As the AGM season comes to an end for another year, it is worth reflecting upon the high pressure that company boards are facing from investors to take greater account of environmental impact, diversity and executive pay – only a few issues from a long list of environmental, social and governance (ESG) criteria that most investors now seem to abide by.
The changing corporate landscape has made the AGM season somewhat uncertain and challenging. As the coronavirus hit, company boards had to deal with reorganisation in response to the pandemic and the blanket ban on large meetings.
But investors seemed to be more courageous and more likely to vote against boards on several issues.
AGMs present an important opportunity for investors to engage with their portfolio. They have a chance to speak directly with companies and scrutinise them and work through shareholder resolutions and expectations.
ESG seems to be the hot topic of the time and it is expected to remain so for years to come. ESG, however, should be viewed as an opportunity and not as a challenge.
At the end of May, the Principles for Responsible Investment (PRI) developed a collaboration with APG and CalSTRS that offered investors a list of ESG-related questions they should ask investee companies during their AGMs.
The guidance aimed to support investors in their stewardship duties. After all, investors have a fiduciary duty to their beneficiaries to act in their best interests.
But collaboration is key. Pension funds, of all investors, are ideally placed to encourage companies to adopt behaviours that ensure business sustainability and success.
They have the power to influence by creating long-term relationships where difficult questions can be discussed and the best decisions made.