Photo: Kane Reinholdtsen, Unsplash
The importance of working as a team in shareholder engagement
The first Chapter of the last issue of “Sustainable Investing In Focus” published in June by Citiwire also focuses on the importance of working as a team in shareholder engagement to obtain results. It contains interviews with some of our members.
Make your vote count. Investors looking to overturn company policies need to stick together
‘We have more direct dialogue in Switzerland than abroad. We do not have direct contact with the chairman of Exxon, for instance, but there are other ways to engage with companies, such as participating in collective investors initiatives. And we still offer voting recommendations’. Vincent Kaufmann, CEO of Ethos Foundation, said.
Changing the behaviour of large listed entities often requires teaming up with other shareholders. Ethos is a member of Shareholders for Change, a European network aiming to develop sustainable financial markets via company engagement.
Another member is Forma Futura Invest, a wealth management firm from Zurich.
‘Most of our clients do care about engagement. Our annual report on the year’s engagements and voting activities (the latter for Swiss companies only) is very well-received and highly valued’. Doris Hauser, Senior Sustainability Analyst at the firm, is aware that her efforts to impact holdings require working with individual clients too.
To help them along, Forma Futura publishes papers on such issues on its website and its Linkedin profile. It also publishes an annual report on its engagement and voting activities.
‘77% of our clients receive our voting recommendations. Whether they use the recommendation to vote themselves is beyond our knowledge. Forma Futura itself is not permitted by law to vote for its customers’.
‘I would argue it’s your fiduciary duty as an investor to read the AGM invitation. And even to attend the AGM, if you have a certain size’. said Julius van Sambeck, fund manager at Zurich-based Ethius Invest (also a Shareholders for Change member).
Being heard at the AGM, even for professional investors, is not always easy. ‘We have our own shadow book for proposals which we are running at Ethius as a legal entity. It is big enough to make proposals at AGMs for our client and fund holdings. Otherwise we are reliant on our clients and the legal department of Universal Investment, which provides administration services for our Ucits fund, can in theory always say no to whatever countermotion we want to submit’.
Another difficulty became clear when Ethius filed a countermotion at Hannover Rück, a reinsurer, opposing the ratification of the acts of the supervisory board. Ethius argued the company’s sustainability strategy is insufficient as it underwrites significant risks from fossil fuel projects. The company AGM took place virtually last month. Ethius was not able to join the call due to a technical error. The proposal got 13.1% of votes. Van Sambeck said this was a reasonable return considering that Germany’s third-largest insurance group, Talanx, owns 50.2% of the company.
In addition to pension funds, Ethos send reports to clients including Vontobel, Raiffeisen and Banque Cantonale Vaudoise. However, it is also familiar with a lack of support from big entities, as shown by Kaufmann’s experiences with Credit Suisse. ‘At the 2022 AGM, we requested a special audit on Greensill, and were only supported by 10% of shareholders. I don’t think BlackRock and similar firms supported us. BlackRock is moving towards giving fund investors their voting rights, which is a good evolution’, said Ethos’s CEO Vincent Kaufmann.
SfC’s strategy and successes, an interview with our president
Forum Nachhaltige Geldanlagen (FNG), the professional association for sustainable investment in the German-speaking countries, has released the Sustainable Investment Market Report 2023. It contains the latest market figures and current trends providing a comprehensive insight on how sustainable investments are developing. For this reason, it has been the reference for policymakers, industry insiders, academics and journalists since 2005.
The report contains an interview with our president Ugo Biggeri (pag. 41) where he emphasised the role of shareholder engagement as an important tool of sustainable finance. Moreover, he told some of our recent successful engagements on crypto mining, with Intel, and biological weapons with the government of Namibia.
Our president also had the opportunity to outline SfC’s strategy:
- to engage with a limited number of companies on a limited number of issues using all possible forms of engagement in order to achieve the greatest possible results
- to address so-called “orphan issues“, i.e. issues that play only a marginal role in the engagement strategies of other investors.