New Year resolutions

Fresh into a new decade, and there are already signs that this year will see a further growth in forceful stewardship by institutional investors. For example, if we rewound to the start of the last decade the conventional wisdom was that using shareholder resolutions was an extreme form of engagement. Few large UK investors wanted to get involved in filing them, and votes in favour of ESG-oriented resolutions were generally low.
If we can be excused a little toot on our own trumpet, we have always advocated the use of shareholder resolutions in order to make the AGM agenda more reflective of investors’ priorities, not just those of management. And we helped our clients file ESG resolutions at companies like Marks & Spencer (on corporate governance) and National Express (on labour standards) when this was still a relatively rare practice.
We also have to doff our caps to the work of Climate Action 100, and formerly the Aiming For A initiative, which thoroughly mainstreamed the use of resolutions in a way that has made investors much more comfortable with both the idea and the practice. The result is that, as we enter 2020, more investors than ever are more willing to both support and file resolutions.
The proposal going to Barclays is an interesting case in point. For a number of years now the role of banks in financing fossil fuel companies has come into sharper focus, and some engagement on this topic has been taking place. The filing of the resolution, which has been organised by responsible investment campaign group Share Action, has changed the nature of the discussion. Two responses are worth watching. First, and most obviously, how Barclays responds to the resolution will reveal much. The resolution has not been launched with the support of the bank, but it’s possible that it may not want to be seen actively opposing it.
Second, how will the big asset managers shake out? As we saw with the BHP resolution in 2019, once these engagements veer into slightly more challenging territory some investors go missing. But once again the terrain may be changing. 2019 saw a number of reports considering how asset managers vote on climate-related resolutions, and we hear plenty of anecdotal evidence that this is leading to some challenging conversations with clients.
Looking wider, we also know that an increasing number of European investors are getting involved with filing shareholder resolutions overseas, in particular in the US market. Once we know which resolutions have made it onto the ballot, we expect to see quite a bit of co-filing by European shareholders. The resolutions concerned tackle issues ranging from climate change to lobbying to human rights. It marks a further step change in stewardship, with asset owners taking an increasingly central role.
There’s a caveat to all this. Clearly engagement is not all about shareholder resolutions. If investors aren’t holding directors accountable too there is a danger that focusing on resolutions alone can let companies off the hook. So we continue to advocate that investors also make sure that the way that they vote on directors also takes account of ESG issues. That said, as we head into the 2020 season we’re expecting some interesting votes.

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