Exercising voting rights and being in dialogue with companies
By active ownership, we understand our responsibility as investors to not only take into account sustainability criteria in the selection process, but also to actively demand measures towards social responsibility, environmental protection, and better transparency from companies.
In doing so, we distinguish between engagement, i.e. formal or informal dialogue with companies, and voting, i.e. the exercise of voting rights at AGMs (Annual General Meetings).
Exercising votes, AGMs
As far as the exercising of voting rights is concerned, the biggest effects of Covid-19 for us have been in signing the registration form to attend the AGMs of Austrian companies and in authorising proxy representatives for such occasions.
While we were able to sign these documents by hand until the beginning of March, we had to switch to electronic signatures from mid-March. The measures that had been taken led to a situation where the physical signature of two authorised people was not an option anymore. By the middle of June, we had registered for 13 AGMs this way.
Some AGMs were and are still being postponed so as to allow shareholders to attend in person. According to our partner ISS (Institutional Shareholder Services), many AGMs have been cancelled, postponed, or turned virtual in the wake of the corona pandemic. In some countries, laws allowing for virtual AGMs had to be passed or amended.
Equity managers were in dialogue with 25 Austrian companies
Covid-19 has not been overly obstructive to company dialogues. After a short period of re-assessment both on our and the companies’ part, dialogues were resumed.
These dialogues do of course not involve personal meetings; instead, they are done by telephone or email, in line with the crisis measures in place. The Responsible Investments Team has been in dialogue with Befea SA among others, an environmental services company that specialises in recycling industrial waste material in the steel industry and recycling services for aluminium and salt slag.
The conversation revolved around the procurement and recycling processes as well as the already comprehensive reporting of the company. Equity and bond fund managers have been in touch with 25 Austrian companies about topics like the reduction of the CO2 footprint, the effects of the corona crisis on companies’ sustainability efforts, AGMs and dividend policy in times of Covid-19, and others.
Themed dialogues
In May and June, we participated in six telephone conferences that were coordinated and headed by our engagement partner Sustainalytics in order to send a clear signal to companies.
We encouraged them to integrate living wages as central pillars in their supply chain management. As owners and investors of companies that depend on their supply chains, we want to support the resilience and survival of small food producers and agricultural employees and thus to strengthen the robustness of the supply chains.
In line with these themes, Erste Asset Management decided also in May – together with 117 other investors – to support a declaration on the basis of an initiative by the Interfaith Center on Corporate Responsibility (ICCR) with recommendations for the protection of the employees of meat-processing companies during Covid-19.
Company dialogues and the EU Green Deal
Sustainalytics failed to find any intensive initiatives for company dialogues with regard to the EU Green Deal. However, important topics of the Green Deal such as the reporting of information and measures for the benefit of climate protection are being addressed by investor alliances such as Climate Action 100+, of which Erste Asset Management is a member.
Active dialogues ensure that companies acknowledge the risks of a quickly changing legal framework in ESG topics and make an effort to reduce them. One has to bear in mind that the EU Green Deal will have an impact on many sectors and society as a whole.
Companies that do not have adequate guidelines, the required infrastructure, or sufficient funding available will be facing big challenges, given the ambitious requirements of the EU Green Deal.
Sources:
EAM – active ownership
ISS (overview cancelled, postponed, virtual AGMs)
BDO – Link (current: Covid-19 and corporate law)
Befesa S.A. – company website
Sustainalytics – blog, email(s)
Interfaith Center on Corporate Responsibility (ICCR) – information on investor statement
Legal note:
Prognoses are no reliable indicator for future performance.