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Proxy voting and active ESG engagement

June 2020

Active ownership: proxy voting and ESG engagement activities

Being a responsible investor requires exercising voting rights in the best interests of clients and engaging with companies and sovereign issuers

As an active manager, we strongly believe that taking account of environmental, social and governance (ESG) considerations can help us make better long-term investment decisions for our clients. Furthermore, we believe in leveraging the power of investors to trigger positive change. This involves exercising our voting rights systematically in the best interests of our clients and engaging directly with the companies we invest in when we have ESG concerns.

 

In our latest active ownership report, we present key figures and commentary on our proxy voting and ESG engagement activities. We look forward to continuing our active ownership activities in 2020, both bilaterally and through collaboration with industry partners.

We believe that leveraging the power of investors to trigger positive change helps shape a more sustainable form of capitalism

Arabella Turner
Arabella Turner, ESG Specialist
Discover the full report (only available in English)

Proxy voting

Our latest voting summary can be accessed here and the past records here.

Engagement with corporate issuers

Through our engagement programme, we seek to focus on corporate issuers with material ESG failings in order to encourage them to align their policies, practices and disclosure with established industry best practice.
166 companies engaged with on ESG issues in 2019
graph1_esg_engagment

Source: Sustainalytics, Pictet Asset Management, December 2019


Corporate engagement examples: ESG in action

German power company on environmental and social issues

We started engaging with this company in early 2019 primarily to press the company to sell off its coal and lignite assets. During the year, the company rotated its assets towards renewables and the company committed to achieve carbon neutrality by 2040.

Climate change
Magnus Arrevad

Even if countries meet commitments made under the 2015 Paris Agreement, the world is heading for a 3.2 degrees Celsius global temperature rise over pre-industrial levels, leading to even wider-ranging and more destructive climate impacts, warns the UN Environment Programme.

Source: UN News, 2019

After multiple bilateral and collaborative meetings (through CA100+), the company made considerable progress on a number of engagement objectives as it:

  • started to work with the Science Based Target Initiative (SBTI) in order to assess the disparity between the company’s own carbon reduction targets and the goals of the Paris Agreement
  • committed to improve the alignment of their reporting with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations
  • begun considering linking executive pay to climate targets
  • initiated a global review on climate-related lobbying practices to ensure they are consistent with the company’s own climate strategy

Canadian material company on corporate governance issues

In 2019, we engaged with this company to prevent a majority shareholder from acquiring it at what was, in our view, an unfairly inexpensive price. We discussed the issue with other long-term shareholders to better understand their views and exchange concerns. We directly engaged with the company’s board together with the external deal consultant and the case featured in a Canadian newspaper.

In June 2019, we visited the company’s latest acquisition on-site to see for ourselves whether this warranted the corresponding share price decline. We met the company CEO and VP Finance & Strategy to discuss the rationale and activities there. This only strengthened our conviction that the share price fall was unwarranted. 

As a result, upon the announcement of a takeover, we emphasised to the board that we were not in favour of the move, especially at the existing offer price. When minority shareholders were asked to vote on the potential takeover bid, our investment team voted against the deal. The bid did not go through due to shareholder opposition and, as such, we achieved our goal and the engagement was closed.

Dialogue with sovereign issuers

For our Emerging Markets sovereign debt strategies, ESG factors are integrated within country risk models. A targeted dialogue with sovereign issuers is part of our active ownership strategy.
Deforestation impact
Side_MA_2018-03-11-peru-panther

Jaguars face a number of threats, including habitat fragmentation and illegal killing. South and Central America’s high rates of deforestation – for grazing land, agriculture, and other uses – have not only destroyed jaguars’ habitat, but also broken it up.

Source: National Geographic, 2020

In 2019, we partnered with EMpower, a well-respected and innovative global philanthropic organisation focused on youth in emerging economies, in order to enhance their analysis and understanding of long-term sustainability issues. 

Brazil: ESG in action 

In 2019 our macroeconomic strategist designed a due diligence trip to Brazil to better understand the unique political and economic challenges, as well as gain insight into specific social development issues. Our research showed issues in the quality of spending in education and its diversity and inclusion system. Conversations with the Ministry of Economy show the current administration’s desire to improve Brazil’s business environment and to secure long-term growth for the country. This is an example of the positive feedback loop between improving ESG issues and the overall creditworthiness of a sovereign issuer.

Our ongoing analysis and dialogue surrounding these issues continues away from country due-diligence trips and at times we have an opportunity to act in a collaborative manner with other investors who share our concerns. For example, in 2019 Pictet Asset Management signed an Investor Statement on Deforestation and Forest Fires in the Amazon.