Monthly Roundup – March 2022
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Latest Georgeson publications
US & Global: Georgeson memo about State Street 2022 Annual Letter to Directors
“On January 12, 2022, Cyrus Taraporevala, President and CEO of State Street Global Advisors, released the firm’s annual letter to directors. Additionally, the firm also released three guidance brochures regarding disclosure of the main topics of the annual letter: Guidance on Climate-related Disclosures; Disclosure Expectations for Effective Climate Transition Plans; and Guidance on Diversity Disclosures and Practices. The following report provides a comprehensive review of the 2022 Letter and State Street’s voting policy updates discussed therein.”
UK & Europe: Georgeson client memo about Say on Climate Board Proposals in 2022 (so far)
Georgeson has published a memo covering Say on Climate board proposals that have been put forward in the UK and Europe so far in the 2022 AGM Season (and how this compares to the board proposals put forward in 2021). The memo also covers the 2022 proxy advisor guidelines on this issue.
Global: Georgeson’s Lee Anne Hagel posts about “Scope 3 Emissions remain a key area of focus for the upcoming proxy season”
“Scope 3 emissions remains a key area of focus for the upcoming proxy season. In BlackRock’s recent ‘Climate risk and the global energy transition’ bulletin, BlackRock provides insight on its approach to scope 3 emissions. Notably, BlackRock differentiates its views on scope 3 emissions from scopes 1 and 2, given ‘methodological complexity, regulatory uncertainty, concerns about double-counting, and lack of direct control by companies.’ BlackRock continues to encourage companies to disclose scope 3 emissions and targets where material to their business models, though this bulletin explicitly notes that scope 3 disclosures and commitments currently are not essential to BlackRock’s support for directors.”
US: Georgeson’s Killian Moote article about SEC Shifts Could Have Major Impact on ESG
“Changes to how the SEC regulates shareholder-sponsored proposals and communications, as well as Environmental, Social, and Governance (ESG) disclosure guidance are expected in 2022. These changes, if all fully implemented, could dramatically affect companies’ disclosures and investor interactions. Taken together, these shifts may embolden investors and require companies to disclose more information on ESG issues, including those they may not yet have tackled such as the impact of, or contribution to, climate change. Regardless of the state of a company’s ESG maturity or the composition of its shareholder base, every company should evaluate how these changes may impact stakeholder and market perception of them.”
US: Georgeson memo about Vanguard’s 2022 Voting Policy Updates
“Vanguard recently announced updates to its proxy voting guidelines. The updated policy guidelines become effective as of March 1, 2022. The most significant policy updates relate to the issues of board commitments, board diversity and qualifications disclosure, and environmental/social shareholder proposals. The policy updates are summarized below.”
Georgeson in the media
US: Georgeson’s Hannah Orowitz was quoted in Agenda in an article entitled “BlackRock Makes ‘Subtle’ Changes to Engagement Priorities” 
“For boards, it’s important to note that “board oversight of ESG is of increasing importance to investors, as is evident in BlackRock’s 2022 priorities’ emphasis on understanding how boards oversee key issues and on engaging directly with non-executive directors responsible for oversight,’ wrote Hannah Orowitz, U.S. head of ESG at Georgeson, in an email.” […] “In several of the KPIs this year, BlackRock removed some of its prescriptive disclosure requests and in some cases added requests. For example, the firm this year removed the request in its climate KPI for carbon-intensive companies to disclose Scope 3 emissions. It explained that, although it encourages companies to disclose Scope 3 emissions when material to the business model, ‘we do not consider such Scope 3 disclosures and commitments essential to our support for directors.’ However, ‘for companies where Scope 3 emissions represent a material element of their carbon footprint, BlackRock further indicates that it will consider Scope 3 disclosures and reduction targets in assessing a company’s overall climate transition preparedness and decarbonization efforts,’ Orowitz wrote. She added that investors have filed 34 proposals specific to Scope 3 emissions so far this year, so it will be ‘an area to watch closely.’ Additionally, in the climate KPI, BlackRock this year asked for disclosures on short-, medium-, and long-term science- based emissions reduction targets, whereas last year it simply asked for GHG emissions reduction targets.”
Italy: Georgeson’s Lorenzo Casale was quoted in Corriere della Sera in two articles entitled “Stock Exchange, the vote of the funds is greener” and “Georgeson: The weight of proxy advisors increases”
“From our privileged observatory - explains Lorenzo Casale, Head of Market Italy at Georgeson, a company active in consulting on corporate governance issues - we are able to anticipate the trends in investor behavior. What we expect is that the large investment funds, whose presence at shareholders' meetings is increasingly heavy in terms of votes, will focus on ESG issues. Commitments made to link management remuneration to environmental and social impact objectives will probably be carefully evaluated, as well as declarations, not of intent but concrete, of strategic positioning towards ecological transition.”
Taiwan: Georgeson’s Domenic Brancati was quoted in an Apple Daily article entitled “Taiwan’s equity battle pays more attention to shareholder activism, Asia sees the rise”
“As for whether shareholder activism will take place in Taiwan, Georgeson Global Chief Operating Officer Domenic Brancati said that it cannot be said that it will not happen in the future. In recent years, it has been seen that activism initiated by shareholders or foreign capital has gradually risen from Japan to Asia. Disputes over board of directors and management rights are more common in Taiwan than in other Asian markets. Domenic Brancati analyzed that Taiwan has a higher proportion of equity fights compared to Asian, European and American markets. Because the competition is different within each company, it may be due to shareholder disagreement, internal family disputes, the lack of independence of the board of directors is also related to the cumulative voting system of directors and supervisors.”
US: Georgeson was mentioned in a Reuters article entitled “Investors say U.S. SEC climate disclosure rule to clarify 'mixed bag' of data”
“The draft rule calls for companies to disclose their direct and indirect greenhouse gas emissions, known as Scope 1 and 2 emissions, and supplier and partner emissions, known as Scope 3 emissions, if material. SEC Chairman Gary Gensler said the commission wants to simplify reporting as investor interest in climate data surges. As of February 41 U.S. shareholder proposals called for some form of new climate disclosures, according to proxy solicitor Georgeson.”
Georgeson Events
Georgeson’s Nicholas Laugier and Kiran Vasantham joined an IR Society Webinar: AGMs – Preparing for 2022
“As the AGM season approaches, we heard both the corporate and investor perspective about priorities for 2022 and what companies should be on the lookout for as they prepare for their AGM. As we emerge from the pandemic, our panel discussed the key issues around upcoming AGMs, the proliferation of ESG matters, voting and remuneration issues, as well as key learnings from 2021 and what they thought will be on the AGM agenda and in focus for 2022. Moderated by Nicholas Laugier, Senior Account Manager, Georgeson, speakers included Eva Hatfield, Investor Relations Executive, NinetyOne; and Aneta McCoy, Asset Stewardship Officer, State Street Global Advisors.”
Taiwan: Georgeson’s Domenic Brancati participated in a Taiwan Stock Exchange webinar entitled “Global Perspectives on Independent Directors and Taiwan AGMs in 2022”
“The panel will discuss questions such as what constitutes independence and does this contribute to overall board performance? What role do independent directors play in Taiwan that is unique compared to other regions? What are the challenges that independent directors face and what training and skillsets are required to be effective in oversight? What are the thresholds to convene an EGM in other regions and how does this compare with Taiwan?”
Shareholder Activism
  • Reuters reports that Pershing Square's Ackman retiring from 'vocal' activist life: “Billionaire investor William Ackman, who spent years building his reputation as a vocal corporate agitator, now plans to work mainly behind the scenes with management and adopt what he calls a ‘quieter approach’ to force change. Fresh off three years of strong double digit returns, Ackman told investors on Tuesday that corporate America now knows who he is and that there is no need for the kind of noisy tactics other activist investors might employ. […] Ackman on Tuesday put into writing what investors had long suspected; the once voluble investor who fought noisy proxy contests at Target (TGT.N), Canadian Pacific Railway and Automatic Data Processing Inc was shifting gears.”
  • The Guardian reports that Investors call for Sainsbury’s to pay workers ‘real living wage’: “Major investors have launched a campaign calling for Sainsbury’s to help tackle the cost of living crisis by becoming the first supermarket group to pay all its workers the “real living wage” of £9.90 an hour. Legal & General Investment Management, Nest (National Employment Savings Trust), which is Britain’s largest workplace pension scheme, and several MPs have formed a coalition to push for the change after reports that increasing numbers of supermarket workers are having to turn to food banks to feed themselves and their families.  The group of investors – whose institutional members manage £2.2tn of assets – will file a shareholder resolution on Monday calling for Sainsbury’s to accredit as a living wage employer. The resolution will be put to the vote at the Sainsbury’s annual general meeting, planned for 7 July. The group said it would be writing to all UK supermarkets urging them to take the same action.”
  • The Financial Times reports that Climate group prepares legal action against Shell directors: “First serious attempt to hold executives legally accountable for alleged emissions failings.”
  • Ethos has announced that Ethos and 11 other investors file climate shareholder resolution at Credit Suisse AGM: “Coordinated by Ethos and ShareAction, a group of institutional investors have filed a shareholders' resolution at the bank. Through a proposed amendment to the bank’s articles of association, the coalition asks that Credit Suisse improve its transparency regarding its climate impact and reduce its exposure to the financing of companies active in fossil fuels.”
  • The Financial Times reports about Political proxies: conservative activists file record shareholder proposals: “Rightwing groups say they are trying to save US companies from being distracted by liberal social causes”
  • Corporate Secretary reports that Sell-side reports play important role in building case for activism, study suggests: “The researchers find that pre-intervention sell-side reports contain ‘significantly more activism dictionary content’ than reports on control firms. Pre-intervention reports also tend to be longer and contain more quantitative information.”
  • The Financial Times reports that Allianz and Cevian raise pressure over linking pay to climate goals: “Asset manager and activist investor urge investors to vote against businesses if conditions not met.”
  • Reuters reports U.S. ESG shareholder resolutions up 22% to record level for 2022, study finds: “U.S. corporations face an unprecedented wave of shareholder resolutions focused on ESG themes for 2022, a new review shows, as activists look to build on favorable regulatory changes and more executives seem willing to make deals.”
  • The Financial Times reports that Amazon under pressure over tax transparency: “Twenty four institutional investors in Amazon are putting pressure on the ecommerce group to increase transparency on where and how much it pays in tax around the world.”
  • The Guardian reports that Sir Chris Hohn urges shareholders to vote against ‘greenwashing’ bank directors: “Call comes as thinktank says the world’s 30 largest financial institutions are undermining their net zero targets”
  • The Financial Times reports that Occidental loses bid to throw out green investor resolution: “SEC will force oil and gas producer group to hold vote on tighter emissions targets”
  • The Wall Street Journal reports that Toshiba Shareholders Reject Plan to Break Into Two Parts: “Some foreign investors in Japanese conglomerate want company to be auctioned to the highest bidder.”
Environmental & Social
  • The IFRS Foundation and the GRI have announced that they are to align capital market and multi-stakeholder standards to create an interconnected approach for sustainability disclosures: “The IFRS Foundation and Global Reporting Initiative (GRI) have announced today a collaboration agreement under which their respective standard-setting boards, the International Sustainability Standards Board (ISSB) and the Global Sustainability Standards Board (GSSB), will seek to coordinate their work programmes and standard-setting activities.”
  • The Wall Street Journal reports about how Quantifying Companies’ Impact on Forests, Oceans Is a Challenge: “Companies and investors are trying to figure out how to assess businesses’ impact on the natural world. A key challenge is deciding what to count.  The Taskforce on Nature-Related Financial Disclosures, or TNFD, a business-backed effort to protect biodiversity, published an early version of a new reporting framework Tuesday. It offers guidance for identifying companies’ nature-related risks, following the model of the climate-risk framework devised by the Task Force on Climate-Related Financial Disclosures. The goal is that better information will channel capital to companies that minimize damage to the environment and their exposure to risks.” See here for more information about the Taskforce on Nature-related Financial Disclosures (TNFD).
  • IR magazine reported that Almost 700 financial firms begin letter campaign for CDP data disclosure: “Financial institutions including Allianz, Amundi, AXA, BNP Paribas, CalPERS, Capital Group, State Street and Vanguard have today begun a letter-writing campaign calling on companies around the world to report more environmental data through CDP.” For the full CDP release see here.
  • Nikkei Asia reported that Opaque carbon credit market undermines fight against climate change: “Nearly 40% of carbon credits purchased by companies are more than five years old, new Nikkei analysis of global data shows, a trend that experts say threatens progress on cutting greenhouse gas emissions.”
  • The Financial Times reports that the Boom in ESG ratings leaves trail of confusion: “With so many providers and methods, it can be difficult to draw meaning from rankings.”
  • Reuters reports that Corporate sustainability push a $35 trillion dollar conundrum for auditors: “Investors agree that the current patchwork of auditing practices offers only basic assurance, falling a long way short of the higher standard applied to a company's financial statements.”
  • The Financial Times argues that Ukraine war prompts investor rethink of ESG and the defence sector: “Conflict drives home the importance of industry to provide safety and security.” Additionally, the FT reports about Stay or sell? Russia’s war shows the difficulties of nuance in responsible investing: “From domestic fossil fuels to defence, the ESG movement is grappling with shifting priorities.”
  • ESG Clarity reports that SBTi excludes oil and gas companies: “The Science-Based Targets Initiative will remove fossil fuel businesses from its list of companies that had made commitments and set targets to reduce emissions.”
  • ESG Today reports that BlackRock Outlines Engagement Priorities, Including Guidance for Linking Pay to ESG Performance: “BlackRock Investment Stewardship’s (BIS) key engagement priority categories include Board Quality and Effectiveness; Strategy, Purpose, and Financial Resilience; Incentives Aligned with Value Creation; Climate and Natural Capital, and; Company Impacts on People.” See here for the full BlackRock release.
  • Responsible Investor reports on the Wide gap between largest European and US investment managers on CEO pay, research reveals: “Germany’s Allianz voted against CEO pay at 92% of S&P 500 firms last year, but US giants BlackRock, Vanguard and Fidelity oppose just 4% of packages, As You Sow report finds.”
  • A BNP Paribas Asset Management study shows positive impact of dialogue and voting on female board membership: “BNP Paribas Asset Management has conducted a global study of the number of women on boards ahead of the 2022 AGM season. The study compares the 3,500 companies in which BNPP AM invests with the 17,000 listed companies in the Institutional Shareholder Services database. The study demonstrates the effectiveness of BNPP AM’s voting policy and shareholder dialogue, finding that: 1) Women make up an average of 25% of the boards of the companies in which BNPP AM invests, compared to 18% for the broader universe of listed companies. 2) Regional differences are considerable, with Europe, South Africa and Australia the most advanced in terms of board director parity, whereas Asia, South America and the Middle East are less diverse. 3) Company size, country of incorporation and local regulations significantly impact levels of female board membership and are key factors for investors to consider.”
  • The South China Morning Post reports that ESG investing: Asian listed firms have a lot of catching up to do in climate impact disclosures, survey shows: “Asia’s publicly traded companies lag behind companies in the United States and Europe in their climate impact disclosures, underscoring the work that remains to be done to get them to comply with investors’ expectations.”
  • The Financial Times reports that Venture capitalists pass on board seats to secure deals in hot crypto start ups: “Founders of digital asset groups seek to avoid investor oversight in new Silicon Valley trend.”
European developments
  • The HLS Forum on Corporate Governance has posted a blog entitled The EU Sustainable Corporate Governance Initiative: Where are We and Where are We Headed?: “As readers of this Forum will know, the EU had started a sustainable corporate governance initiative back in 2020. This initiative was backed by an Ernst & Young report, called a “study on directors’ duties and sustainable corporate governance”. The initiative and especially the EY study drew fierce criticism, also from many U.S. scholars, indicating some misleading and erroneous elements (such as Roe et al (2020); Coffee, Jr. (2020)). The Initiative gained global attention partly because of taking stock with the “corporate purpose” debate. It indicated that an EU level initiative to empower corporate directors to integrate wider interests into corporate decisions was in sight. Specifically, a reform option was to require (or allow) ‘company directors to take into account all stakeholders’ interests which are relevant for the long-term sustainability of the firm or which belong to those affected by it (employees, environment, other stakeholders affected by the business, etc.), as part of their duty of care to promote the interests of the company and pursue its objectives…’.”
  • The Financial Times reports that the ECB accuses eurozone banks of ‘white noise’ on climate risks. “Central bank says none of the 109 lenders it supervises meet its disclosure expectations”
  • The Financial Times reports about What to expect in the AGM season: Bonuses, net zero and Ukraine: “AGM season is under way. This year, the perennial shareholder questions around pay, climate change and diversity will be asked against a backdrop of war in Ukraine, which has thrown the usual preparatory work off course. Deal making and large strategic shifts have been postponed, according to multiple advisers. Meanwhile, activist investors are increasingly shaping the conversation in British boardrooms.”
  • IVIS and the Investment Association have published the IA Shareholder Priorities and IVIS approach for 2022: “Climate change and diversity will be top of mind for investment managers during this year’s AGM season, according to the new expectations on companies issued today by the Investment Association (IA). The shareholder priorities are issued annually ahead of AGM season and outline the key areas that investment managers deem to be critical drivers of long-term value for companies. Linked to these priorities is the IVIS (Institutional Voting Information Service) approach to analysing these issues. IVIS will analyse UK listed companies against these priorities and the broader IA guidelines to provide information to help shareholders reach a decision on how to vote at company AGMs. With climate change presenting one of the biggest risks to the long-term sustainability of a company, investment managers will be looking for businesses to take immediate action, explaining how climate change will impact them and how they are mitigating the risks. They encourage firms to disclose their transition plans to net-zero ahead of these being mandated by Government. This year, IVIS will give an ‘amber-top’ warning for all companies that do not make disclosures against all four pillars of the Task Force on Climate-Related Financial Disclosures (TCFD). Diversity continues to be a priority area for investment managers. For the first time, IVIS will issue its strongest warning, a ‘red top’, where FTSE 100 companies fail to meet the Parker Review target of having one ethnically diverse board member, and ‘amber top’ FTSE 250 companies that do not disclose the ethnic diversity of their boards or have an action plan to achieve the Parker Review targets by 2024.” See the full document here.
  • The Financial Times argues that UK airline investors have an ESG problem: “Such disenfranchisement should be particularly concerning when investors are being asked to vote on proposals such as the Wizz chief executive’s £100mn pay plan, approved last year on less than 16 per cent turnout after the airline curbed investors’ voting rights. In 2020, when UK shareholders could vote and turnout was above 80 per cent, investors rejected Wizz’s remuneration report.”
  • The Parker Review committee has announced that Nearly all FTSE 100 companies have met the Parker Review's ‘One before 2021’ target to improve ethnic diversity of FTSE 100 boards: “The Parker Review committee has published the results of its latest voluntary census on the ethnic diversity of FTSE 100 and FTSE 250 companies’ boards, carried out jointly with the Department of Business, Energy & Industrial Strategy (BEIS). The voluntary census showed that 89 FTSE 100 companies and 128 FTSE 250 companies had minority ethnic representation on their company boards as of 31 December 2021, the target date. Another 5 FTSE 100 appointments have been announced since then and an additional 3 companies are at an advanced stage in the recruitment process. Of the 3 companies which have not signalled their commitment, one is being acquired by a US Group and will de-list; another is a Russian steel and mining company which will shortly be removed from the FTSE100 index; and the final one is a UK subsidiary of a US based Group. In 2017, the Parker Review made a series of recommendations and set a "One by 2021" target for all FTSE 100 boards to have at least one director from a minority ethnic background by December 2021. The Review also set a similar "One by 2024" target for all FTSE 250 boards.” See the full document here.      
  • The Financial Times reports that UK stewardship code adds 74 new signatories: “Combined assets managed under the standard grow to £33tn.” See here for further info.
  • The Daily Telegraph argues that City do-gooders threaten to undermine Britain’s nuclear deterrent: “The City has, to a large extent, disgraced itself over Russia. Encouraged and overlooked by successive governments, the Square Mile has been unquestioning in its welcoming of Russian money for decades. Even the Prime Minister admitted last week that ‘we have an issue with Russian money in the City’. Until now, there has been little attempt to cleanse the system of Putin’s kleptocracy, despite warnings from MPs on the foreign affairs committee and the security and intelligence committee. There was no shareholder outcry over BP’s involvement in Russia, at least not publicly. Not even BlackRock, whose chief executive Larry Fink is the self-anointed high priest of do-goodery, has felt compelled to speak out in its capacity as BP’s largest shareholder. Meanwhile, the decadent ESG (environment, social and governance) investment movement is busy undermining the funding of defence. Some funds refuse to own shares in Western defence contractors. At their very worst the ESG crowd are cautioning UK-listed companies against bidding for contracts managing Britain’s nuclear deterrent, as Serco has discovered.”
  • The Financial Times reports that Bet365 chief Denise Coates has her pay cut for first time in 3 years: “Base salary falls more than a third to £250mn as gambling group’s revenues hit by pandemic.” 
  • L'Agefi reports that Danone shareholders question the role of the Honorary Chairman (“Des actionnaires de Danone questionnent le rôle du président d’honneur”): “Together with Mirova, Erafp, Ircantec, OFI AM and the Caisse d'assurance vieillesse des pharmaciens, Phitrust has requested the inclusion of a resolution on the agenda of Danone's general meeting on 26 April. This resolution proposes to amend Danone's statutes in order to clarify the role of the Honorary Chairman. The aim seems to be to limit the influence of Franck Riboud, 66, on the board. The latter had specified last summer that he would not ask for the renewal of his directorship at the 2022 general meeting, while remaining honorary chairman. He had received this honorary title in 2017 ‘in recognition of his invaluable contribution to the work of the board’, according to the universal registration document.”
  • The French Sustainable Investment Forum (Forum pour l’Investissement Responsable - FIR) has published a memo, signed by a number of investors, entitled Say on Climate: an imperative of transparency for a constructive dialogue (“Le Say on Climate : un impératif de transparence pour un dialogue constructif”): “On the eve of the 2022 general meeting season and in line with the FIR's appeal to SBF 120 companies last September, which was supported by a growing number of players in the financial ecosystem, several organisations are today signing a statement reminding companies of the importance of presenting ambitious climate plans and consulting their shareholders, by organising an annual vote at the general meeting, on these plans and their implementation. In general, the FIR recalls the need for a dialogue with shareholders, social partners and all stakeholders of the company on their ecological transition. This tribune also calls on companies to include in their ‘Say on Climate’ a minimum base of information in order to have a clear view on the strategy and climate objectives of companies and to evaluate the degree of alignment with the objectives of the Paris Agreement. Finally, the signatories of this memo therefore invite the generalisation of a ‘Say and do on Climate’ for companies. This requires a necessary reform of company law to institutionalise a French-style ‘Say on Climate’ that is innovative, demanding and allows for a permanent dialogue within the framework of general meetings on climate issues.”
  • L'Agefi reports that The choice of a 70-year-old president at Orange raises questions about governance (“Le choix d’un président de 70 ans chez Orange interroge sur la gouvernance”): “While institutional shareholders cannot discriminate on the basis of age, they will look at the competence and suitability of the proposed profile.”      
  • Reuters reports that Major Ericsson investors to vote against some board members at shareholder meeting: “Major Ericsson shareholders will vote against a motion to clear some board members of responsibility over possible payment of bribes to militant organisations in Iraq, deepening a crisis at the Swedish group that has knocked a quarter off its market value. Shareholders, including Cevian Capital, Swedbank Robur and Norway's wealth fund, plan to vote against discharging the board members of liability at Ericsson's annual general meeting on Tuesday. The shareholder vote is likely to be close to a 10% threshold that would give investors the right to sue board members in the future under Swedish company law. Ericsson has been under scrutiny by the U.S. Department of Justice and from shareholders for not properly disclosing that its 2019 investigation had found the company may have paid militant organisations in Iraq.”
North America
United States
  • The SEC issued a press release about SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors: “The Securities and Exchange Commission today proposed rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. The required information about climate-related risks also would include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks.”
  • IR Magazine reports that Gender parity on larger company boards not expected till 2042, says MSCI: “The slow rate at which companies are adding women to boards means gender parity among global large and mid-caps will take another 20 years, according to research from MSCI.”
  • Bloomberg Opinion argues that SEC’s Climate Rules Are No Environmental Crusade: “The reason is plain: Investors want more information about how companies are dealing with climate change, and it’s the SEC’s job to get it for them.”
  • Harvard Law School Forum on Corporate Governance has published a post entitled The Evolving Role of ESG Metrics in Executive Compensation Plans: “As boards work to integrate ESG concerns into discussions of company strategy, many are also considering how to create the right incentives for achievement of ESG-related goals. Incentive plans have long been driven primarily by objective financial goals. That often means quantitative goals related to things like revenue, cash flow, units sold, EBITDA, earnings per share, or total shareholder return. But at many companies, a shift is underway as non- financial goals become more common. As of March 2021, more than half of companies in the S&P 500 (57%) used at least one ESG metric in their plans.”
  • Michael Moritz (Sequoia Capital) argues in the Financial Times that Tim Cook pay vote shows ISS should not be judge and jury: “Shareholders must not rely on the crutch of the proxy voting adviser’s recommendations.” In response, Paul Lee comments about The madness, let alone unfairness, of US executive pay.
  • As You Sow writes about how Opposition to CEO Pay Increases Could Bring Record Votes Against Pay in Coming Proxy Season: “2021 showed substantial increases in opposition to CEO pay packages. A record 16 companies had CEO pay packages rejected by more than half of the shareholders, a 60 percent increase from the ten in 2020 and more than double the seven in 2019.”
  • The Financial Times reports that Proxy adviser ISS urges vote against $247mn pay for Discovery chief: “Shareholder group says David Zaslav’s package is part of ‘history of poor pay practices’ at media company.”
Hong Kong
  • The South China Morning Post reports that Aquila Acquisition gets HKEX approval, moving Hong Kong’s first blank-cheque listing closer to reality: “Hong Kong stock exchange has approved the first initial public offering (IPO) by a special purpose acquisition company (SPAC) under its new listing regime. The approval for Aquila Acquisition Corp, sponsored by the asset management arm of Chinese brokerage CMB International, was reflected in an updated draft prospectus published on website of Hong Kong Exchanges and Clearing (HKEX). While the company did not say how much it plans to raise from the share sale, SPACs in Hong Kong must raise a minimum of HK$1 billion (US$128 million). Green Tea Group, a Chinese restaurant chain operator with 236 outlets nationwide, also received a nod from the city’s bourse operator for its IPO. The firm aims to raise between US$100 million and US$200 million, a source familiar with the transaction said.”
  • The South China Morning Post reports that Tracker Fund names Hang Seng to run Hong Kong’s biggest exchange-traded fund, ending State Street’s mandate: “Hong Kong has picked Hang Seng Investment Management to manage the Tracker Fund (TraHK), ending a two-decade mandate by State Street Global Advisors that threw the city’s biggest exchange-traded fund (ETF) into the middle of US-China friction last year.”
  • The Japan Times reports that Ex-Nissan exec Kelly leaves Japan after trial over Ghosn's pay: “Former Nissan Motor Co. director Greg Kelly left Japan on Monday, days after receiving a suspended sentence for helping Carlos Ghosn underreport compensation, and more than three years since being arrested in one of the most dramatic corporate takedowns of the past decade. Kelly, 65, and his wife, Dee, flew to the U.S. from Tokyo’s Haneda Airport, where they were seen off by Rahm Emanuel, the U.S. Ambassador to Japan. Last Thursday, Kelly was found guilty by a panel of three judges at the Tokyo District Court of aiding Ghosn in 2017, but was cleared of charges of involvement for prior years. The 17 months of proceedings essentially served as a proxy trial against Ghosn, the former chairman of Nissan and its car-making alliance partner, Renault SA. The two auto executives were arrested in Tokyo on the same day in November 2018 and charged with various financial misconduct offenses.”
  • Reuters reports that China policy banks slash overseas energy finance to zero in 2021 – research: “China's two main trade policy banks made no new overseas energy finance commitments in 2021, a first for this century and a sign that Beijing's pledge to stop investing in foreign coal plants is already in effect, new research showed on 15 Mar 2022. The shift was highlighted in a new study of China Development Bank (CDB) and the Export-Import Bank of China (CHEXIM) project commitments last year by the Boston University Global Development Policy Center. Chinese President Xi Jinping pledged to end his country's support for new overseas coal power plants during a video address to the United Nations General Assembly last September. ‘It is a dramatic drop, but ultimately not surprising, given the persisting impacts of the COVID-19 pandemic, narrowing borrowing capacities in developing countries and the global trend towards phasing out coal,’ said Cecilia Han Springer, Assistant Director of the centre's Global China Initiative. The two banks had issued a total of $234.6 billion in loans to foreign governments and associated energy sector entities since the year 2000, including $75.1 billion since 2016 alone, far exceeding total energy sector lending by the World Bank over the period.”
  • ChinaDaily reports that Digital yuan will make payments easier and curb corruption: “The electronic yuan, or e-CNY, is the digital version of fiat currency issued by the China's central bank, and operated by authorized agents. It is a value-based, quasi-account-based, and account-based hybrid payment instrument with legal tender status and loosely covered account linkage. According to an official document on the development of e-CNY in China, issued by the Working Group on E-CNY Research and Development of the People's Bank of China in July 2021, one of e-CNY's main goals is to expedite the internationalization of the digital yuan. Equivalent to paper currency bills and coins, e-CNY will meet people's demand for digital currency and help develop financial services in the country. And given China's strong production capacity and spending power, e-CNY will help build a new trading pattern, which in turn will help boost global cooperation. The central government and its departments attach great importance to the development of digital currency. They have introduced a series of preferential policies for e-CNY and included it into the 14th Five-Year Plan (2021-25). They have also urged governments at all levels to start testing the digital currency, with the aim of expanding its coverage and assessing its impact on the country's monetary policy and financial system, and, if need be, improving the digital currency's operations. Since May 2020, the country has made remarkable progress in promoting the central bank digital currency. Initially, cities began trials by giving people digital envelopes with e-CNY to spend. A year later, the digital yuan entered third-party payment platforms and began online e-CNY payment trials-for example, passengers could pay for public transport by scanning a QR code for the digital currency.”
  • The South China Morning Post reports that Overhaul of online platforms run by Chinese fintech firms including Ant Group ‘went well’, though more work is needed, says regulator: “Business overhauls at 14 mainland Chinese internet finance platforms, including Ant Group, to tackle disorderly expansion and anticompetitive behaviour that brought major risks to China’s finance sector have gone well, though more work is needed, a senior regulator said. Self-inspection by the platform operators has been largely completed, although it will take more time for the revamp to be fully implemented as it involves complicated issues, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said on Wednesday. ‘These innovative financial platforms, previously not under our supervision, have gradually come under our scrutiny,’ he told reporters. ‘This process takes time as we encountered difficulties in areas such as the identification and evaluation of their products, besides the protection of private personal data, corporate information and commercial secrets. Beijing unleashed a raft of new fintech regulations and an antitrust inquiry into the country’s technology sector late in 2020. It came soon after Ant’s US$34.5 billion dual initial public offering slated for Hong Kong and Shanghai was foiled at the last minute on the back of regulatory changes last November.”
  • The Australian Financial Review reports that APRA says banks might pay for climate delay: “APRA chairman Wayne Byres says the regulator is conscious that Australian banks might have to pay more for funding given the country’s timeline for getting to net zero emissions. As more global investors look to transition their portfolios to align with net zero by 2030 – 20 years earlier than the federal government’s plan for net zero emissions by 2050 – Mr Byres told The Australian Financial Review that the different timelines present a risk that the Australian Prudential Regulation Authority is factoring in its climate considerations.”
  • The Australian informs that Big emitters shun new carbon reduction program. “Australian companies are set to come under increasing pressure to disclose their climate change risks and carbon emissions in the wake of this week’s move by the US Securities and Exchange Commission to make climate change disclosures mandatory for listed companies.”
  • The Financial Times reports that Coal wins out in bid tussle over Australian energy group AGL: “Failed takeover pitch by Brookfield and software billionaire was aimed at accelerating green transition.”
  • The Australian Financial Review asks Can the ‘Wild West’ of ethical investment be tamed? “The rising influence of ESG ratings reflects the fact that most investors want to put their money into things that are both ethical and profitable. But a lack of regulation, standardisation and transparency in the fast-growing sector has left many concerned that investors will be led astray while conflicts of interest go unchecked.”
  • The Financial Times reports that Nun’s landmark coal mine victory quashed by Australian court: “Decision will ‘put a handbrake’ on climate litigation, warns legal expert.”
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