The quarterly showcase of the team’s activities also include a lookback at another lively corporate AGM season and their moonshot awards, physical resilience to climate change, and connecting engagement with results in a Robeco investment portfolio.

The report begins with a report of a roundtable that Robeco convened in Brussels together with the collaborative group Investor Policy Dialogue on Deforestation (IPDD), focused on implementing the EU’s Deforestation Regulation. While deforestation remains a critical risk for investors and companies, the EUDR has undergone adjustments following its postponement and review.

“Managing deforestation risks is something that is closely aligned to the key priorities in our Climate and Nature Transition Plan,” says senior engagement specialist Laura Bosch Ferreté. “We were pleased to provide constructive feedback to encourage the timely implementation of the regulation without losing any of its force.”

Amid the continuing litigation risks emanating from the US, fewer resolutions were made during the traditional Spring AGM season. However, it was positive to see climate change still on the agenda in Europe, while Asia tries to improve governance, and with it, their valuations.

“Overall, shareholder engagement remains strong amid diverging governance standards worldwide,” says Head of Voting Michiel van Esch. “But some things never change, as seen in the moonshot awards¹ appearing on both sides of the Atlantic that shareholders need to remain vigilant about.”

Climate change continues to present physical risks from storms, floods and fires, but many companies remain unprepared for both the direct and indirect effects of global warming, such as water scarcity and disruption to supply chains.

“Avoiding the growing physical risks of climate change amid global warming is a growing issue,” says engagement specialist Harry Ashman. “The engagement approach in the new Physical Resilience theme focuses on high-risk sectors such as utilities and food, seeking better risk assessments and actions, while addressing challenges in modeling, disclosure and long-term planning,” adds engagement specialist Alexandra Mortimer.

Dedicated followers of fashion will know that the industry has come a long way from the dark days of factory collapses, but it still has notoriously poor standards for sustainability.

“We believe that deeper change requires integrating sustainability into commercial practices, with a new focus on companies driving systemic impact,” says senior engagement specialist Danae Motta. “Many new industry initiatives have been launched, but with work still needed, particularly on living wages. It’s a marathon, not a sprint.”

Overlapping transitions that are climate, socially or geopolitically related have consequences for companies not keeping up with events, particularly in not allocating capital in areas such as energy efficient.

“Companies need to walk the walk and not just talk the talk when it comes to taking action on transition issues such as climate, particularly when they have social or political repercussions,” says senior engagement specialist Ana Victoria Quaas. “Our SDG Engagement program has been helping investors distinguish between execution and rhetoric.”

Finally, a wave of high-profile stock market debuts has raised concerns over unusual governance arrangements that concentrate power in founders’ hands, or limit shareholder rights. However, regulators have been relaxing listing rules, amid a shortage of new IPOs coming to the market, rather than seeking to strengthen them.

“No company can survive long-term without investor confidence, particularly at the very start of their stock market journeys,” concludes senior engagement specialist Diana Trif. “Yet, IPOs have often highlighted poor governance that derails trust from the beginning. As regulators relax rules amid a listings drought, Robeco will continue to press for high governance standards, allowing some flexibility, but opposing any weakening of investor protections.”

Footnote

¹Moonshot awards in executive pay are high-risk, ultra-high value compensation packages that promise tectonic payouts to corporate leaders, but only if the company achieves groundbreaking financial or operational milestones.

*Robeco focuses its engagement efforts based on an analysis of financial materiality. Robeco selects three to five new engagement themes every year, and for any given engagement theme, a number of companies are selected that have the most exposure to the engagement topic. These companies are not necessarily part of this portfolio and the impact of engagement is limited on fund level. Information with regard to Robeco’s Stewardship approach and guidelines can be found at docu-stewardship-approach-and-guidelines.pdf.