Our bi-weekly spotlight explores key ESG-related market developments and their implications for corporates and investors.
ESG in the News
At least half of BlackRock’s largest clients have signed the UN Net-Zero Alliance or have made public commitments to sustainability and emissions reduction. Clients’ increasing focus on decarbonization has prompted BlackRock over the last three weeks to launch the largest range of climate-focused ETFs as part of a long-term trend to offer sustainable versions of core products. The new funds bring the total number of globally available iShares sustainable ETFs to more than 150, with $149.1 billion in assets.
- Teneo Takeaway: Sustainability-linked funds continue to proliferate as ESG investing gains traction with investors. This new evolution of climate and net-zero-focused strategies may impact access to capital for companies at the leading or lagging end of emissions reduction initiatives.
The SEC passed a rule requiring universal proxy cards, which include both dissident and management nominees on one proxy ballot for investors to choose from in proxy contests. Consequently, investors will have the opportunity to vote on a mix of management and dissident candidates, which they currently cannot do unless they vote in person at a shareholder meeting. The rule will go into effect for shareholder meetings held on or after August 21, 2022.
- Teneo Takeaway: The new rules confer more significant rights to shareholders without any minimum ownership requirements – and are likely to reshape how hostile bidders, activist investors, and other dissident shareholders can influence control and policy at public companies through director elections.
Proxy advisor Glass Lewis has released its policy guidelines for 2022. Amid several changes on the ESG landscape, the firm also released guidance for ESG-related matters. Specifically, these guidelines clarify its approach to assessing management and shareholder-sponsored Say on Climate proposals. Glass Lewis also codified its approach to shareholder proposals, which requests that companies lower the threshold required to initiate written consent. In the UK, Glass Lewis has updated board diversity policies to reflect expectations that FTSE 100 companies appoint at least one minority director.
- Teneo Takeaway: ESG is likely to play a larger role in annual meetings and proxy votes. Glass Lewis’ policy update reflects those of its closest competitor, ISS, whose annual survey found that nearly all investors (86%) wanted the proxy advisor’s climate policy to align to net-zero goals.
PowHer Redefined published PowerHer: Women of Color Reimagining the World of Work, a report based on the experiences of 1,500 professional women by Nformation and the Billie Jean King Leadership Initiative. The report found of the women of color (WOC) surveyed, 61% said that they’re not satisfied with their advancement, 70% reported having to “prove themselves over and over again,” and 92% said that companies must establish specific goals for hiring and promoting WOC into influential positions. Executives surveyed reported that women of color compete with other WOC for a seat at the table and consider this problem to be systemic.
- Teneo Takeaway: The report highlighted some opportunities for improvement, including investing in and focusing on retaining WOC talent, transparency in compensation and commitment to pay equity, and providing timely and constructive feedback as part of talent development.
Earlier this week, Forbes released its inaugural Green Growth 50 list, using emissions data from Sustainalytics and financial data from FactSet. The list focuses on U.S. companies with market caps greater than $5 billion that started with more than 100,000 tons of carbon dioxide equivalent emissions in 2017 and have since successfully reduced their emissions while growing profitability (as measured by an absolute increase in net income or operating income from 2017-2020). Aptar, which makes containers for consumer goods, foods, and cosmetics, took the no. 1 spot on the first Green Growth 50.
- Teneo Takeaway: These companies have undertaken greener business models in response to consumer demand, highlighting the power of stakeholders to spur sustainable businesses.
They Said It: ESG Influencers Speak Out
Huw van Steenis, Senior Advisor to the CEO of UBS and a former advisor to Mark Carney, wrote in the Financial Times: “Better data will also enable greater engagement or activism. Some of the most polluting assets are being taken private without any reduction in real world actual emissions. This is simply ‘paper decarbonisation’. Investors will need better data and comparable metrics if they are to hold boards accountable. And critically, investors will also need to rethink the playbook of an inflation-protected and diversified portfolio.”
Looking Ahead: Upcoming ESG Events
- ESG in Fixed Income Mega-trends, Environmental Finance (Virtual) – 18 November
- Global Reporting Initiative, GRI Summit (Virtual) – 18 November
- How is climate change influencing investment strategies and what is net zero?, FTSE Russel (Virtual) –15 November
- ESG Integration Forum, IR Magazine (Virtual) – 1-2 December
- 2021 Growth & ESG Conference, BMO Capital Markets (Virtual) – 7-8 December
- AICPA & CIMA ESG Online Conference, AICPA (Virtual) – 13 December