Asset owners unite to push key ESG agendas
Asset owners are increasingly making their voices heard in unison as active investors. Views on deficient environmental, social and governance (ESG) efforts in investee communities are more often turning into action on climate-related issues.
Most recently, three institutional shareholders filed a climate lobbying-related resolution for Toyota Motor Corporation’s annual general meeting on June 14th. Although the resolution only got 15% of shareholders’ backing – against a need of at least 2/3 to be adopted – the number indicates that the suggestion resonated with investors.
“There is definitely a rise in institutional investors being active on pushing the climate agenda in portfolio companies. It is on the rise in Asia and North America after the climate agenda has gotten prevalent in Europe among institutions there,” Anders Schelde, chief investment officer at AkademikerPension, told AsianInvestor.
Also read: Global asset owners pile pressure on Toyota over climate lobbying
The Danish pension fund, with about $20 billion in total AUM, filed the Toyota climate lobbying resolution together with Dutch pension investment company APG Asset Management ($581 billion AUM) and Norwegian financial services company Storebrand Asset Management ($120 billion AUM).
“The more and the bigger institutional investors that voice similar views on an issue, it becomes harder to ignore when it is not just something that we are thinking about in our Gentofte headquarters with our relatively small AUM of $20 billion. We are harder to brush off when other, large institutional investors have similar views,” Schelde said.
Among the asset owners that publicly backed the resolution were the California Public Employees' Retirement System (CalPERS), the largest US public pension fund with some $450 billion in AUM, and the Office of the New York City Comptroller overseeing a pension system with about $243 billion in AUM.
Likewise, the Church of England Pensions Board with about €3.2billion ($3.5 billion) in AUM declared its support for the resolution. A CalPERS spokesperson declined to comment on AsianInvestor’s inquiries about the fund’s views on shared views on assets owners. The Office of the New York City Comptroller and the Church of England Pensions Board did not respond to AsianInvestor’s inquiries.
CLIMATE CONSENSUS
Schelde pointed out that it is often the climate issue that leads to action, but institutional investors have generally become more active and willing to use new tools.
“There is an increase in shareholder suggestions also regarding climate. We also see a tendency of lawsuits where it is no longer about money but also about corporations not living up to their own climate aspirations. The trend is accelerating, and we believe it will continue,” he said.
Schelde mentioned Shell as a recent example of this trend. On February 9, 2023, NGO ClientEarth sued all eleven members of the board of directors of Shell plc before the English High Court for allegedly failing to take steps to protect Shell against climate change-related risks.
Also read: How asset owners aim to close ESG data gap themselves
In the case of Toyota, the world’s largest car maker, the group’s electric vehicle (EV) transition is important for the decarbonization of the entire auto industry and its supply chain of auto-related industries such as steel making and components.
“This proposal is unique because the proposing shareholders consist of institutional investors only and do not include an NGO," Park Yoo-kyung, head of responsible investment and governance in Asia Pacific at APG Asset Management, told AsianInvestor.
"Properly handling climate risks is not just for social good. In fact, it significantly affects Toyota’s corporate market value,” she added.
CHANGING JAPAN
The active trend for ESG matters has an effect on corporations in Asia as well. For instance in Japan, according to Koh Matsuki, CEO of Japanese ESG advocacy firm Proxy Watcher.
He believes that corporate Japan is getting into the biggest momentum where Japanese companies will transform to meet global expectations from investors.
“Investors are finally waking up to Japanese companies. Investors are keen to actively engage with companies, with the Tokyo Stock Exchange requesting listed companies with stagnant price-to-book ratios to disclose and implement improvement measures," Matsuki told AsianInvestor.
"Numerous investors including NBIM, who has shares in more than 1500 companies in Japan, will vote against corporate leaders without female directors."
Matsuki referred to the Norwegian sovereign wealth fund’s investment management arm Norges Bank Investment Management (NBIM) that in December 2022 sent an open letter to Japan’s Financial Services Agency and the Tokyo Stock Exchange raising concerns on gender diversity on company boards.
In April 2023, NBIM took its diversity efforts a step further by declaring the fund will vote against board nominations of Japanese companies it invests in that do not include any female directors.
AkademikerPension’s Schelde also noted the differences in ESG focus in different markets.
“In Japan, for instance, shareholder suggestions happen very rarely and are a bit unheard of. In our native Denmark, Danish companies are not particularly happy either when they get shareholder proposals, but there is more acceptance, in our view,” he said.