ACTIVISM has long been a feature of annual general meetings held by ASX-listed companies
But an increasing sophistication in the way resolutions are prepared and drafted is leading to more engagement from shareholders and boards.
There are even recommendations from some companies that shareholders vote in favour of activist proposals, says Susheela Peres da Costa, head of advisory at Regnan, a leader in impact investing and ESG (Environmental, Social and Governance).
It’s a major development — and it highlights how portfolios can deliver real results on climate change and other ESG issues when holding companies in portfolios instead of divesting, says Peres da Costa.
“There’s a few reasons for this seismic shift,” she says.
“One is that the advocacy groups have become more sophisticated in understanding the language of shareholders and have a greater appreciation for what is actually within companies’ powers to do.
“But also, investors have become more comfortable about casting their votes based on the substance of the resolution before them — rather than fearing it will be seen as a protest.
“Having a company like BHP recommend that shareholders support a resolution brought by an advocacy group turns that kind of thinking on its head.”
At BHP’s upcoming annual meeting, activists have proposed the mining giant rethink its membership of industry associations that do not support the Paris Agreement’s climate goals. The BHP board agrees and has recommended shareholders pass the resolution.
“That was unthinkable just a few years ago,” says Peres da Costa
A similar resolution has been put to miner South32 which has also recommended shareholders vote in favour.
In the past, activist resolutions were often dismissed by companies and institutional shareholders declined to take proposals from activists seriously.
“Investors have also changed their approach,” says Peres da Costa.
“Big institutions are increasingly recognising that using their votes in a principled way can communicate their position more clearly and transparently than relying only on private meetings behind closed doors.”
Find out about
Regnan Global Equity Impact Solutions Fund
In Australia, successful shareholder resolutions are often drafted by non-government organisations with roots in the not-for-profit sector.
Campaigner Market Forces grew out of the Friends of the Earth climate group. Researcher and shareholder advocate Australasian Centre for Corporate Responsibility is partly funded by industry super funds.
Resolutions may have started as way for activists to make a protest, but increasingly institutional shareholders are co-sponsoring shareholder resolutions being put to boards.
The lesson for investors?
“Stewardship does drive change. It is working, and success breeds further success,” says Peres da Costa.
“It may not get the cut-through that divestment does, but shareholder engagement and voting can really change things in the world. Changes that companies make after a successful shareholder resolution are proof.”
Susheela is Regnan’s head of advisory. She has more than 15 years of domestic and international experience advising institutional investors on responsible investment.
As Head of Advisory, she has assisted small foundations through to the world’s largest institutions, including a successful 18-month project in Switzerland responsible investment leadership for a global full-service bank and strategic advice to the UN-backed Principles for Responsible Investment on upgrading stewardship.
Susheela chairs the Responsible Investment Association of Australasia and is special adviser to the co-chair of the Australian Sustainable Finance Initiative.
Regnan is a responsible investment leader with a long and proud history of providing insight and advice to investors with an interest in long-term, broad-based or values-aligned performance.
Building on that expertise, in 2019 Regnan expanded into responsible investment funds management, backed by the considerable resources of Pendal Group.
Regnan Global Equity Impact Solutions Fund invests in mission-driven companies we believe are well placed to solve the world’s biggest problems, while the Regnan Credit Impact Trust (available in Australia only) invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change.
For more information on these and other responsible investing strategies, contact Head of Regnan and Responsible Investment Distribution Jeremy Dean at email@example.com.
This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at October 6, 2021.
PFSL is the responsible entity and issuer of units in the Regnan Global Equity Impact Solutions Fund (Fund), ARSN: 645 981 853. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund.
An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested.
This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.
The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.
Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance.
Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.
For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com