Policy Survey 2024: ESG Issues

(MENAFN- EIN Presswire) This post provides an overview of a section of Glass Lewis' 2024 Policy Survey, conducted to inform their annual“benchmark” policy guideline updates.

In Spain and Switzerland, companies are now required to prepare a report on non-financial matters (i.e., environmental, social, and employment-related matters, respect for human rights, and anti-corruption) on an annual basis, and submit that reporting to a shareholder vote.

Across the board, investors were more likely to consider voting against, with expectations particularly higher regarding the timeliness, completeness and/or quality of reporting.

Many non-investors offered a different view:

There appear to be different approaches to non-financial reporting based on geography. Whereas 12% of North American investors would never consider voting against a company's non-financial reporting under any circumstances, no investors from other markets provided this response. There was a similar gap between non-investors, 30.9% for North Americans and 10.2% for other markets.

Adopting a B Corporation structure certifies that a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.

Among both investors and non-investors, the most popular response was that adopting a B corporation form is unnecessary, as companies are already able to consider stakeholders and environmental factors; however, this only accounted for roughly four in ten investors, vs a majority of non-investors. Investors were more likely to respond that boards should take whatever corporate form they deem appropriate (32.4% vs 14.5% among noninvestors). There was a notable geographic split among investors, with respondents from outside North America more likely to be open to the B corp form (66.7%, vs 46.3% among North American investors).

A majority of both investors and non-investors either find it reasonable for all companies to retain the same external audit firm to provide both financial and sustainability assurance, or don't think it matters (58.3% of investors, vs 54.4% of non-investors).

Investors were nearly three times more likely to view it as acceptable for a transition period, but generally prefer separate auditors (29.2%, vs 10.6% among non-investors).

Of the minority of investor respondents who do not currently evaluate climate transition strategies when making decisions on director elections, roughly a quarter indicated that they plan to begin doing so in future. Among those that answered“Yes”, there were a range of approaches. Some look at the overall quality and robustness of the company's climate strategy and reporting, but many cited more specific factors (see below).

Several commented that they only apply climate transition considerations to director voting at certain companies, assessed either sector-by-sector, based on the Climate Action 100 list, or on an ad hoc basis. Another consideration is engagement; many investors stated that they only turn to director voting if the company has not been responsive to discussions on the topic. For example:

Some were more specific about their voting policies.

While there were substantially fewer responses from non-investors on this proxy voting-centric question, some did share their comments. For example, a U.S. non-investor opined that:

There was a notable geographic split on investors' approach to Say on Climate. While a slightly greater proportion of North American investors would consider voting against a proposal where the link to financial and shareholder returns is unclear, for all other factors, investors from other markets were more likely to consider voting against, in some cases by a wide margin. In particular, alignment of capital expenditures with long-term climate strategy, alignment with a 1.5-degree scenario, and the presence of a net zero strategy were all seen as significantly more important by non-North American investors.

Notably, respondents from both segments raised concerns with the use of Say on Climate votes:

How respondents approach shareholder proposals were generally aligned across different segments, with all or a significant majority viewing each component as“Very” or“Somewhat Important”. Of the three components we asked about, proponent identity was the most divisive, but was nonetheless viewed as“Very” or“Somewhat Important” by over 70% of investors. Notably, more North American investors view the identity of the proponent as“Not Important” (37.0%, vs 18.2% for other markets).

Despite the broad alignment, investors expressed a range of views on how to approach shareholder proposals:

Some investors noted other considerations:

We followed up on how the proponent's identity is considered, and found that far fewer investors view the number of shares held as“Very” or“Somewhat Important” (50%, vs 78.5% of non-investors).

Link to the full report can be found here .

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