Part of the PRI’s work to promote more effective stewardship and active ownership amongst our signatory base is to address the system and regulatory barriers to stewardship.
Acting in concert
Acting in concert is often perceived as a key regulatory barrier when institutional investors seek to engage collaboratively with companies.
To address this perception, the PRI is working with a number of law firms to provide an overview of the regulation related to acting in concert in key markets, as well as a legal opinion on whether certain behaviours would be considered acting in concert and trigger regulatory requirements.
The key markets that this work will focus on are: UK, US, Germany and South Africa. The UK and South Africa guidance have been published, and can be viewed on the Collaboration Platform.
In this legal guidance, Linklaters provide an overview of the regulation relevant to collaborative engagement in the UK, namely the FCA’s disclosure and transparency rules, market abuse regulation, mandatory offers under the Takeover Code, the FSMA Change in Control regime and the AIFMD. Linklaters have assessed this regulation against a number of hypothetical collaborative engagement scenarios, and in general acting in concert should not be seen as an impediment to collaborative engagement in almost all scenarios assessed.
South Africa guidance
This legal guidance from Bowmans considers a number of collaborative engagement scenarios and whether these would trigger regulatory requirements for the purposes of the Companies Act and Regulation, the Financial Markets Act, the JSE listing requirements and the Competition Act. Importantly, they note that in many cases collaborative engagement on ESG issues by shareholders is unlikely to trigger regulatory requirements.
This legal guidance from Norton Rose Fulbright provides an overview of the regulation relevant to collaborative engagement in Germany, including the Germany Securities Trading Act and German Securities Acquisition and Takeover Act, shareholder control regime in the financial sector and laws governing affiliated enterprises. Norton Rose Fulbright assessed this regulation against a number of hypothetical collaborative engagement scenarios and conclude that in general acting in concert and other legal concerns in Germany should not be seen as a significant barrier to collaborative engagement by institutional investors.
Public policy critically affects the ability of institutional investors to generate sustainable returns and create value. It also affects the sustainability and stability of financial markets, as well as social, environmental and economic systems.
Policy engagement is therefore a natural and necessary extension of an investor’s responsibilities and fiduciary duties to the interests of beneficiaries.
The PRI actively engages with public policy where relevant to our Principles and Mission. This includes responding to policy consultations and organising sign-on letters to policy makers.