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Workers’ Capital News - January 2014

In this issue:

  • Shareholder Activism

    ERAFP sets voting policy on excessive executive pay / New voting guidelines from Ethos increase remuneration scrutiny / 2014 proxy season themes: disclosure, pay for performance, engagement / Review executive pay and proxy voting resources from CWC

  • Governance and Disclosure

    Japan produces draft Stewardship Code / UK debates fiduciary duty / Find resources from on fiduciary duty, stewardship codes and responsible investment on CWC website

  • Pensions and Investments

    UN urges retirement funds move to low-carbon assets / Danish funds commit to renewable energy in emerging economies / Competitive returns from low carbon investment: CDP report / See climate risk and opportunity investor brief from CWC

Shareholder Activism

 ERAFP sets voting policy on excessive executive pay

The French Public Service Additional Pension Scheme, ERAPF, has set a maximum limit in its voting policy: corporations can pay executives no more than 50 times the median workers’ salary, as reported by Responsible Investor  Another voting consideration for ERAFP shareholder activism in 2014 will be board gender diversity, to have corporations meet EU targets for 30% women on boards by 2015, increasing to 40% by 2020.

 New voting guidelines from Ethos increase remuneration scrutiny

In their 2014 proxy voting guidelines, the Ethos Foundation (Switzerland) has established limits for both fixed and variable remuneration. Base salaries are not to exceed median pay within a group of peer corporations, and variable components – such as bonuses and other performance-based instruments – should not exceed three times the base pay for a CEO. Ethos found that of 42 companies that disclosed on potential compensation in Switzerland, 18 would be above the limit of three-times base salary.

2014 proxy season themes: disclosure, pay for performance, engagement

The Wall Street Journal reports that while compensation and governance issues will still be prominent this proxy season, boards are expecting additional scrutiny on three particular fronts: disclosure, pay for performance and engagement. Push for pay-ratio disclosure and more long-term engagement are anticipated drivers for these themes.

Governance and Disclosure

 Japan produces draft Stewardship Code

As reported in Responsible Investor, Japan has published a draft Stewardship Code of Principles for Responsible Institutional Investors. The Code focuses on fostering corporate value over the medium- to long-term through constructive engagement or dialogue with companies. Seven principles are outlined in the Code, including policy on stewardship responsibilities, monitoring companies, policies on voting activity and disclosure, and ongoing reporting and engagement. English and Japanese versions of the draft Code are available here and comments are due by Feb. 9.

 UK debates fiduciary duty

 ShareAction’s response to the UK Law Commission, reported in I&P Europe, calls for clarification on the applicability of ESG integration in regard to fiduciary responsibilities. The response to a recent consultation paper on fiduciary duties underscores that non-financial factors should not be characterized as incompatible with passive investment practices and that engagement might only be cost-effective for larger funds.

The Network for Sustainable Financial Markets has also weighed in on the fiduciary duty consultation paper. In its response, NSFM highlighting contributions such as identification that trustees may to take into account ESG factors and systemic issues, as well as quality of life and ethical considerations that do not reduce returns. There are also a number of outdated assumptions that NSFM disputes, such as diverse practices beyond screening for ESG integration, and application of ESG factors beyond public equities and for all sizes of funds.

  • For more resources on responsible investment, fiduciary duty and stewardship codes, see the CWC’s trustee education page

Pensions and Investments

UN urges retirement funds move to low-carbon assets

Pointing to investments in fossil-fuel assets, the Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC) called for institutional investors to help reverse the trend of increasing emission by shifting to low carbon.  Concern for a lack of corporate disclosure on holdings in fossil fuel resources and a lack of necessary levels of investment for the shift to a low-carbon future highlighted the urgency of present situation in light of the anticipated impacts. The UNFCCC hopes that a global climate change agreement will be set by the end of 2015. See video on the speech at the Climate Bond Initiative blog.

Danish pension funds commit to renewable energy in emerging economies

As reported by Investment & Pensions Europe, two of Denmark’s largest pension funds have provided capital for the Danish Climate Investment Fund, a EUR160m fund; PensionDanmark and PKA have each committed DKK200m. The focus of the fund will be to reduce carbon emissions in emerging economies through projects in wind, solar, hydro and other renewable or energy efficiency improvements, with annual expected returns reported at 12%.

Competitive returns from low carbon investment: CDP report

CDP (formerly Carbon Disclosure Project) reports that companies can generate positive returns on investment averaging 33% through emission reduction activities. The third annual Carbon Action Report, released this month, highlights that companies have created US 15 billion in value through carbon reduction. 190 global investors have signed on to the Carbon Action project to date.

 

 

*Please note that viewing linked articles requires registering for free in the case of IPE online, and a subscription in the case of Responsible Investor.

Disclaimer: The CWC News Digest is a compilation of news items covered in industry publications. The content does not necessarily reflect the views of the CWC or its members. Comments and reflections on news items may be sent to acard@share.ca

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