Investors Zero in on Diversity This Proxy Season (Newsletter 2/26)
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Investor Spotlight
Institutions Go All in on DEI
As we approach the finalization of proxy’s and 10-K’s, it’s clear that institutions are asking companies to ramp up Diversity, Equity, & Inclusion (DEI) disclosures, targets, and commitments. NIRI shared insights from buy-side investors and what they look at. For example, Brown Advisors digs into gender, racial representation on the board, turnover, arbitration policies, compensation gaps, and promotion criteria. Similarly, Nuveen says it wants to hear how the D&I efforts are fitting into the overarching corporate narrative, and what the company is doing in its human capital management efforts.
State Street issued relatively anemic guidance on expectations for DEI disclosures, clearly aimed at the bottom 10% of disclosing companies within the S&P 500 and FTSE 100. Commitments include a promise to vote against Nominating and Governance Committee members at companies that don’t disclose the racial and ethnic diversity of their board in 2021, and which don’t have at least one director from an underrepresented community in 2022. Also, in 2021 they will vote against the Chair of the Compensation Committee in 2020 for companies that don’t disclose EE0-1 reports.
In Ontario Teachers’ Pension Plan’s 2021 proxy guidelines, the firm rewrote rules related to Diversity expectations, and added an expectation for the governance/nominating committee to set, and disclose publicly, a policy on enhancing board diversity (Proxy Insight). And lastly, Fidelity added a new policy opposing the election of certain or all directors if there are no women on the board or if the board has fewer than two women directors (applies to boards with ten or more directors).
Demand for ESG ETFs Continues
After announcing its commitment to introduce only ESG dedicated funds in 2021, DWS, one of the world’s largest ETF managers, is seeing a spike in demand from clients for educational ESG discussions, which has led to a hiring frenzy at the firm. According to Morningstar, Xtrackers had €13 billion in net inflows last year, the second best in Europe.
People Moves
- Barclays selects Marie Freier as Global Head of ESG Research
- Partners Capital names Kristen Eshak Weldon as Global Head of ESG and impact investing
Company Spotlight
ESG FAQ
In an interview with Walmart’s Kathleen McLaughlin, EVP & Chief Sustainability Officer, on how companies can accelerate ESG impact, she discusses the importance of developing an “ESG Investment” thesis. By directly giving investors, or customers/suppliers, a KPI, she is controlling the narrative and showing them how to use the data Walmart is disclosing to measure the retailer’s progress towards attaining its goal of net zero by 2040.
Ways to Share Goals and Progress
Schneider Electric published extra financial results in conjunction with the company’s fourth quarter 2020 earnings results. The mini report shared a self-assessment on Schneider’s progress towards achieving its ESG goals, also tied to UN SDGs, identifying where the company met or fell short of its targets.
ESG visuals are becoming a thing. Ingersoll Rand included an infographic in its release containing the company’s lofty 2030 and 2050 environmental goals around water conservation, waste reduction, and energy targets for 2030 which will then lead to net zero by 2050.
And Companies Respond by Beefing up DEI Initiatives
The retail industry is quick to respond to DEI improvements. In support of Black History Month, WWD highlighted a number of companies promoting underrepresented groups in the workforce. VF Corp strives to achieve 25% representation among Black, indigenous, and people of color at the director level and above by 2030. Additionally, VF Corp has set out to address any pay gaps by 2024. On a similar note, Gap committed to doubling its representation of Black and Latino employees, currently at 18% and 25% respectively, in the U.S. by 2025. The article covers a variety of other retail companies and their programs in place to promote and expand diversity.
Regulatory News
Honing in on Climate-Related Risks
New SEC Commission Lee is starting her tenure off with a bang, publicly stating that, in 2021, the SEC will likely expand how much information companies are expected to disclose about risks climate change poses to their business.
Forced Racial Audit
The SEC denied Johnson & Johnson’s request to exclude racial audit proposal submitted by Trillium Asset Management. The company will be required to publish a third-party audit with a review of its racial impact from corporate policies, practices, products and services, and recommendations to improve. More news to come.
News Bites
If You Are…
Still at the beginning of your ESG journey and trying to make the case internally for budget and prioritization of ESG disclosures within your company? Read this.
Ready for the advanced class on how to integrate the ESG issues most important to your investors? Read this.
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