AResponsible for the 2022 Annual General Meeting (AGM) season, Nasdaq IR Intelligence has analyzed some of the key trends across a selection of the world’s largest asset managers and collected the themes and areas that are likely to receive more great attention during this year’s voting season.
As you might expect, environment, social and governance (ESG) are the subject of particular attention, with the impending climate crisis drawing particular attention to the environmental part of ESG. However, emphasis is also placed on the social and governance domains.
ESG and Compensation
In many of the asset managers we have reviewed, some level of attention to climate risk has been included in guidance and focus areas for 2022 on an annual basis that reflects each company’s business and sector. A key element among asset managers was the link between ESG objectives and performance metrics and executive compensation, and some asset managers go so far as to say that a vote against pay policy resolutions can be warranted if companies do not take ESG factors into account or if compensation disclosure around objectives and progress is insufficient.
Board diversity, like ESG, is unlikely to disappear from the attention of asset managers anytime soon. A diverse board – not just in terms of gender – but a mix of experiences, skills, cultures and nationalities, as well as age and ethnicity, are considered important by most managers assets to contribute to an enriched boardroom and decision-making process. as well as long-term economic results for companies. However, asset managers are aware that changing the composition of the board of directors can take time; if succession planning and future board appointments are done with this in mind, and conversations with governance teams assure asset managers that this is happening, votes in favor are warranted.
Evolution of ESG reporting standards
Better reporting is demanded from asset managers in terms of sustainability, ESG and diversity so that investors can effectively assess KPIs affecting the risk and valuation of the company. Reporting standards in this area are constantly evolving and can be difficult for businesses to manage. From an asset manager’s perspective, more reporting is probably better; reports should be structured, ensuring that the company’s objective and strategy are ESG-focused and evidence-based, and that they include details on opportunities and risks. Data must also be readily available through chosen reports so that it can be viewed and used by an ever-widening audience and new stakeholders who depend on this information.
In summary, while asset managers are focused on several priorities already established this AGM season, progress on key metrics is likely to be expected, particularly from companies that are perceived to be lagging behind by relative to their peers or the market. If asset managers feel that there is little or no indication of a concerted effort to address these topics, votes against relevant resolutions could start to be more frequent.
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