RIAA 2016: Corporate Engagement A closer look at the impact of - PowerPoint PPT Presentation

RIAA 2016: Corporate Engagement – A closer look at the impact of engagement v

Engagement can address market inefficiencies v

Not all meetings are equal ENGAGEMENT IS NOT REGNAN ENGAGEMENT  ☓ ☓ ☓  ☓ ☓  ☓  ☓ v

Private Engagement – Research Evidence Ferraro, F and Beunza, D, Why Talk? A Process Model of Dialogue in Shareholder Engagement http://www.unpri.org/viewer/?file=wp-content/uploads/Ferraro- and-Beunza-2014-Why-Talk.pdf

Investors as a stakeholder Legitimacy Power Urgency Mitchell, R., Agle, B. and Wood, D. 1997. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. The Academy of Management Review, 22 (4), pp. 853-886

Contacts

Corporate engagement – the what, why, when, who and how of shareholder resolutions Howard Pender, Research Director RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 1 hpender@accr.org.au

RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 2 hpender@accr.org.au

• • • • • RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 3 hpender@accr.org.au

• • • RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 4 hpender@accr.org.au

• • • . RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 5 hpender@accr.org.au

• • RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 6 hpender@accr.org.au

RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 7 hpender@accr.org.au

RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm www.accr.org.au 8 hpender@accr.org.au

A Closer Look at the Impact of Engagement: Leveraging Domestic Excellence on a Global Stage RIAA Conference Melbourne, Australia 23 November 2016

Engagement: Domestic Excellence and Global Opportunity  Australia has the 4th largest pool of pension assets globally, is the fastest growing pension market in the world (by aum), and is the third largest fund management industry globally.  Australian pension funds are the most domestically focused after U.S. managers  Currently, Australian institutional investors allocate their funds to international equities and domestic equities equally.  In the next 10 years, the allocation to global equities of Australian Super Funds is expected to increase to 60 percent.  If this holds true, engaging more on ESG issues globally will become even more important in the future. Source: Towers Watson 2014 Global Pension Asset Report and 2 Mercer Global Pension Assets Study 2014

Engagement: Domestic is Global ASX 200 Companies with ESG Controversies Outside Australia ( Regional Breakdown) RISK ASSESSMENT Low High 3

Engagement: Global Opportunity  Shareholder Director Exchange  Protocol offers a framework for shareholder-director engagement  100 proxy statements found 28 companies disclosed a process for shareholder engagement with the company’s directors— two of those specify they endorse the SDX Protocol.  Task Force on Climate-Related Financial Disclosures  Developing voluntary, consistent climate-related financial risk disclosures so companies can provide information to investors  The Task Force plans to deliver its recommendations to the FSB at the end of December  European Commission Shareholder Rights Directive  Aims to encourage long-term shareholder engagement  Association of Member Nominated Trustees  Drafted best practice voting instructions across E, S and G  Japan Financial Services Agency – Stewardship Code  Promotes the sustainable growth of companies through investment and dialogue  GPIF – Global Assets Owners’ Forum 4 Source: PwC Director Shareholder Engagement Report

Engagement: Global Responsibility  Although it’s too early to know how the new U.S. Administration will behave, we can make some educated guesses.  The initial market reaction is not “ESG - friendly”:  Peabody Energy’s (NYSE: BTU) shares rose by 58.5% the day after the election (and continued to climb thereafter)  Energy stocks such as BP, Chevron and Exxon Mobil also traded upward subsequent to the election  Probable rolling back or softening of ESG/sustainability-related initiatives/agreements:  Paris Agreement  Clean energy initiatives  Renewed focus on key investor-focused legislation and agencies (with possible negative ESG implications):  Securities and Exchange Commission (SEC)  Financial Choice Act 5

Engagement: Global Responsibility  Securities and Exchange Commission (SEC)  Any reduction in its appropriations will hit the SEC’s enforcement program  There may be a change in its authority to pursue cases in administrative hearings outside of federal court  Subpart 400 of Regulation S-K  A significant amount of proxy research is derived from the disclosure required under this regulation  Could affect disclosures related to ESG information as well  Financial Choice Act  Congressman Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, has said “I will not rest until Dodd - Frank is ripped out by its roots and tossed on the trash bin of history”  It will not just roll back Dodd Frank - a handful of provisions could render the SEC’s ability to conduct rulemaking much more difficult  Some commentators believe the Act could neuter the so-called “independent” federal agencies that govern the U.S.’s financial institutions and markets 6

For more information please contact: Michael Jantzi Catalina Secreteanu Chief Executive Officer Associate Director, Institutional Relations T: +1 (647) 317 3647 T: (+61) 28015 5651 E: michael.jantzi@sustainalytics.com E: catalina.secreteanu@sustainalytics.com Amsterdam | Boston | Brussels | Bucharest | Frankfurt | London | New York City | Paris | Singapore | Sydney | Timisoara | Tokyo | Toronto| Washington