Still talking the talk and walking the walk at company AGMs

It follows an attempt by US oil giant ExxonMobil to take two investors to court for asking for more ambitious climate targets. The lawsuit was dismissed last month by a US federal judge who said the case was unnecessary after the climate proposals were withdrawn.

It did though cause huge concern about the ability of shareholders to pursue change at their investee companies, since investors routinely ask companies for action on ESG factors, particularly during the Spring season for company annual general meetings (AGMs).

This was the first time that a company had responded with a lawsuit, setting a new precedent and putting shareholder rights under pressure. However, the main trend is still that companies on the whole are happy to engage with their shareholders about sustainability issues, including climate.

“Many companies remain committed to a constructive exchange with their shareholders, especially around their annual shareholder meetings,” says Peter van der Werf, Head of Active Ownership at Robeco. “This is the avenue that we will continue pursuing, as maintaining a dialogue is obviously the best way forward.”

The ExxonMobil case leads the quarterly report of the Active Ownership team’s voting and engagement activities, including the key proxy voting season. Three engagement themes are highlighted, beginning with the closing of the ‘Labor practices in a post-Covid world’ theme. In her report, Claire Ahlborn reflects on the impact that the theme made in the last three years over which the pandemic has since moved into a distant past.

“The crisis has acted as a wake-up call for many human capital-intensive sectors, as many frontline workers who were laid off became resistant to coming back to work unless labor practices improved, highlighting the financial materiality of having responsible labor practices,” Ahlborn says.

“Food retailers invested heavily in human capital career paths, showcasing progress in the form of internal promotion rates and diversity metrics. Meanwhile, online food delivery companies reviewed delivery algorithms and incentive mechanisms to prioritize less risky routes and allocate more time to delivery, thereby reducing road accident rates.”

After three years of dialogues, engagement with financial institutions has been extended and broadened to include biodiversity, recognizing that climate targets cannot be achieved without also protecting and restoring nature. It’s now called the ‘Climate and nature transition of financials’ theme. Sylvia van Waveren reports on its progress so far.

“The engagements so far show clear regional discrepancies, with EU banks having made significant progress in setting climate targets and financing phase-out plans, while US and Asian banks are taking longer to translate climate ambitions into practice,” Van Waveren says.

Meanwhile, engagements under the Sustainable Development Goals (SDG) theme have started to be reciprocated after a fruitful first two and a half years. Rather than just going along with the changes requested, companies have started to take their own initiative by asking where they can improve.

Alexandra Mortimer reports on how these interactions are developing, particularly in addressing how much impact the engagements are making on the ground, and who they are ultimately serving, among other issues.

“This is taking a cross-fertilizing view as our SDG engagements are nearing the three-year mark,” Mortimer says. “Companies are beginning to reach out to us to receive feedback, showing that the intensive engagement structure of the theme is paying off.”

Finally, the Japanese market is undergoing a significant transformation following the Tokyo Stock Exchange’s new guidance on capital allocation and sustainability disclosures. Ronnie Lim explains how these enhancements around transparency and governance around capital efficiency are already paying off.

“The enhanced disclosure requirements mean that companies must be more transparent about their operations and strategies, which should lead to improved investor confidence and ultimately enhance the global competitiveness of Japanese companies,” Lim says.

“As we enter the second half of 2024, we look forward to picking up new engagement themes and to continue with the strong collaboration and support we have received from our clients.”