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

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

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Engagement can address market inefficiencies

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Not all meetings are equal

ENGAGEMENT IS NOT

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REGNAN ENGAGEMENT

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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 Urgency Power

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

• f shareholder resolutions

Howard Pender, Research Director

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

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

• RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm

www.accr.org.au hpender@accr.org.au 3

• RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm

www.accr.org.au hpender@accr.org.au 4

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

• RIAA Conference 2016 - Session 1 - Wed 23rd Nov 1:15pm

www.accr.org.au hpender@accr.org.au 6

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

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

A Closer Look at the Impact of Engagement: Leveraging Domestic Excellence on a Global Stage

RIAA Conference Melbourne, Australia 23 November 2016

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Engagement: Domestic Excellence and Global Opportunity

Source: Towers Watson 2014 Global Pension Asset Report and Mercer Global Pension Assets Study 2014

• 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.

Engagement: Domestic is Global

ASX 200 Companies with ESG Controversies Outside Australia (Regional Breakdown)

Low High RISK ASSESSMENT

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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

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

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Engagement: Global Responsibility

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• 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

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For more information please contact:

Catalina Secreteanu Associate Director, Institutional Relations T: (+61) 28015 5651 E: catalina.secreteanu@sustainalytics.com Michael Jantzi Chief Executive Officer T: +1 (647) 317 3647 E: michael.jantzi@sustainalytics.com