Fashion transition engagement leads Q1 Active Ownership report

How the new ‘Fashion Transition’ engagement theme will play out is the leading item in the team’s report of all its activities in the first quarter of 2024. Also discussed are the engagement themes for tax transparency, water management and the undesirable aspects of console gaming, along with updates on corporate governance and voting activities.

The fashion push, begun in Q1, is being conducted in tandem with the management of a new investment strategy, Fashion Engagement Equities, launched late last year. It is the second Robeco strategy in which all the investee companies are engaged with to improve their environmental, social and governance (ESG) credentials.

It addresses the key ESG concerns with companies from across the fashion and cosmetics ecosystem, including dialogues with fragrance producers, clothing brands and third-party sustainability certifiers. In her report, Danae Motta explains how shifting toward circular operational structures and minimizing unavoidable ESG risks and impacts is key to the engagement.

“We have introduced a new cross-thematic engagement theme opening a dialogue with one of the most polluting, yet often forgotten sectors – the fashion industry,” says Carola van Lamoen, Head of Sustainable Investing, in the introduction to the Q1 report.

“We’ll be looking closely at its social, environmental and strategic management choices, hoping to help define the sector’s sustainable and increasingly circular transition.”

Another new engagement theme, looking at ‘Tax Transparency’, aims to encourage companies to be more transparent on their tax practices. It aims to help investors identify taxation risks and potential adverse impacts to sustainable development globally.

Manuel Sobral outlines how the engagement aims to highlight certain practices such as moving profits to lower-tax jurisdictions and the potential negative impacts if tax income is shifted away from markets where investments are needed in infrastructure, education, or other sustainable development.

“By delving into the complex world of taxation, we aim to bring transparency into an often overlooked part of companies’ ledgers,” Van Lamoen says. “Taxes affect a company’s bottom line, and uncertainties around taxation thus form a risk to profitability. But they are also relevant to funding sustainable development. Investors should carefully assess corporate tax practices to assess all the risks.”

The use of Earth’s most precious resource – fresh water – has been the subject of an engagement theme with heavy industrial users since 2022. One and a half years into the ‘Natural Resource Management’ theme, Sylvia van Waveren reflects on the progress achieved across the chemical, oil and gas, pulp and paper, beverage and utility sectors. With a 50% success rate so far, the article shares key highlights, innovations, and the next steps.

“One and a half years into our engagement with some of the companies that have the highest water intensity, or are exposed to water-scarce regions, we can draw our first conclusions,” Van Lamoen says. “With a 50% success rate so far, and several engagements ongoing, we recognize the growing awareness around water and waste management.”

The risks of gaming addiction, and the abuse often suffered by users and workers alike, was the subject of the ‘Social Impact of Gaming’ engagement theme. As the three-year engagement comes to a close, Alexandra Mortimer reports on how companies have addressed some of the worker harassment among game developers, and agreed to increase transparency on in-game incentives that fuelled uncontrolled higher spending, particularly among the young.

“We have successfully closed 80% of the engagements with some of the world’s largest listed video game publishers successfully, based for instance on gaining added safeguards around children’s time and money spent online, or the adoption of clear diversity and inclusion strategies for their workforce,” Van Lamoen says.

“Lastly, we reflect this quarter on the upcoming changes to the corporate governance rules in South Africa, a country long at the forefront of this vital arena, now using this regulation to address the country’s stark income inequality. And we note a growing threat to minority shareholder rights.”

“On a global level, we are noting a growing threat to minority shareholder rights, with investors having been taken to court for filing on stronger climate commitments and new share classes with higher say hitting the market, requiring investor attention.”

“Meanwhile, building on the expertise gained throughout our long-standing engagements, we are planning to scale up our engagement efforts around climate, biodiversity and human rights over 2024, systematically broadening our clients’ coverage of assets under engagement on these important areas.”