviewed Journal gives interdisciplinary perspectives on sustainable and responsible investment from both academics and reflective practitioners.
Nearly 40% of Novartis shareholders vote against board pay
Giant pharmaceutical company Novartis hosted the first Swiss say-on-pay at its AGM on 22 February and saw 38.3% of shareholders oppose current levels of board remuneration, 0.7% abstain from voting and 61% of investors approve. This year is the first time most Swiss investors have been able to vote on board level pay, after Swiss investors recently campaigned to have an advisory say-on-pay vote. That campaign and the latest at Novartis have been led by Ethos, the Geneva-based Swiss Foundation for Sustainable Development, which looks after over CHF2.3billion (€1.4billion) in assets for more than 100 pension funds and foundations.
French investment group PhiTrust ActiveInvestors has filed a tar sands-related resolution with oil giant Total, which it says is the first of its kind to be filed with a French company. PhiTrust, an asset management firm, is putting the resolution forward in partnership with Greenpeace France and US campaign group the Natural Resources Defense Council. Total is set to hold its AGM in Paris on 13 May.
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