As the season for annual general meetings (AGMs) approaches, he says investors including Robeco are ready to use their powers to oppose non-climate friendly policies, including votes against the reappointment of directors.
“For companies that are poorly addressing climate risk, we will also hold the board accountable by voting against either the chairman of the board, the chairman of the sustainability committee and the report and accounts,” Van Esch says.
“Investors with their own mandates to decarbonize portfolios are increasingly declining to ‘rubber stamp’ normally routine AGM business. This is a practice we began last year.
“We developed a framework to assess where we support shareholder resolutions on climate change mitigation and where we don’t. But it continues to be a moving target, as the expectations for companies to decarbonize are becoming more demanding.”
One way that investors can seek change is through shareholder resolutions asking for some aspect of the company’s business to be improved. If enough shareholders support the resolution, the company comes under pressure to adopt it.
“We voted in favor of 70% of environment-related shareholder proposals last year, since we are generally very supportive of shareholders using their rights to drive progress on climate,” Van Esch says. “But there are some conditions for our support.”
“We would normally support any resolution asking for risk mitigation analysis, a request for a strategy on climate, and any reporting based on the guidelines from the Task Force for Climate-Related Financial Disclosures.”
“However, it is important to bear in mind that proposals should be aimed at supporting a company in taking its next steps in the climate transition. Proposals that seek to ban the use of so-called transition fuels, or in certain conditions would emphasize an absolute target over an intensity targets, could actually be counter-productive.”
It’s also important to note that many companies deserve praise for taking their own initiative in decarbonizing, Van Esch says. “When considering a resolution, we also take a company’s own performance and plans into account, including its responsiveness to engagement, the concreteness of its climate program, and quality of reporting,” he says.”
“For companies that do very well on these aspects, their own plan actually might be better than what is proposed via a shareholder request.”
“Another interesting development is that we’ve seen a management proposal asking for shareholder support on its climate strategy, a so-called ‘say on climate’. We welcome such management proposals and hope to see them on agendas more routinely.”
The issue of women on boards is another issue of concern for shareholders. Many studies show that companies with more women in senior management positions are actually more profitable, making it a financially material subject.
“We believe that diversity can help incorporate a variety of perspectives on key board topics,” Van Esch says. “Therefore, we will vote against the chairman of the company’s Nominating Committee if the board has not sufficiently addressed diversity.”
“For most markets, some form of soft law or guidance is in place for board gender diversity, and votes against can be triggered if companies do not meet a target of having 30% gender diversity. In markets where there is no such guidance, votes against are triggered if there is no gender diversity at all at the board level.”
“In general, we will support shareholder proposals that aim to improve a company’s nomination policies to leverage the benefits of diversity beyond gender and to promote a culture of inclusion.”
And then there is the traditional AGM staple: the thorny issue of executive pay, particularly when it doesn’t tally with the company’s performance in the prior year. Robeco assesses remuneration proposals based on four things. These are the structure of the pay plan; the degree to which pay is aligned with performance; the transparency and accountability of the board over the issue; the inclusion of relevant sustainability aspects, and how appropriate the amount of pay is for the organization.
“There is always plenty of attention for remuneration plans, but in the 2021 AGM season (much like last year) there are a couple factors that are going to make it more interesting,” Van Esch says.
“First of all, there will be much more engagement with EU companies because of the amendment to the Shareholder Rights Directive (SRD II) requiring more frequent shareholder approval of compensation plans. Our engagement on executive remuneration is going to be closely aligned with our expectations when we vote on these topics.”
“Companies that do not meet investor expectations on remuneration will probably have to do much more consultation on the topic in the coming years – we already see that happening now,” Van Esch says.
Another complicating factor is the Covid-19 crisis. “Many companies have had to make difficult decisions, on cost cutting, capex spending, letting people go, requesting or accepting state aid, and cancelling dividends,” Van Esch says.
“So, what is an appropriate remuneration package for executive management in this context? Theoretically, most remuneration policies would reward management with higher pay when performance is strong, and lower pay out when things are looking down. In practice, such mechanisms can have design flaws that pay well when the sky is the limit but do not adjust in a downturn.”
“That is something we will look out for this season, especially in relation to any Covid-19-related impacts on the company.”
当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。
商号等： ロベコ・ジャパン株式会社 金融商品取引業者 関東財務局長（金商）第２７８０号
加入協会： 一般社団法人 日本投資顧問業協会