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February 2021February 2021Volume 8, Issue 2Volume 8, Issue 2

VOTING NEWSVOTING NEWS

PROXY PROXY MONTHLYMONTHLY

POLITICAL CONTRIBUTIONS IN THE POLITICAL CONTRIBUTIONS IN THE WAKE OF THE U.S. RIOTSWAKE OF THE U.S. RIOTS

DREW HAMBLY OF MORGAN DREW HAMBLY OF MORGAN STANLEYSTANLEY

PEOPLE MOVESPEOPLE MOVES

It has been a busy month for the Proxy Insight Online team as investors file proposals and outline their engagement plans for the coming year.

With a new proxy season comes new policy updates, and asset managers have made it clear that climate change will be their top priority in future engagements. BlackRock CEO Larry Fink published his letter to CEOs this month, calling for companies to “disclose a plan for how their business model will be compatible with a net-zero economy,” and eliminate greenhouse gas emissions in line with Paris Agreement goals.

Aviva Investors and EOS at Federated Hermes echoed BlackRock’s sentiment, calling for companies to disclose Scope 1 and Scope 2 emissions, as well as pledging support towards the implementation of an advisory say on climate vote, giving shareholders the opportunity to vote on climate transition plans at portfolio companies.

Investors also wrote to Allison Herren Lee, acting chair of the Securities and Exchange Commission (SEC) requesting the SEC reform its Rule 14a-8 no-action process, suggesting the current policy makes it difficult for shareholders to successfully submit environmental proposals with portfolio companies.

The investors emphasized the Biden administration’s goal to combat climate change through investor engagement but are waiting on an answer from the SEC.

This month’s interview is with Drew Hambly, executive director of global stewardship at Morgan Stanley Investment Management. Drew discusses how Morgan Stanley’s custom voting policy promotes improved governance practices and what the European Technical Expert Group for Sustainable Finance’s official EU Ecolabel means for the future of sustainable investing.

Our first article in this month’s issue explores political action committee (PAC) contribution proposals and the growing demand among investors for disclosure of lobbying payments and policies. The storming of the Capitol building on January 6 by pro-Trump rioters has led many companies to pause PAC contributions, and investors will be increasingly supportive of lobbying disclosure proposals in the coming proxy season.

This month we also include an article first published in Activist Insight Monthly in November 2020. Our sister magazine’s vulnerability report that month cited FirstCash’s weak corporate governance as a potential catalyst for activist activity at the U.S. pawn shop. FirstCash has been subject to ongoing criticism for its all-male board that is only 67% independent, and three directors up for re-election on the staggered board received less than 80% support at FirstCash’s June 2020 annual meeting. To read two of these reports each week, as well as additional analysis, please contact info@insightia.com to arrange a trial of Activist Insight Vulnerability.

We are also pleased to feature a new section in this issue of the magazine, the personnel round-up. This quarterly section highlights the latest hirings and appointments within the investment industry and complements our weekly round-ups on the Proxy Insight Online newswire. I hope you enjoy this issue of Proxy Monthly and welcome your feedback regarding these new developments.

rsherratt@insightia.com@Rebecca_proxy

Proxy statementRebecca Sherratt, corporate governance editor, Proxy Insight, an Insightia company.

2

The storming of the U.S. Capitol building by pro-Trump rioters on January 6 led many companies to pause donations to political action committees (PACs). As tensions increased in the lead up to Joe Biden’s inauguration, investors have been given a sudden wake up call to the risks PAC contributions can have on investment portfolios. As a result, investors will be increasingly attentive toward PAC contribution disclosures in the coming proxy season.

Dying embers

The number of shareholder proposals seeking disclosure of political contributions subjected to a vote has seen a steady decline in recent years. In 2014, 94 shareholder proposals of this kind were subject to a vote in the U.S., decreasing to 73 in 2016, and 60 in both 2019 and 2020 respectively, according to Proxy Insight Online data.This decrease is partly a result of issuers excluding

shareholder proposals from proxy statements on the grounds of being immaterial to shareholder interests after filing 14a-8 no-action requests to the Securities and Exchange Commission (SEC). Companies such as Duke Energy Corporation, The Walt Disney Co, and Pfizer have all successfully excluded proposals of this kind in recent years through use of the 14a-8 no-action process.

A more optimistic take is that companies are improving, at least by some measures. The CPA-Zicklin Index, established by the Center for Political Accountability and the Wharton School’s Zicklin Center for Business Ethics Research, scores companies based upon the transparency of their political donations. The number of S&P 500 companies receiving scores of 90% or higher for transparency was 35 in 2016 but increased to 79 in 2020, with five companies, HP, Honeywell International, Edwards Lifesciences, Northrop Grumman, and Becton, Dickinson & Co, scoring 100%.

Reaching a boiling pointSupport for political contribution disclosure grows, as U.S. investors seek to mitigate the risks of corporate spending, writes Rebecca Sherratt.

3

Shareholder proposals for disclosure of lobbying activities

Source: Insightia | Proxy Insight Online

2015 18249Total666 9

2121142016Total737 8 2

192472017 Total6510 5

1952018 Total577 20 6

31532019 Total604 21 14

2020Total606125 22 14

30-39.9920-29.990-9.99 50+

Support (%)10-19.99 40-49.99

North American issuers, data by calendar year.

2014 172322Total9411 15 6

1

“SUPPORT HAS INCREASED HAND-IN-HAND WITH INVESTORS LEARNING TO RECOGNIZE THE RISKS OF

CORPORATE POLITICAL SPENDING.”

4

But, despite this, support for political contribution disclosure proposals that are subject to a vote has increased year-on-year. In 2014, 22.3% of proposals received over 40% support. This figure increased to 28.3% in 2019, and 33.3% in 2020. In 2017 and 2018, no proposals received over 50% support, compared to 5% in 2019 and 10% in 2020.

Support has increased hand-in-hand with investors learning to recognize the risks of corporate political spending, leading them to urge companies to mitigate risk in their portfolios and safely navigate the ongoing tensions in the U.S.

“The storming of the U.S. Capitol building happened a little late to impact the filing of shareholder proposals for the 2021 proxy season, but will impact the level of support for proposals that will be subject to a vote,” said Dan Carroll, vice-president for programs at the Center for Political Accountability. “The Capitol storming may drive companies to be more interested in reaching withdrawal agreements” with proponents, usually following concessions.

Even if proposals fall short of majority support and receive support in the “upper 20-upper 30% range […] this level of support will often persuade companies to move within a year or so to adopt political disclosure and accountability,” said the president of the Center for Political Accountability, Bruce Freed.

Call to action

Following the storming of the Capitol building, all eyes have been on leading asset managers to engage with portfolio companies regarding the pausing of PAC contributions. But, so far, this has not been the case.Both BlackRock and Vanguard announced a pause on their own PAC contributions, but have made no announcements regarding expectations amongst portfolio companies in direct response to the Capitol storming.

BlackRock’s commentary on political lobbying, published December 2020, recommends issuers “provide accessible and transparent disclosure” so that investors and interested parties can understand how a company’s strategy and contributions align, but data suggests that disclosure of this kind is not a priority for BlackRock. According to Proxy Insight Online data, BlackRock supported 3.3% of political contribution disclosure proposals in 2019, dropping to 0% in 2020.

In BlackRock’s 2020 corporate governance guidelines, the asset manager suggests that “it is not the role of shareholders to suggest or approve corporate political activities; therefore we generally do not support proposals requesting a shareholder vote on political activities or expenditures.”

Although this stance suggests shareholders need not concern themselves with a company’s political contributions, the Center for Political Accountability argues that this view clashes with the concept of accountability being a cornerstone of good governance.

BlackRock is not the only major asset manager subject to scrutiny regarding its support for donation proposals. Vanguard has opposed every proposal of this kind in the past six years, citing similar reasons for opposition, although the asset manager suggests it will take into account the effects of the Capitol storming in future engagements.

“Recent events in the U.S. political landscape have raised new questions about the potential risks associated with corporate political activity,” Vanguard told Proxy Insight

Online in an interview. “The Vanguard funds will take

Investor 2015

2016

2017

2018

2019

2020

*

BlackRock 0 0 0 1.7 3.3 0

Vanguard Group 0 0 0 0 0 0

SSgA Funds Management 31 36 44 27.6 32.8 32.1

Top investor support

Source: Insightia | Proxy Insight Online

Top investor support for political contribution shareholder proposals in the U.S. by calendar year (%).Data for 2020 not yet fully disclosed.

“A MORE TRANSPARENT POLITICAL SYSTEM MAY BE COMING, WHETHER THE INDEX FUNDS ARE ON

BOARD OR NOT.”

that into consideration in our case-by-case analysis, in the same manner in which we integrate other market developments and new data.”

State Street Global Advisors, the world’s fifth-largest asset manager, demonstrated the highest level of support for proposals seeking disclosure of political contributions, 33.8% support over the past six years.

The storming of the Capitol building served as an awakening for investors regarding the risks PAC contributions can have on their portfolios. A more transparent political system may be coming, whether the index funds are on board or not.

Source: Insightia | Proxy Insight Online

Top shareholder proponentsMost prolific filers of shareholder proposals on political contributions from 2015-2021.

InvestorProposals

filed

Comptroller of the State of New York 113

Mercy Investment Services 101

Comptroller of the City of New York 74

Boston Trust / Walden Asset Management 71

International Brotherhood of Teamsters 57

T H E A C T I V I S T T H E A C T I V I S T I N V E S T I N G I N V E S T I N G

A N N U A L R E V I E WA N N U A L R E V I E W2 0 2 12 0 2 1

C L I C K H E R E T O C L I C K H E R E T O

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# A I A R 2 0 2 1# A I A R 2 0 2 1

ACTIVIST INSIGHTACTIVIST INSIGHT5 MODULES, 1 DEFINITIVE PLATFORM FOR ACTIVIST 5 MODULES, 1 DEFINITIVE PLATFORM FOR ACTIVIST

INVESTING AND CORPORATE GOVERNANCE INFORMATION.INVESTING AND CORPORATE GOVERNANCE INFORMATION.

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ONLINEONLINE3,500+ ACTIVIST PROFILES, LIVE NEWS & ALERTS, COMPREHENSIVE GLOBAL HISTORICAL CAMPAIGN DATABASE.

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Could you provide a brief overview of how Morgan Stanley approaches its proxy voting responsibilities?

Morgan Stanley carries out its proxy voting processes slightly differently compared to most asset managers, in that we do not outsource. In the 6,500 meetings we vote at on average per year, our team reviews every single meeting and ballot item. We do take advantage of proxy advisory research, but are in no way beholden to proxy voting recommendations from Glass Lewis or Institutional Shareholder Services (ISS).

Morgan Stanley has its own custom policy that is managed internally, and have yet to turn our custom policy over to anyone else to interpret – we do all the work ourselves. We have set ourselves up in a way that we can work with individual investment teams to really understand what is a good governance practice for a certain type of company in a certain type of portfolio. As such, a lot of work is conducted on a case-by-case basis.

Do you expect companies to review executive compensation as part of their approach to coping with COVID-19?

We do, and this falls into two categories. We have witnessed some companies do very well in the pandemic, able to move the majority of their workforce to a work from home model with very little interruption to services provided to clients. In contrast, there are businesses, such as the travel industry, that have been hit hard by the pandemic.

Our expectation is that every company is going to review compensation in the coming year and we would like to see companies that have had a difficult year be very tempered. We expect companies to

show evidence that they are protecting their whole workforce, not just those at the top.

On the flip side, if a company has done extremely well through the pandemic and has had a record-breaking year, we still expect them to be cautious. Morgan Stanley doesn’t support volatile pay, and we advise against companies raising executive compensation by a significant percentage because they had one good year. In our minds, this establishes a level of expectation, causing complications if the following year’s results are flat or a little down. We are expecting boards to take a more holistic view on pay this year because last year was such an unusual year.

How do you think the pandemic will impact the upcoming proxy season? Do you expect we will see a shift in investor voting trends or in the kinds of proposals filed by investors?

COVID-19, the Black Lives Matter movement, and ongoing political turmoil will potentially foster some unique shareholder resolutions in the coming proxy season, perhaps more focussed upon human capital management, climate disclosure, and EE0-1 reporting. COVID-19 was a catalyst for investors to re-examine ESG issues that have always been there in the background, giving people pause to engage with these issues in more depth.

What trends do you think will gain traction in 2021, regarding ESG concerns in the corporate world?

The Black Lives Matter movement has spurred a focus on diversity, equity, and inclusion (DEI), so we expect this topic to gain more attention in 2021, especially at board level. We are cognizant that some directors may

A breath of fresh airAn interview with Drew Hambly, executive director of global stewardship at Morgan Stanley Investment Management.

7

not want to be pigeonholed, so perhaps boards could disclose data at an aggregate level.

The change in U.S. administration is also bringing some fresh air into the ongoing discussion regarding climate change. Biden recently established a net-zero goal for utilities by 2035, meaning investors such as ourselves will be increasingly engaging with issuers and asking what they are doing to transition towards wind or solar energy, or to help retire coal plants.

I think these two issues, as well as an emphasis on a circular economy, are finally receiving increased attention and 2021 will help push this agenda forward.

Do you believe we will see any key areas of growth in socially responsible investing in 2021?

Yes. Starting in spring, the European Technical Expert Group for Sustainable Finance will be permitted to certify sustainable funds with the official EU Ecolabel, should they meet certain sustainability criteria. We may see a lot more investment funds and solutions that are branded as such, promoting responsible investing.

Sustainability is, of course, a broad term and there is the potential for greenwashing, but we are also seeing an increasing number of asset managers allocating portions of their funds to sustainable investments. An example of this is the New York City Employees Retirement System and the New York City Teachers’

8

“COVID-19 WAS A CATALYST FOR INVESTORS TO RE-EXAMINE ESG ISSUES THAT HAVE ALWAYS BEEN

THERE IN THE BACKGROUND, GIVING PEOPLE PAUSE TO ENGAGE WITH THESE ISSUES IN MORE DEPTH.”

$715bn assets under management.*

*At Sept 30, 2020, according to their website.

Investor % Voted For ISS Match %Glass Lewis

Match %

Management

Board of directors 95.4 95.6 92.8

Remuneration 85.3 91.5 85.2

Corporate structure 87.6 97.3 92.9

Committees and reporting 98.4 99.1 96.8

Shareholder

Environmental 53.3 88.9 68.4

Social 44.0 80.0 68.0

General governance 40.5 59.5 60.3

July 1, 2019-June 30, 2020. Source: Insightia | Proxy Insight Online

About Morgan Stanley Investment Management

More than 26,000 resolutions voted in year to June 30, 2020.

Receives voting research from ISS and Glass Lewis.

Retirement System’s $4 billion divestment from coal last month. Investors can sell their oil and gas stocks, but where will they put that money? With more strategies tailored to investors who are focused upon sustainability, we will see an uptick in shareholders taking a more targeted approach as to where they invest their assets.

It will also be interesting to see if the Securities and Exchange Commission (SEC) establishes more standardized ESG disclosures, under a Biden administration.

As companies were forced to adapt to changing circumstances last year, do you expect virtual or hybrid meetings to become an industry standard?

I believe virtual-only or hybrid meetings will continue to be the model for the 2021 proxy season. Hopefully companies have learnt some lessons about participation in virtual and hybrid meetings, making it easier for all parties to get involved to a greater extent. A well-run hybrid model may, in fact, encourage more shareholder participation than a meeting at a physical venue.

Thank you, Drew.

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“I BELIEVE VIRTUAL-ONLY OR HYBRID MEETINGS WILL CONTINUE TO BE THE MODEL FOR THE 2021

PROXY SEASON.”

“WE EXPECT COMPANIES TO SHOW

EVIDENCE THAT THEY ARE PROTECTING

THEIR WHOLE WORKFORCE, NOT JUST

THOSE AT THE TOP.”“

“

IN HOCKFIRSTCASH, THE BIGGEST PAWN SHOP OPERATOR IN THE AMERICAS, COULD FIND ITSELF TARGETED BY ACTIVISTS DUE TO ITS SLOWING GROWTH RATE, WEAK GOVERNANCE, AND FAILURE TO EMBRACE TECHNOLOGY, WRITES JASON BOOTH.

FIRSTCASH

SECTOR FINANCIAL SERVICES

MARKET CAP $2.3 BILLION (MID CAP)

EXCHANGE NASDAQ

TICKER FCFS

HQ FORT WORTH, TX

VULNERABILITIES

A pandemic-induced recession might seem like the ideal

time to be running a chain of pawn shops, but market leader

FirstCash has failed to cash in. Weak corporate governance

and a board getting low marks from investors may make it a

tempting target for a bargain hunting activist. The Texas-based

company ranks in the 96th percentile of the Activist Insight

Vulnerability index of companies most likely to face demands

over the next nine months.

If so, an activist would likely push the company to follow the

example of peer EZCorp by developing its online presence,

thus reducing dependence on store traffic to generate revenue.

They could also follow EZ’s lead and team up with an online

bank to offer financial services to customers, adding a new

business line at a time when acquisition-driven growth looks to

be running out of steam.

FirstCash has grown through acquisitions to become the

largest operator of retail-based pawn stores in the United

States and Latin America, with over 2,700 retail outlets.

Despite its size, its store makes money the same way as

any other pawn shop would, making pawn loans secured by

personal property, ranging from jewelry to power tools and

guns. Most loans are small, averaging around $190 in the

U.S. and $67 in Latin America. FirstCash not only charges a

monthly service fee of around 13% on those loans, but if the

borrower doesn’t repay the loan, the pawn shop can sell the

items held as collateral for a sizable profit, usually between

35% and 40%. Until recently, FirstCash also had a payday loan

business, where people could borrow against future earnings,

paying a steep interest rate. The business generated over $118

million in revenue as recently as 2015. But with federal, state,

and local regulators imposing tighter rules on payday lending

in recent years, FirstCash and its affiliate Cash America have

exited most of that business to focus on their pawn stores.

Revenue more than doubled between 2015 and 2017, from

just over $700 million to around $1.8 billion, but has remained

relatively steady since then. The stock’s performance has

DIRECTOR SUPPORT LACK OF DIVERSITYTOTAL SHAREHOLDER RETURN

“

“GROWTH

.

THIS ARTICLE WAS FEATURED IN THE NOVEMBER 2020 ISSUE OF ACTIVIST INSIGHT MONTHLY.ALL DATA CORRECT AT TIME OF PUBLICATION.

“SINCE MID-2019, HOWEVER, THE STOCK PERFORMANCE HAS WEAKENED AS THE COMPANY HAS STARTED TO RUN OUT OF SUITABLE TAKEOVER TARGETS.”“

“

10

FIRSTCASH’S 12-MONTH SHARE PRICE PERFORMANCE

0

20

40

60

80

100

0

1000

2000

3000

4000

5000

01 NOVEMBER 2019 01 MARCH 2020 01 JULY 2020 01 NOVEMBER 2020

CLOSING SHARE PRICE ($) VOLUME ('000S)

reflected that growth. Shareholder returns over the last five

years were a strong 74%, roughly equal to the S&P 500 Index

and easily beating average returns of 5% for peers. Since mid-

2019, however, performance has weakened as the company

has started to run out of suitable takeover targets, wound

down its payday loan business and, more recently, seen

business slow due to the COVID-19 pandemic.

BAD PANDEMIC

The pawn industry traditionally thrives when unemployment

and the poverty rate rise as more people try to make ends

meet by pawning personal items. But this downturn has

been different, as government stimulus checks have kept

heads above water and the fear of infection has kept them

out of stores. Some pawn shops, and especially those run by

FirstCash, have suffered more than others.

Despite there being over 15,000 pawn shops in the U.S.,

FirstCash has only one large publicly traded rival, EZCorp (its

other proxy peers are discount stores and consumer lending

companies). Over the longer term FirstCash has outperformed

EZCorp in terms of growth and profitability. But the smaller

rival has performed better during the pandemic. While

FirstCash’s revenue fell almost 8% to around $413 million in

the second quarter versus the same period of 2019, EZCorp

revenue was up around 5% to $210 million. Though EZCorp

posted a small net loss in the most recent quarter, it increased

its cash holdings to $311 million, up $100 million compared to

the prior quarter. FirstCash remained profitable, albeit seeing a

30% decline in net earnings, but it also borrowed $500 million,

adding to a sizable debt load, which has tripled since 2015.

As a result, FirstCash’s shareholder returns have been negative

34% over the last year, versus negative 13% for peers and a

gain of 7% for S&P 500 companies. EZCorp’s stock is down

just under 5% over the last 12 months. One reason for that is

that EZCorp still engages in the payday loan business. It has

also begun to embrace technology. Unlike FirstCash, some of

EZ Corp’s stores sell their merchandise via the internet, as do

a growing number of other pawn shops. In 2019, it launched

its “Lana” digital platform, through which it issues credit cards

to people with poor credit, via a deal with Green Dot, enabling

customers to remotely manage both pawn and payday loans.

EZCorp reported more than 32,000 Lana accounts as of June

30, up from around 8,000 at the end of March.

MEN ONLY

An activist would likely also target FirstCash’s weak corporate

governance. There are no women on the board and only 67%

of directors are independent, versus an average 86% for S&P

500 companies. CEO Rick Wessel also serves as chairman

and has been a director for 28 years. Three directors up for

re-election on the staggered board at the annual meeting in

June received less than 80% support, well below the 94%

average for U.S. companies, with dissenting shareholders citing

governance problems.

Primary-focus and partial-focus activists currently hold less

than 1% of shares. But given that insiders own less than 3%

of the company, an activist would have little trouble acquiring

an influential stake in the mid-cap company. An activist might

also find support among existing shareholders.

Earnest Partners, which has a 5.3% stake, supported Starboard

Value’s successful proxy fight at Darden Restaurants. Fiduciary

Management, with 3.6%, supported Voce’s campaign at Argo

Group International Holdings, according to Proxy Insight.

A

JANUARY 29, 2020 - FIRSTCASH ISSUES Q4 2019 EARNINGS.A

JULY 22, 2020 - FIRSTCASH ISSUES Q2 2020 EARNINGS.B

B

Share price data source: CSI - www.csidata.com and Xignite

11

http://www.proxyinsight.com

13

Upcoming eventsA selection of meetings and shareholder proposals in the coming month.

Issuer Type HQ Date

Oxford Metrics Annual February 18, 2021 DETAIL

Stellantis Special March 8, 2021 DETAIL

Walt Disney Company Annual March 9, 2021 DETAIL

Maximus Inc Annual March 16, 2021 DETAIL

Starbucks Annual March 17, 2021 DETAIL

Meetings

Shareholder proposals

Sponsor Issuer HQ Meeting Date

Oxfam America Sanderson Farms February 18, 2021 DETAIL

Report on human rights due diligence process

Requesting a report to assess the company’s human rights due diligence process.

Unknown Apple Inc. February 23, 2021 DETAIL

Improve principles of executive compensation program

Improve the executive compensation program to include NEO pay ratios.

John Chevedden AECOM February 24, 2021 DETAIL

Report on lobbying payments and policy

Requesting a report disclosing company policy and payments concerning lobbying.

Congregation of Sisters of St Agnes Walt Disney Company March 9, 2021 DETAIL

Report on lobbying payments and policy

Requesting a report disclosing company policy and payments concerning lobbying.

Kenneth Steiner Applied Materials Inc March 11, 2021 DETAIL

Require independent board chairman

Requesting the adoption of a policy requiring the board chairman to be independent.

Global

BlackRock CEO Larry Fink’s annual letter to CEOs called

for companies to “disclose a plan for how their business

model will be compatible with a net-zero economy,”

eliminating greenhouse gas emissions in line with Paris

Agreement goals, and establishing science-based targets

to limit global warming to no more than 2°C above

preindustrial averages.

More than 20 asset managers wrote to BlackRock CEO

Larry Fink on January 25, calling for the world’s largest

asset manager to align its disclosure policies with its

recommendations for portfolio companies. BlackRock

is criticized for its lack of disclosure surrounding its own

lobbying activities, and failing to support shareholder

proposals calling for transparency surrounding corporate

political donations.

The Net-Zero Asset Owner Alliance published its “Inaugural

2025 Target Setting Protocol” on January 14, outlining

decarbonization targets for issuers and institutional investors

to achieve by 2025. The protocol promotes the disclosure of

Scope 1 and 2 emissions, and the establishment of targets to

cut Scope 3 emissions. The protocol asks financial institutions,

sovereign wealth funds, and companies to set science-based

targets for 2025 and report against those.

Investor alliance Follow This announced its intention to file

multiple shareholder proposals at oil and gas companies,

including Chevron, BP, and Equinor. The proposals call

for the energy companies to disclose their greenhouse

gas emissions data and set targets to reach net-zero

emissions by 2050 and follow on from resolutions filed

by Follow This in 2020, requesting companies align with

Paris Agreement goals.

14

News summaryThe latest developments in corporate governance.

Policy Changes

Glass Lewis announced updates to its proxy voting recommendations for Europe and Asia. The proxy adviser’s changes

reflect a renewed focus on board composition and independence.

Fidelity Management & Research published its 2021 proxy voting guidelines, revising its policies regarding board

composition, overboarding, and stock lending.

Aviva Investors updated its proxy voting guidelines for 2021, adding expectations for companies to set science-based

emissions targets. Revisions have also been made to its guidelines concerning conflicts of interest, remuneration, and

board independence.

Invesco’s proxy voting guidelines have been updated, revising the asset manager’s policies regarding auditor

independence, board accountability, and conflicts of interest.

Schroders updated its proxy voting guidelines, outlining developments to its ESG risk management processes and an

increased focus on board independence and human capital management.

Massachusetts Financial Services Investment Management (MFS) published its 2021 proxy voting guidelines, featuring

amendments to its director nomination, diversity, and proxy analysis sections.

DETAIL

DETAIL

DETAIL

DETAIL

DETAIL

DETAIL

DETAIL

DETAIL

DETAIL

DETAIL

15

A study published by climate lobby group InfluenceMap

suggests leading asset managers are failing to align portfolios

with the goals of the Paris Agreement. In a sample of the

world’s 30-largest asset managers by equity holdings,

between 8% and 27% deviated from Paris-aligned targets.

Overall support for environmental proposals increased in the

2020 proxy season, but institutional investors declined to

support 75% or more of environmental proposals, according to

InfluenceMap’s report.

North America

The New York City Employees Retirement System (NYCERS)

and the New York City Teachers’ Retirement System (TRS)

announced an estimated $4 billion divestment from securities

related to fossil fuel companies, one of the largest divestments

in the world. This announcement forms part of the New York

Comptroller’s target to reach net-zero emissions by 2050 for all

New York pension funds. The divestment, announced January

25, is expected to take five years.

Joe Biden’s presidency is expected to give socially responsible

investing a big boost in the coming years, according to

a white paper from leading proxy adviser Institutional

Shareholder Services (ISS). ISS evaluates countries on their

ESG frameworks through its ISS ESG Country Rating system.

Implementation of Biden’s climate engagement plans could

push the U.S. from its current ISS ESG Country Rating ranking

of 117 out of 120 to 70 within the next five-10 years, the report

suggests.

Shareholder activist James McRitchie filed proposals for

multiple companies, including Starbucks, to consider non-

management employees as prospective director candidates.

McRitchie cited a recent study by the National Bureau of

Economic Research, suggesting that employee representation

on boards “contribute[s] to overall more cooperative labor

relations.”

A group of investors told Acting Chair Allison Herren Lee

that the Securities and Exchange Commission (SEC) must

urgently revise its Rule 14a-8 no-action relief process to allow

investors to engage with issuers on climate concerns. The

investors suggested the current framework works against the

Biden administration’s goal to combat climate change through

investor engagement.

The Open Media & Information Companies Initiative (Open

MIC) coordinated the filing of shareholder proposals at

Home Depot and Omnicom Group on January 15, calling

for investigations into the spread of inappropriate content

via social media advertising. The proposals seek third-party

investigations into how advertisers may have “inadvertently

financed the spread of white supremacy, disinformation, voter

suppression, government censorship, and more on social

media platforms.”

A serious lack of ESG expertise on U.S. boards of directors

is hampering engagement with investor concerns, according

to a study by Tensie Whelan, Clinical Professor of Business

at the New York University Stern Center for Sustainable

Business. The white paper, entitled “U.S. corporate boards

suffer from inadequate expertise in financially-material ESG

matters,” reviewed the credentials of 1,188 Fortune 100 board

members, finding “very little director expertise” present among

evaluated board members.

The Congregation of Sisters of St Agnes refiled a shareholder

proposal calling for Walt Disney to revise its current lobbying

policies and report on payments it has made as part of a six-

year engagement with the company to disclose its lobbying

expenditures. The board recommends shareholders oppose

the upcoming resolution, suggesting additional disclosure is

not an efficient use of resources.

Europe

The European Securities and Markets Authority (ESMA)

wrote to the European Commission (EC) on January 28,

urging the organization to implement standardized ESG

ratings and regulations for ESG assessment tools, to

mitigate the risk of greenwashing, product mis-selling and

capital misallocation.

The U.K. government published a rule that would require

workplace pension schemes to report on climate-related

risks within their portfolios, as part of the Pension

Schemes Bill. From October 2022, trustees of pension

plans with more than 5 billion pounds in assets under

management will be required to report on the financial

risks within their portfolios, in line with recommendations

set out by the Task Force on Climate-related Financial

Disclosures (TCFD).

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The Investor Forum published its 2020 annual review

on January 12, reporting its strongest year of collective

engagement activity and recommending the introduction

of a mandatory “say on climate” vote. The say on climate

campaign, launched by The Children’s Investment Fund (TCI)

CEO Chris Hohn, advocates shareholders being given the

opportunity to vote on corporate climate action plans. The

campaign encourages issuers to establish emission reduction

plans and provide annual disclosure of emissions.

RPMI Railpen, the asset manager for U.K. railway pension

schemes, urged the government to revise the HM Treasury’s

Listings Review, expressing concern that the proposed dual-

class share structure ruling does not protect the rights of minority

shareholders. RPMI Railpen suggested reconsidering whether

shares with reduced voting rights should have their weighting in

the index reduced by a commensurate amount.

French energy company Total announced it would not be

renewing its membership to the American Petroleum Institute

(API), following disagreements regarding climate policies and

investor pressure to cut emissions. In a January 15 press

release, Total said differing views on pricing carbon, as well

as a lack of support for investment in electric vehicles, were

behind its decision to exit API.

Responsible investment charity ShareAction wrote to the chairs

of FTSE 100 businesses, calling for companies to make annual

meetings more accessible to shareholders in the coming year.

Investors have expressed concern regarding shareholder

meetings in the coming year, as the U.K. Government’s

Corporate Insolvency and Governance Bill, allowing companies

to shift to virtual meetings in response to the pandemic, is due

to expire on March 30.

In a new whitepaper entitled “Gender diversity in the FTSE

350,” Glass Lewis notes that the aggregate percentage of

women directors in the FTSE 350 has increased from 15.8% in

2018 to 33.6% in 2020. Glass Lewis recommends companies

focus attention toward appointing qualified women into key

leadership roles, including CFO and CEO positions. The

whitepaper also suggests FTSE 350 companies aim for a

minimum of 40% female representation, providing a buffer in

transitional periods where women directors may exit boards

and diversity levels may decrease.

Shareholders filed a proposal at FTSE 100 supermarket chain

Tesco on February 9, calling the company to set targets to

increase the proportion of healthy products in its sales. The

resolution, co-filed by 108 investors and co-ordinated by

responsible investment organization ShareAction, requests

Tesco disclose the share of total food and non-alcoholic drink

annual sales consisting of healthier products (as defined by

the U.K. Department of Health) and develop a strategy to

“significantly increase” that share by 2030.

Asia-Pacific

In response to proxy advisers Glass Lewis and Institutional

Shareholder Services (ISS) updating their policies to oppose

cross-shareholding share structures, the Tokyo Stock Exchange

has announced revisions to its listing requirements. Index

membership will depend upon the level of free-flowing market

capitalization, excluding cross-held shares. Changes will be

implemented on March 31, 2021.

South Korea’s Financial Services Commission (FSC) announced

that large companies will be expected to disclose ESG data

by 2025. This will expand to all companies listed on the Korea

Composite Stock Price Index (KOSPI) by 2030. The Korea

Exchange will publish guidance on ESG disclosure in the coming

weeks, promoting voluntary disclosure by listed companies.

The Korean stewardship code will also be revised, introducing

revisions to fiduciary duties relating to ESG.

South Korean conglomerate GS Group has drawn the ire

of investors with a proposed $3 billion tie-up of two of its

retail businesses. In November, GS Group revealed plans to

merge GS Retail with GS Shop, touting the synergies and

increased scale resulting from the tie-up. But GS Shop minority

shareholders say the proposed merger ratio of 4.22 shares of

GS Retail for one share of GS Shop undervalues the country’s

biggest home shopping network.

A recent study by the Australasian Center for Corporate

Responsibility (ACCR) calls on investors to revise their

engagement process with fossil fuel companies to ensure

all measures to support climate change action have been

exhausted prior to divestment.

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U.S.

Satyam Khanna – Securities and Exchange Commission

Senior policy adviser for climate and ESG

Satyam Khanna was promoted to senior policy adviser

for climate and ESG for the Securities and Exchange

Commission (SEC). In this new role, Khanna advises the

SEC on environmental, social, and governance matters

and advancing new initiatives across its offices. Khanna

was previously a member of the SEC’s Investor Advisory

Committee, where he served on the Investor-as-Owner

Subcommittee, and was a senior adviser to the U.N.

Principles for Responsible Investment (PRI).

Olivia Knight – As You SowRacial justice initiative coordinator

Olivia Knight recently became a leading member of As You

Sow’s Racial Justice Initiative. She earned a Master’s in

Environment, Development, and Policy from the University

of Sussex in the U.K. where her research focused on

African-American participation in mainstream environmental

movements in the U.S.

Sharo Atmeh – Alyeska Investment Group

Head of ESG

Sharo Atmeh joined Alyeska Investment Group as head of

ESG, overseeing the integration of ESG factors into investment

processes and portfolio construction. Atmeh also leads the

sustainable investing and corporate engagement programs.

U.K.

Eva Sun-Wai – M&G Investments

Global government bond fund manager

M&G Investments promoted Eva Sun-Wai to manage its global

government bond fund, with over 2.5 billion pounds in assets

under management. Sun-Wai has taken over from Claudia

Calich and will serve in her stead as deputy manager of M&G’s

global macro bond strategy, with over 2.3 billion pounds in

assets. Sun-Wai joined M&G in 2018 as a graduate intern,

before moving to the wholesale fixed income team in 2019.

Daniela Dorelova – Nomura Asset Management

Global utilities and ESG analyst

Daniela Dorelova joined Nomura Asset Management’s

global equity team in London, to bolster the team’s ESG

research and support its sustainable equity strategy.

Dorelova joined from Nomura’s risk and performance unit,

having spent most of 2020 helping the team achieve its

environmental impact goals.

Minako Takaba – Nomura Asset Management

ESG investment manager

Minako joined Nomura Asset Management in January 2021

to support ESG integration within managed funds. Prior

to this, she spent 13 years overseeing ESG ratings and

managing ESG Japan research at Morgan Stanley Capital

International ESG Research. She is a co-head of Women in

Exchange Traded Funds’ Japan Chapter.

Nancy Hameni – CMi2i

Head of proxy

Nancy Hameni recently joined Cmi2i as the firm’s new head

of proxy solicitation. Hameni joins from D.F. King where

she was a director of proxy solicitation and corporate

advisory across the EMEA region. Hameni has over nine

years of experience in investor relations, shareholder

communications, corporate governance, transactional

services, and activist situations.

Heloise Courault and Anne Hirai – Squarewell PartnersCo-heads of ESG research

SquareWell Partners appointed Anna Hirai and Heloise

Courault to co-head its newly-created ESG Research

Team. They will support the consultancy’s growing global

client base and craft ESG strategies that resonate with

all stakeholders. Hirai joins SquareWell from one of the

leading ESG research and ratings firm, Vigeo Eiris, where

she rated listed companies’ ESG practices. Courault joins

SquareWell from Institutional Shareholder Services (ISS),

the world’s largest proxy adviser, where she served as a

senior research analyst and was involved in ISS’ policy

formulation for continental Europe.

17

Personnel roundupThe latest hirings and appointments in the investment market.

Subscribe to Proxy Insight Online for regular market updates in our weekly personnel round-ups.

18

Rest of the World

Allyson Porter – Georgeson

Corporate governance manager

As corporate governance manager of Georgeson Australia,

Allyson Porter oversees the company’s ESG advisory services

for Australia. Porter holds a Diploma of Investor Relations, a

Bachelor’s in Commerce, and an MSc in Aviation.

Luiz Sorge – BNP Paribas Asset Management

Head of Latin America

BNP Paribas Asset Management promoted Luiz Sorge to

the role of head of Latin America. In this new position, Sorge

will expand the company’s long-term sustainable investment

solutions for BNP Paribas clients. Sorge joined BNP in 2001

as director of products for BNP Brazil. In 2007, he became

head of sales and product development for institutional and

individual investors and foreign investors.

Gomolemo Seete – Old Mutual Investment Group

ESG analyst

Old Mutual appointed Gomolemo Seete as its ESG analyst

on February 1. Prior to this role, she served as an equity

analyst specializing in ESG at All Weather Capital, based in

Johannesburg, South Africa. Seete began her financial career

at STANLIB Asset Management, serving as an investment

support administrator for four years, during which time she

obtained her Honours degree in Investment Management from

the University of Johannesburg.

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19

Last month in briefA summary of shareholder proposals in January.

Board of directors

Corporate structure

General governance

Committees & reporting

Remuneration

Environmental & social

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4 4

3

1

1

Source: Insightia | Proxy Insight Online

Global shareholder proposals by category

Resolution TypeGlobal* U.S. U.K. Canada Australia Japan

Avg Chng Avg Chng Avg Chng Avg Chng Avg Chng Avg Chng

All 38.1 +0.3 33.9 +0.2 46.4 0 28.4 +0.4 18.7 0 18.9 +0.1

Board of directors 48.0 +0.4 39.2 +0.7 47.2 0 43.2 0 14.6 0 27.2 0

Committees & reporting 36.7 -0.6 17.4† 0 14.0† 0 3.4 -0.2 N/A N/A 11.8 0

Corporate structure 28.6 -0.2 16.9 +0.2 78.5 0 23.8 -4.6 19.5 0 14.1 0

Environmental & social 23.8 -0.1 31.1 -0.2 17.8† 0 26.5 0 24.4 0 6.1 0

General governance 40.9 +0.7 41.2 +0.4 N/A N/A 59.2† +40.8 6.8† 0 40.9 +1.5

Remuneration 33.5 -0.3 20.7 -0.4 3.1† 0 14.7 0 N/A N/A 21.2 0

Source: Insightia | Proxy Insight Online * Excludes China due to difference in market practices.† Based on fewer than five results.

Shareholder proposal results by region12-month average support % to January 31, 2021, with degree of change from December 31, 2020.