Monthly Roundup – August 2022
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Georgeson in the media
US: Georgeson’s Don Cassidy is quoted in a The Deal article titled “M&A Severance Proposals Draw More Support”

“There have been prior attempts to focus attention on golden parachutes,” Georgeson global head of corporate governance Don Cassidy said. “In the past, the efforts have sought shareholder input on the topic, but there has been a lot more attention to it this year, compared to previous years, and [proposals] have received much greater support.”

US: Georgeson’s Ed Greene is quoted in a Compliance Week article titled “New environmental, social issues made for ‘unprecedented’ 2022 proxy season”

“Additionally, firms can perform a gap analysis to compare their disclosures to their peers. To the extent a company is discussing its disclosure requirements internally, “that conversation also definitely includes the compliance team,” Greene said. In particular, compliance can play a valuable role by working with the business to ensure ESG disclosures are accurate, truthful, and complete. A failure to understand how the company’s largest shareholders feel about any number of hot-button issues and the disclosures they are seeking puts the company at a disadvantage if they receive a shareholder proposal and they haven’t worked through those issues in advance, Greene said.”

US: Georgeson’s data was referenced in Corporate Secretary’s article titled “Important ESG factors reviewed by RBC GAM for the 2022 proxy season”

“Recently, we have seen an increasing number of environmental and social-related shareholder proposals, such as requests for enhanced disclosure on workforce diversity practices or climate-related risks and opportunities. For the 2022 proxy voting season, shareholders submitted a record 924 ESG-related proposals to US companies, according to data tracked by investor intelligence firm Georgeson.”

Georgeson events
US: Georgeson hosted a webinar titled “Advance Your Company’s ESG Practices” on July 12

ESG considerations are a part of nearly every aspect of the corporate ecosystem and have reached the core of many strategic business decisions. With SEC rulemaking on the horizon, a divergence in ESG ratings and evolving investor policies, priorities and voting behavior, addressing ESG matters is imperative for every company.

Join this webinar to hear a discussion of notable proxy season takeaways, a temperature check on what the analyst community is thinking and practical guidance that should be considered as companies tackle ESG integration.
Italy: Georgeson is hosting a webinar discussing our soon to be published 2022 AGM Season Review for Europe on 12 September

The webinar will be moderated by Georgeson’s Alberto D'Aroma and will feature: Gianluca Antipasqua, the Head of Southern Europe Research at ISS; Francesco Drigo, Active Ownership - Group Sustainable Investements and Governance at Generali Investment; Giovanni Marsili, Partner at Gianni & Origoni; Maria Pierdicchi, President at NedCommunity; and Francesco Surace, Head of Corporate Governance at Georgeson.
Shareholder Activism
  • Bloomberg reports that Richemont Wins Support of Proxy Adviser Against Activist Investor Bluebell: “Bluebell Capital Partners Ltd. was dealt a blow in its efforts to revamp the board of luxury-goods company Richemont after a prominent advisory firm counselled shareholders to vote against the activist investor’s board nominee at a Sept. 7 annual meeting.”
  • The Financial Times reports that Taiwanese Apple supplier battles activists over $4bn cash pile: “Argyle Street’s pursuit of changes at Catcher Technology a symbol of growing shareholder unrest in Asia”
  • The Wall Street Journal reports that Investors Put Forward More Proposals, Dialing Up Pressure on Companies: “Apple, Activision Blizzard and Chevron saw proposals gain considerable support in this year’s proxy season”
  • The New York Times reports that Tesla Prevails Over Most Activist Shareholder Proposals: “One proposal from investors that would allow investors to nominate directors to the electric car company’s board was approved.”
  • The Wall Street Journal argues that PayPal Should Be Friendly With Elliott: “An activist could be just what stock needs as PayPal sets new course for post-pandemic payments landscape”.
  • Forbes argues that Activist Battles Are About To Get A Lot More Personal: “A major change in the SEC’s proxy rules, coming this Fall, could make such battles even more personal – and harder to win for both public companies and activists. The new rules require public companies and activists to use a universal proxy card when soliciting shareholders in any director election contest after August 31, 2022.”
  • The Wall Street Journal reports that Elliott Management Has Large Position in Cardinal Health: “The activist investor nominated five directors to the medical-products distributor’s board two weeks ago”.
  • The Wall Street Journal reports that ValueAct Takes Stake in New York Times: “Activist investor says media company’s shares are undervalued, represent investment opportunity”.
  • The Financial Times reports that HSBC’s chair hits back at Ping An break-up demands: “Mark Tucker warns investors split would result in share-price drop and reduce dividends”.
  • The Wall Street Journal reports that Dan Loeb’s Third Point Calls for Disney to Spin Off ESPN, Refresh Board: “Activist investor, which acquired new stake in Disney, also suggests company buy rest of Hulu”.
  • Sidley posted an update titled “ISS Provides Guidance on the Universal Proxy Card, Puts ‘Weakest’ Directors on Notice”: “In its note, ISS declared the new rules the “superior” way for shareholders to exercise their voting franchise and observed that this system will make it “dramatically easier” and “cheap” for activist shareholders to launch proxy fights. ISS also offered perspectives on how the new system could help activists in their campaigns. Public companies should pay close regard to these perspectives in light of the weighty influence of ISS’s proxy voting recommendations on the outcomes of contested director elections. The most notable of ISS’s perspectives are that under the new framework, directors’ individual qualifications may come into greater focus relative to the merits of an overall slate and that a board’s “weakest” members may now become more vulnerable in a proxy contest.”
Environmental & Social
  • Bloomberg Law reports that Disability Representation on Boards Is Up, Yet Inclusion Lags: “An increase in people with disabilities in boardrooms and corporate leadership isn’t always translating to more inclusive workplaces for rank-and-file employees. Of the 415 companies that participated in the 2022 nonprofit Disability:IN’s Disability Equality Index Report, 30% have at least one senior executive who is disabled and 6% have someone who identifies as disabled serving on their corporate boards. The companies surveyed include large employers such as Starbucks Corp., Twitter Inc., and Inc.”
  • Thomson Reuters asks Will ESG regulation surpass SOX and Dodd-Frank in total cost for companies?: “How does the cost to corporations and financial services firms to accommodate needed Environmental, Social & Governance (ESG) initiatives compare to past legislative reform? Some experts believe that Environmental, Social, & Governance (ESG) agendas are going to dwarf the two major corporate compliance and financial industry overhauls of recent decades — the Sarbanes Oxley (SOX) Act and the Dodd-Frank Act — in terms of cost and investment by companies.”
  • Investment News reports Impact funds getting more attention as investors seek to address climate change, racial equity: “More than 60% of investors who use impact funds are planning to increase their allocations to those products over the next year, and financial advisers are showing similar enthusiasm. That’s according to results of a survey published last week by Calvert Impact Capital, which queried about 800 people who hold the company’s Community Investment Note, as well as advisers with whom the company has a relationship. Nearly all — 94% — of advisers who responded said they would like to see more impact products on the market, according to Calvert. Eighty-eight percent said they plan to increase the amount of impact investments used in clients’ portfolios; the survey found.”
  • Pensions&Investments reports Managers treading lightly as ESG scrutiny grows: “Increased scrutiny over just how green investment strategies are has market players worried. The U.S. Securities and Exchange Commission, European regulators and investors are piling pressure onto money management firms over greenwashing, with the phrase hitting headlines more recently due in part to high-profile allegations made against DWS Group and other firms. As a result, managers are taking a careful look at how they have classified their strategies, with some firms already downgrading their ESG credentials to play it safe and an expectation of more changes to come, sources said.”
  • ESG Investor reports Litigation Surge Reflects Evolving Climate Duties: “Company directors are under increasing risk of climate-related litigation partly due to the increased willingness of activist and others to use legislation to hold firms to account for their climate impacts and policies, according to a recent publication on board members’ legal obligations. Noting that the number of court cases being brought against companies on climate-related grounds has recently topped 2,000, the report says some plaintiffs are seeking to recover the costs of climate change itself, or the expense caused by having to adapt to it. Others are bringing legal challenges to the actions, or absence of them, of companies and governments.”
  • The Financial Times reports how US banks tout fossil fuel credentials after Republican ESG backlash: “Several ‘Red’ states have introduced legislation to punish firms adhering to ‘woke’ agenda”.
  • The Telegraph reports that Ethical investors have made ‘screeching U-turn’ on defence, says Serco: “Chief executive Rupert Soames says Ukraine war has shifted attitudes of 'extreme' investors”.
  • The Harvard Law School Forum on Corporate Governance published the BlackRock Response to the Exposure Draft Climate-Related Disclosures Issued by ISSB: “BlackRock strongly supports the ISSB’s goal of providing a global baseline of standards to support the disclosure of more reliable, comparable, and consistent climate-related information. We view both the ISSB Exposure Draft ED/2022/S1 on sustainability-related financial information and ED/2022/S2 on climate-related disclosure as important contributions to a multi-year, multi-jurisdictional effort towards improving the availability, quality, comparability, timeliness, and interoperability of sustainability-related disclosures.”
  • Bloomberg reports that ESG Funds Face SEC Probe Over Ceding Votes on Social Issues: “US regulators are expanding their crackdown on misleading labels of investment products with a probe focused on whether managers of funds that are marketed as sustainable are trading away their right to vote on environmental, social and governance issues.”
  • Responsible Investor reports that MSCI makes implied temperature scores less precise after pushback: “Popular new climate assessment has been scaled back after accusations of ‘pseudo-precision’”
  • Responsible Investor reports on Morningstar: Passive climate funds ‘could drop Article 9 designation’: “Further downgrades from the highest SFDR classification are expected as the proportion of assets in ESG-designated funds crosses the 50 percent mark in Europe.”
  • The Financial Times reports that Funds want SEC’s ESG names rule ‘discarded’: “Regulators on both sides of the Atlantic are refreshing their fund name rules amid the ESG boom. In May, the European Securities and Markets Authority asked EU countries to investigate investment fund names to see if companies were including terms such as ‘sustainable’ or ‘impact’ without basis. Regulators should challenge groups if fund names were perceived to be misleading, Esma said. The SEC has proposed broadening its names rule. It said funds cannot simply consider ESG factors and add ESG terms to their names. Asset managers would be liable for materially misleading the public if a fund used ESG in its name without it playing a central part in its investment strategy. These proposed changes have upset the asset management industry, which is gearing up for a fight. The Investment Company Institute, the asset managers’ powerful lobbying group in Washington, wants the rule to be ‘discarded’.”
  • Reuters reports that BlackRock warns Wall Street watchdog new ESG rule could harm investors: “The world's largest asset manager BlackRock Inc. (BLK.N)warned the U.S. Securities and Exchange Commission (SEC) this week that its proposed rules aimed at fighting "greenwashing" by fund managers will confuse investors.”
  • The Financial Times reports that Platform boosts investors’ participation in shareholder votes: “The number of do-it-yourself investors on the Interactive Investor platform who voted on shareholder resolutions soared after the company automatically opted all of its customers into a voting and information service”.
  • Institutional Shareholder Services released its Annual Global Benchmark Policy Survey: The survey closes is used to assess potential policy changes for 2023 and it closed at the end of August. “This year’s survey first covers the global topic of climate change risk management with a focus on specific questions concerning climate-related board accountability, climate transition plans and management “say on climate” resolutions, climate risk as a critical audit matter, and financed emissions for companies in the financial sector.”
  • NewsDirect reports that ESG Disclosure Regulations are Strengthening in Asia Pacific: “Environmental, social, and governance (ESG) reporting is growing in importance and urgency . Businesses are also recognizing the value of ESG beyond mitigating risks. Studies have shown that corporations prioritizing ESG performance tend to outperform their peers, are more resilient to supply chain disruptions, and produce better financial returns. In Hong Kong and Singapore, similar ESG reporting requirements are coming into effect that will have implications for companies across the APAC region. In November 2021, Hong Kong Exchanges and Clearing Limited (HKEX) published guidance to listed issuers on climate disclosures. All HKEX listed companies will be subject to this regulation. The Hong Kong Monetary Authority (HKMA) also recently released the supervisory policy manual for climate risk management. It provides high-level guidance for financial institutions to build climate resilience by incorporating climate considerations into governance, strategy, risk management, and disclosure. The Singapore Exchange (SGX) announced climate disclosure rules in December 2021. These reporting rules require every issuer to prepare an annual sustainability report, and guidance is also aligned with TCFD. Reporting will become mandatory for companies in the financial, agriculture, food and forest products, and energy industries beginning in FY 2023. “
European developments
  • The AFM has published a report titled “Short Selling: Quantifying the effects of a ban”: “As described in the first edition of Market Watch, the Netherlands Authority for the Financial Markets (AFM) decided in 2020 not to impose a ban on short selling in the Netherlands, as the Dutch markets seemed to be functioning in an orderly fashion. However, in some European markets, including France, the relevant authorities did decide that long-term short selling bans were necessary.”
  • The Financial Times reports that Philips chief exits in wake of fallout from medical device recall: “Frans van Houten’s sudden departure comes after the Dutch company recalled faulty products”
North America
United States
  • The Wall Street Journal reports that SEC Requires Disclosures on Executive Pay Versus Company Performance: “The Securities and Exchange Commission on Thursday voted to require companies to disclose how well top management’s pay tracked with corporate performance over several years, the culmination of a long-delayed effort by the U.S. securities regulator.”
  • The SEC issued a press release titled “SEC Publishes Draft FY22-26 Strategic Plan for Public Comment”: “The draft strategic plan establishes three primary goals: Protecting working families against fraud, manipulation, and misconduct; Developing and implement a robust regulatory framework that keeps pace with evolving markets, business models, and technologies; and Supporting a skilled workforce that is diverse, equitable, inclusive, and is fully equipped to advance agency objectives.”
  • Corporate Secretary reports Debate looms over SEC shareholder proposals plan: “The SEC’s plan to update the grounds on which companies may be allowed to exclude shareholder proposals looks set to divide opinion along traditional lines, even with the deadline for official feedback more than a month away. The commission last month proposed amendments to Rule 14a-8, which governs the process for including shareholder proposals in a company’s proxy statement. The rule provides several bases on which companies can apply for no-action relief if they exclude a proposal. The proposed amendments would revise three of these bases for exclusion.”
  • Politico reports Battle over proxy advisers reignites after SEC unwinds Trump-era rules: “Some of the country’s largest business groups are challenging the Securities and Exchange Commission’s decision last month to undo Trump-era restrictions on the proxy advisory firms that make recommendations to investors on how to vote on often contentious proposals put up at annual corporate meetings.”
  • The Financial Times reports that US banks tout fossil fuel credentials after Republican ESG backlash: “Several red states have introduced legislation to punish firms adhering to ‘woke’ agenda”.
  • The Wall Street Journal reports how Short Seller Carson Block Sued Over $14 Million Whistleblower Award: “Lawsuit highlights the often lengthy and complex road to winning SEC whistleblower awards”.
  • A Harvard Law School Forum blog post reports that SEC Proposes Narrowing Grounds for Excluding Shareholder Proposals: “On July 13, 2022, the Securities and Exchange Commission (the “SEC”) proposed revisions to Rule 14a-8 under the Securities Exchange Act of 1934 to amend certain substantive bases on which U.S. public companies can exclude shareholder proposals from their proxy statements. The proposed amendments would make it harder for companies to exclude shareholder proposals based on the following three substantive bases for exclusion: substantial implementation, duplication and resubmission.”
  • The Wall Street Journal reports that Texas Blacklists BlackRock, UBS and Other Financial Firms Over Alleged Energy Boycotts: “The move could lead state pensions and other public entities to sell shareholdings in those companies”.
  • The Financial Times reports that US and China reach landmark audit inspection deal: “Agreement gives US regulators access to Chinese accounts in effort to keep listings on New York exchanges”.
  • The Financial Times reports that Landmark US-China audit deal spurs hunt for devils in the details: “Two sides have different interpretations of agreement that could prevent delisting of Chinese companies in US”.
  • Mondaq reports that China Issues First ESG Disclosure Guidance: International Guidelines With Chinese Characteristics: “China's State Council-backed think tank, China Enterprise Reform and Development Society ("CERDS"), alongside a number of major Chinese companies including Ping An Insurance Company, issued "The Guidance for Enterprise ESG Disclosure" effective on 1 June 2022 ("Guidance"). The Guidance is China's first ESG disclosure guideline, and covers all companies and industries. It follows the environmental disclosure rules issued by China's Ministry of Ecology and Environment (MEE) which came into effect earlier in February 2022 (which we reported here). The Guidance sets out a framework for Chinese companies to report under 3 primary indicators of environmental, social and governance metrics, which are further divided into 10 secondary indicators, 35 tertiary indicators and 118 total metrics. Each Chinese company can choose the applicable time cycle for making its disclosures. This official ESG report is for use by various bodies including regulators, investors, media, and the general public. The most notable quality of the Guidance is that it adapts ESG standards to fit the Chinese business landscape and the requirements of domestic laws and regulations. This includes references to unique features of China's social welfare system, such as social security and the housing provident fund.”
  • Reuters reports that China's cyberspace regulator: supportive of domestic firms seeking foreign capital: “China's cyberspace regulator said on Friday that it was supportive of domestic companies seeking foreign capital and that the focus of its review was whether there was the risk of data they held being abused by foreign governments. The Cyberspace Administration of China, speaking at a press conference to discuss the country's internet development, also said it was guiding and supervising the rectification work of Didi Global, the Chinese ride-hailing giant which was fined $1.2 billion last month for violating data security laws. It also said it was supportive of the healthy development of internet companies, and that it would build a close and clean relationship between enterprises and the government.”
  • The Financial Times reports that China ESG funds bleed $1.4bn in Q2 as Asian growth slows sharply: “Decline in sustainable fund investment hits country harder than elsewhere in the region”.
  • The Wall Street Journal reports that Five Chinese Companies Say They Plan to Delist From the New York Stock Exchange: “PetroChina, China Petroleum & Chemical, Aluminum Corp. of China and others cite low trading volumes, costs”.
Hong Kong
  • The Standard reports that New climate rules for small funds challenge Hong Kong money managers: “Climate-disclosure guidelines that go into effect soon in Hong Kong are posing a challenge for small domestic money managers that lack the resources of their global peers to track the data. Starting Aug. 20, fund managers overseeing at least HK$8 billion (US$1 billion) must take climate-related risks into account in their investment and risk-management processes for the first time and disclose the results. The remainder have until Nov. 20 to comply, according to a Securities and Futures Commission circular released last year. The SFC requires fund managers to define the board’s role in overseeing climate-related considerations in their investment and risk management processes and identify physical and transition risks for each strategy and fund. The rules also require large asset managers to provide investors with the greenhouse gas emissions associated with their underlying investments starting in November. If managers believe climate risks are irrelevant to their strategies and choose not to incorporate them, they must disclose those exceptions.”

  • The Straits Times reports that Singapore-listed firms, trusts improved their corporate governance: Study: “Singapore listed companies and trusts strengthened their corporate governance, transparency and sustainability disclosures this year, according to a new index survey released on Aug 3 2022. The 2022 Singapore Governance and Transparency Index showed that scores improved across two categories, reaching a new high since the index was first compiled in 2009. The general category ranked 489 listed firms while the real estate investment trust (Reit) and business trust category studied 44 trusts. The mean score in the general category rose to 70.6 points, compared with 68.7 last year. It is also the first time the score has crossed 70 points. Companies are scored based on their corporate governance practices and disclosures, as well as the timeliness, accessibility and transparency of their financial results. The index is the result of an annual study conducted by CPA Australia, the National University of Singapore (NUS) Business School's Centre for Governance and Sustainability, and the Singapore Institute of Directors. The release of the 2022 Singapore Governance and Transparency Index was marked by a hybrid event held at CPA Australia's office in Raffles Place as well as online.”
  • Reuters reports how Gautam Adani takes new tycoon risk to next level: “Gautam Adani is a different sort of Indian tycoon. The 60-year-old university dropout and son of a trader is a first-generation entrepreneur who has become the world’s fourth-richest man by building and buying critical energy and infrastructure assets at lightning speed. There is none of the obvious financial profligacy that broke many of his rivals in recent years, but other concerns cast a shadow over the billionaire who is starting to get too big to fail.”
  • Reuters reports that Ben & Jerry's Unilever fight shows risks of ceding control: “Ben & Jerry's legal battle with Unilever (ULVR.L) sheds light on an issue affecting a growing number of purpose-led brands: how to maintain their identity after being bought by a major consumer company.”
  • The Age reports ‘We’re comparing apples, oranges and bananas’: Climate disclosure by banks under microscope: “Reporting of climate change risks for banks and other financial institutions must become more standardised, climate experts say, with some calling for mandatory rules around disclosure.”
  • The Australian Financial Review reports that Transition rules sped up as emissions target set: “The Australian Sustainable Finance Initiative (ASFI) has brought forward its work to define a local taxonomy to this year from 2023, to give Australia a stronger voice at the international table when it comes to setting frameworks for sustainable definitions.”
  • The Financial Standard Sustainability informs ESG product definitions a matter for legislation: ASIC. “The Australian Securities and Investment Commission believes that standard definitions of ESG products and investments should be set by legislation.”
  • The Financial Standard Sustainability report on ASX300 upping the ante on ESG reporting: Melior. “ASX300 companies are taking action on carbon intensity and net zero targets while showing only incremental improvements on social indicators like gender diversity on boards and executive leadership teams, according to Melior Investment Management.”
  • ESG Clarity reports that APAC appetite for sustainable investing creeps up:  “Sustainable investing “is becoming a mainstream investment theme across the Apac region” but concerns about performance and terminology remain, a Fidelity survey has found.” 
New Zealand
  • Radio New Zealand reports that NZX promises new body will provide better investor protection: “A new five-person advisory board at the stock exchange will mirror the work of the ASX's Corporate Governance Council.”
  • The External Reporting Board (XRB) has released their final consultation on the Climate-related Disclosure standards: Shedding sunlight on climate risks and opportunities: “XRB Chief Executive April Mackenzie says today’s release is a significant milestone towards ensuring the effects of climate change are actively and routinely considered in business, investment, and lending decisions.”
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