New report from world’s leading proponent of responsible investment comes ahead of 2021’s AGM season
London, 9 March - Today, the Principles for Responsible Investment (PRI) releases a new report, Making Voting Count, which argues that investors should view voting on shareholder resolutions not necessarily as part of an escalation strategy, but rather as a tool for clear, effective and accountable investment stewardship.
As shareholders prepare to cast votes during this year’s annual general meeting (AGM) season, the report from the PRI provides timely guidance to its 3,600 signatories, managing over $100 trillion in assets, on how they can develop and apply high-level principles to guide their voting on shareholder resolutions.
“Despite a significant increase in support for ESG shareholder resolutions in recent years, some investors are still reluctant to use voting as a tool to progress towards critical ESG goals,” said PRI CEO Fiona Reynolds. “Voting in support of shareholder resolutions that align with investors’ ESG principles should be viewed as an essential complement to engagement.”
“Climate change, inequality and other systemic sustainability issues seriously threaten the long-term performance of economies and asset owners’ portfolios, as well as the world in which their beneficiaries live,” said Stephen Miles, Global Head of Equities at Willis Towers Watson. “It is crucial that investors are addressing these risks by effectively utilising all the stewardship levers at their disposal, which includes voting on shareholder resolutions at company annual general meetings.”
Effective voting on shareholder resolutions allows investors to strengthen engagement by focusing on a concrete call to action that resists mischaracterization by companies, shareholders, or commentators. Key points from the paper include:
- Voting principles are high-level statements that explain an investor’s position on Environmental, Social and Governance (ESG) issues and how they vote to effect progress on those issues.
- Voting principles support the careful determination of voting decisions, and give clarity to companies, clients and beneficiaries on how investors will approach voting on proposals.
- Investors should support resolutions that are consistent with their voting principles by using votes as a means of informing investee companies of their views, affirming support for good corporate practice, and advising corporate leaders of expectations.
- Investors should publicly disclose their voting principles to allow for scrutiny by clients, beneficiaries, and other stakeholders. It is also recommended that investors consider publicly pre-declaring their voting intentions, voting records and rationale for voting decisions.
In line with Active Ownership 2.0 - a PRI framework for more effective stewardship – Making Voting Count makes further recommendations for investors aspiring to become leaders in stewardship. Investors should commit to using their voting principles to prioritize real-world outcomes, as well as a focus on systemic sustainability issues and the protection of common assets over narrower interests.
“Active Ownership 2.0 is critical to advancing progress on the most pressing issues facing investors and their beneficiaries,” said Daniela Jaramillo, Senior Responsible Investment Adviser at HESTA Super Fund. “We welcome this paper, which sets out how investors can align to stewardship best practice on voting on shareholder resolutions.”
PRI will continue to work closely with its investor signatories in advance of and throughout the 2021 AGM season.
Additional supporting quotes included:
“As a long-term asset owner, we believe strong proxy voting principles that address the management of systemic risks like climate change are pivotal for the transition to a sustainable global economy,” said Jake Barnett, Director, Sustainable Investment Service at Wespath Benefits and Investments. “We are excited to use this paper as a foundation for engagement with our external managers to encourage their alignment with an outcomes-oriented approach.”
“As stewards of our clients’ capital, voting on shareholder resolutions is one of the most powerful tools we have as investors to drive positive corporate action and outcomes,” said Robert Lewenson, Head of Stewardship at Old Mutual. “We are encouraged by the uptake in support for environmental and social shareholder proposals over the last few years and we hope that the adoption and application of voting principles will improve the effectiveness of this process.”
“Adopting principles to govern voting decisions can help make shareholder resolutions a more effective tool for all investors, as well as companies and other stakeholders,” said Paul Chandler PRI’s Director of Stewardship. “Yet for those who want to go further, they also provide an opportunity to implement an Active Ownership 2.0-aligned approach where principles prioritize the achievement of real-world outcomes on the systemic sustainability issues we must address to protect our financial markets, environment and society more broadly.”
About the PRI:
The PRI works with its international network of signatories to put the six Principles for Responsible Investment into practice. Its goals are to understand the investment implications of ESG issues and to support signatories in integrating these issues into investment and ownership decisions. The six Principles were developed by investors and are supported by the United Nations. The PRI does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.