Shareholder engagement and transition to sustainability
The General Assembly season, which is the time of the year when many organisations and corporations hold their annual shareholder meetings or AGMs, is ending. During these meetings, the company's owners (the shareholders) ratify decisions on topics such as past financial performance, future strategy, leadership change and, more recently Environmental and Social strategies.
In recent years, Asset Owners and Financial institutions have increasingly been making climate commitments and have wanted to ensure that the votes in AGMs reflect their ambitions and, by extension, their clients’ ambitions.
Therefore, after many “Say on Pay” resolutions submitted over recent years, shareholders as well as civil society organisations are now increasingly using AGMs to push for climate-related resolutions to be voted, such as “Say on Climate”. With more than 50% of the global Gross Domestic Product (GDP) now dependent on biodiversity1, will we soon see “Say on Biodiversity” resolutions increasing?
Asset Managers’ active voting role
Asset managers (AMs) play a crucial role in shaping corporate governance and driving these sustainability initiatives, as a consequence of their own convictions or as a result of pressure from their investors. Their participation in Annual General Meetings is up by 10%2. Furthermore, two thirds of Asset Management companies have increased their participation in the AGMs of non-European issuers, and the volume of their participations is up significantly (+20%)3.
Asset Managers’ engagement role
Engagement is another crucial aspect of the asset manager’s role. By engaging with companies – either individually or collectively – AMs can influence decision making and advocate for changes that are aligned with their investment strategies and sustainability goals, or at least relinquish poor practices. Some common engagement strategies include active dialogue with targeted objectives to achieve change.
Asset servicers’ facilitation role
Asset servicers play a key role both in organising AGMs and in facilitating the voting process.
On the one hand, they act as a centraliser for collecting and checking voting instructions before consolidation and reporting to the corporate board. They can also provide the operational framework on the day of the AGM itself.
On the other hand, Asset Servicers provide a range of services to stakeholders ensuring their rights are protected and ensuring they can exercise those rights effectively.
Their role ranges from the identification and the notification of general meetings, and the accurate communication of eligible positions and voting rights, to the possible choice of a proxy advisor, as well as execution and, lastly, reporting. Overall, the asset servicers will ensure that the stakeholders have the information and tools they need to participate effectively in the company’s decision-making process.
Societe Generale Securities Services (SGSS) is an active player in this process, providing access to 40+ markets, 19 proxy advisors, and routing 300,000+ voting instructions!
At SGSS, we feel that the Industry may have a bigger role to play in the coming years to foster shareholder participation in corporates’ strategies in terms of sustainable development. We are capable of bringing added value to our clients through partnerships and solutions, not only to assist asset managers in fulfilling their role as shareholders, but also to include asset owners in the process among other possible solutions.
Article published during the Network Forum.
1Source: World Economic Forum - Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy | World Economic Forum (weforum.org)
2Source: AFG Study Exercice des droits de vote par les sociétés de gestion en 2022 (afg.asso.fr)
3 Source: AFG Study Exercice des droits de vote par les sociétés de gestion en 2022 (afg.asso.fr)