Institutional Investors Highlight the Growing Importance of ESG in Investment and Proxy Voting Decisions in a New Morrow Sodali Survey – Financial Post
NEW YORK & LONDON — Institutional investors with assets under management of USD 26 trillion unanimously confirm that ESG (Environmental, Social and Governance) risks and opportunities played an increasingly important role in their investment decisions and their evaluation of portfolio companies during the past 12 months, according to Morrow Sodali’s annual Institutional Investor survey, released today.
The Morrow Sodali Survey highlights the main areas of focus for institutional investors in determining how to exercise their voting rights at 2020 annual shareholder meetings. Survey results reveal that the broadly defined concept of ESG will have a direct practical impact on shareholder meetings, proxy voting, engagement and the various means by which investors fulfill their oversight and stewardship responsibilities.
Several findings stood out:
– Climate change is at the top of investors’ ESG agenda. All companies, regardless of their sector, should expect increased investor scrutiny on how they approach this issue.
– Investors expect to be privy to the inner workings of the board, underlining the importance of board/shareholder engagement.
– In general pay-for-performance continues to dominate as a key pressure point for investors, but increasingly the emphasis is on how companies and boards respond to shareholder concerns and negative votes.
– Many investors express a need for more explicit non-financial information, which they see as an important indicator of underlying corporate culture, integrity and sustainability. With regards to climate change factors, it is of primary importance to investors that companies clearly show what is the connection to their financial risks and opportunities.
The Morrow Sodali survey, now in its fifth year, was conducted in January 2020. Forty-one global institutional investors, with USD 26 trillion of assets under management in total, responded to the survey.
The survey notably indicated that:
– Investors are more likely to support activists if the company has weak governance practices, an even more important factor than the credibility of the activist’s proposed business strategy.
– An overwhelming majority of investors expect companies to demonstrate in their reporting a link between financial risks, opportunities and climate change, with a majority also believing that greater detail around the process to identify these risks and opportunities would significantly improve companies’ climate-related disclosures.
– Second only to climate change, human capital management is cited by investors as an important sustainability topic that they will focus on when engaging with boards in 2020, with a specific focus on improved disclosure around board involvement in setting the corporate culture in addition to robust health and safety indicators.
– Investors widely agree that stakeholder engagement approach and outcomes should be included in companies’ reporting together with their explanation of corporate purpose.
– ESG and sustainability are playing a more important role in fixed income investment decisions, with ESG rating agencies having established themselves as an essential factor in analyzing risks and opportunities, in addition to the credit rating agencies.
Kiran Vasantham, Director of Investor Engagement, said:“With ESG now firmly in the investor mainstream, we strongly believe that companies must proactively manage this at the board level, essentially as a two-way communication area with their shareholders and investors. ESG is a journey, not a destination. Companies that fail to fully appreciate the need to engage risk losing touch with the expectations of their most loyal long-term providers of capital and weakening these important relationships. I am delighted and grateful that a broad cross-section of investors took part in the survey, as it provides valuable insights about asset managers’ priorities and a heads-up for companies about the ESG issues that will impact investment and voting decisions in 2020.”
To access the full report of Morrow Sodali’s Institutional Investor Survey 2020, click here. To access our previous surveys (2016, 2017, 2018, 2019), click here.
About Morrow Sodali
Morrow Sodali is a leading provider of strategic advice and shareholder services to corporate clients around the world. The firm provides corporate boards and executives with strategic advice and services relating to corporate governance, shareholder and bondholder communication and engagement, capital markets intelligence, proxy solicitation, shareholder activism and mergers and acquisitions.
From headquarters in New York and London, and offices and partners in major capital markets, Morrow Sodali serves more than 700 corporate clients in 40 countries, including many of the world’s largest multinational corporations. In addition to listed and private companies, its clients include mutual funds, ETFs, stock exchanges and membership associations.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
