Shareholders are increasingly using annual general meetings to push their ESG agenda, says AXA Investment Managers.
According to the group, ESG topics have become increasingly entwined in the meeting process and shareholder voting has become a “concrete avenue” to enact meaningful stewardship of assets.
Executive pay and ‘social’ acceptability have attracted particular attention among shareholders. After the pandemic, there was a significant spike in executive pay packages, but investors have been keen to see the same trend reflected among lower-paid employees.
In market commentary, AXA IM said: “To avoid widening the gap between average worker pay and the total remuneration available to executives, many investors specifically asked whether companies had taken steps to support their lowest paid employees and pushed for increases in executive base salary to be proportionally lower than the overall workforce.
“While a large majority of UK employers took appropriate action, some were widely considered to be lagging and this translated into a notable increase in dissent at AGMs around remuneration-related items,”
AGMs have also seen growing focus on voting activities this year. In June, the European Parliament approved its draft of the Corporate Sustainability Due Diligence Directive, requiring companies to consider the potential negative impact of their activities on human rights and the environment. One provision requires asset managers and investors to engage with investee companies and exercise voting rights with the aim of forcing companies to minimise or end any adverse environmental or social impact. AXA IM said this development is likely to further emphasise scrutiny on asset managers’ stewardship approaches.
“Asset owners are increasingly scrutinising how their managers cast votes on their behalf on specific resolutions, helping to address any potential misalignment between the wishes of pension savers and asset manager voting patterns. We expect that evolutions in market guidance, stewardship codes and sustainability-linked regulation will further focus on voting as a powerful lever for asset managers to maximise the success of their stewardship policies and secure sustainable outcomes,” AXA IM said.
This year has also seen an “important and challenging” shift towards fragmentation around ESG, the investment manager said.
Whilst 2023 saw a 12% year-on-year increase in the overall volume of ESG-related shareholder proposals, the US also witnessed a rise in the number of ‘anti-ESG’ proposals. Overall, AXA IM voted on 54 anti-ESG proposals in the first half, more than twice the number voted on in the first half of 2022. The change in direction is likely to reflect the increased prescriptiveness of the resolutions, as well as political support for the oil and gas sector in certain states.
AXA IM said: “We expect fragmentation around ESG to encourage ESG-focused investors to reiterate the evidence of links between ESG factors and long-term financial performance. In this regard, we remain steadfast in our ESG commitments and have increased our level of support for ESG resolutions in H1 2023.”
[Main image: markus-spiske-iZYJzBWXfYA-unsplash]
