Time for Responsible Corporate Tax

The COVID-19 crisis may become the “tipping point” that makes tax havens and aggressive tax avoidance as controversial as bribery and corruption.

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Climate Series: Oil and gas preparing for a carbon-constrained world – leaders and laggards

The investor pressure on oil and gas companies to address climate change as seen in the latest proxy voting season has mounted like never before. In May, BP shareholders, representing over 99% of the votes, passed a resolution asking the company to align its business strategy and investments with the Paris Agreement. When a similar resolution was blocked by Exxon, who had asked the U.S. Securities and Exchange Commission to reject it, investors urged a vote to split the chief executive officer and board chairman roles as protest.

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Climate Series: Decarbonisation of Cement and Steel Sectors

With their widespread use across multiple sectors, from construction and infrastructure to energy and transportation, cement and steel are central to modern economy. They are also inherently energy and carbon-intensive. Taken together, those two sectors account for up to 15% of global CO2 emissions, and as the world’s population grows, emissions are only projected to increase.

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Climate Series: Facing the Dilemma with Coal Divestments

Still more institutional investors are divesting from coal companies to protect their investments against stranded assets. It is understandable, because most coal companies are not aligned with the well below two-degree goal. However, it raises a dilemma, because the reduced investor owners’ pressure on the coal majors due to divestment can make it more difficult to reach the Paris Agreement. This third blog in our climate series presents the results of Engagement International’s engagement with coal companies over the past three years, which can further inform investors’ strategies to the controversial industry.

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Climate Series: Engaging with the Top 100 Climate Change Contributors

On behalf of institutional investor clients, Engagement International has evaluated and engaged with the 100 listed companies that contribute the most to climate change since the Paris Agreement was adopted in December 2015. Through in-person meetings and conference calls every six months over the past three years, we seek to encourage the companies to align their business with the well-below two-degree goal. This blog is the first of a climate series, in which we will discuss the premise and results of the engagement project “Top 100 Climate Change Contributors” (Top100CCC).

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Is sustainable corporate governance going to dominate the investor engagement landscape?

Last week the EU conference gathered together experts representing various fields, including policy-makers, investors, academia, trade unions and environmentalists, with the aim to reflect on how to foster more sustainable governance in line with the Action Plan on Financing Sustainable Growth. The key message emerging from the event points out that if we want sustainable finance, we need sustainable corporate governance.

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Strengthening of investor’s fiduciary duty by the new EU Action Plan at the forefront of sustainable finance

European institutional investors can expect a stronger focus on fulfilling their fiduciary duties and there will be more demand of transparency in relation to exercising these duties as part of investment decisions. This direction is now clear from the EU Action Plan and the last week’s high-profile conference on how to move the strategy on sustainable finance going forward. While some of the key outcomes will be already seen in about a year.

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New Danish guideline on Responsible Investments

Early March, the governmental entity Danish Business Authority, launched its long-awaited publication Recommendations on Responsible Investments. It closely refers to the OECD’s Responsible Business Conduct for Institutional Investors which is an integrated part of the OECD Guidelines on Multinational Enterprises. The Danish guidelines also refer to the United Nations Guiding Principles on Business and Human Rights (UNGP), the Paris Accord on Climate Change and UN’s 17 Sustainable Development Goals (SDGs).

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Eight sustainable investing trends for 2018

Active ownership and sustainable investing continue to flourish with growing number of institutional investors integrating ESG risks and opportunities into their investment practices and new sustainable investment products appearing across all asset classes. As the 2018 begins, we are looking at the key trends that are going to shape the industry moving forward.

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The cost of ESG exclusion

Exclusion of more than a handful of companies due to ESG incidents has a negative impact on the risk-adjusted financial return, according to the analysis from MSCI ESG Research. Read the article about the main results in Økonomisk Ugebrev (in Danish).

Decline in shareholder democracy

While the Danish and European authorities are pushing institutional investors to be more active and responsible owners of companies they are investing in by voting at the general meetings, among others. It is quite the opposite in the United States. Read more in the Økonomisk Ugebrev article.

EU encourages active and responsible ownership

Just before Easter, the European Union finally adopted the Shareholders’ Rights Directive that is encouraging institutional investors to behave more as active and responsible owners. After ten years of dispute, the European Council followed the EU Commission and Parliament and gave its green light for the comprehensive directive that applies to more than 8.000 listed companies. The member states have now up to two years to transpose the new provision into domestic law.

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Overpaid CEOs underperform financially

Extremely high payments to CEOs are often explained by the “fact” that they get “peanuts” compared to the much higher financial value they are creating for shareholders. In Denmark, it has recently been the answer to the many critics of the IPO of Nets, which resulted in a gain of nearly USD 100 million for the CEO. And the answer was similar when it was known that America’s new foreign minister, Rex Tillerson, raised an annual compensation of USD 27 million as CEO of Exxon Mobil and an even greater amount when he said goodbye to the oil company. However, two independent studies based on the US data prove that the truth is rather the opposite.

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Climate Engagement leads to better Management

During the last months of 2016, Engagement International engaged on behalf of institutional investors with 28 of the 100 listed global companies that are contributing the most to climate change – now or potentially later, due to their fossil fuel reserves. About 40% of the companies have a clear commitment to the Paris Agreement and are explicit about their own responsibility to contribute to the two-degree-goal. However, in general, the highly exposed energy-, mining-, steel- and cement companies need to do much more. Two thirds have shown an increasing carbon emission intensity over the last five years. And a new set of very ambitious financial disclosure recommendations from the Financial Stability Board (FSB) will push not only these highly climate change exposed companies, but organisations in all industries to adopt a better management of their climate risks and opportunities.

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