Engagement and voting as a responsible shareholder
For investors and shareholders, it was recently the height of the general shareholders’ meeting season. Equity analysts have been closely inspecting the agendas, the submitted resolutions and their impact, while SRI (socially responsible investment) portfolio managers have exercised their right to vote in line with their policy.
Responsible investment requires portfolio managers to carefully select the equity making up their portfolios — a choice traditionally guided by non-financial criteria that focus on environmental, social and governance (ESG) issues. There are other, less known drivers of sustainable investment: shareholder engagement and voting.
To find out more, Claire Douchy, Head of Corporate Commitments and Responsible Projects for Societe Generale Private Banking France, spoke with Nurcan Ilhan, Head of Shareholder Engagement and Voting at Societe Generale Private Banking.
Claire Douchy: Nurcan, what do we mean by shareholder engagement?
Nurcan Ilhan: It means having a regular dialogue with the companies in which we invest on the progress of their ESG practices, over and above what is publicly disclosed in their non-financial reports. Topics include governance, diversity policies, but also environmental priorities, such as a company’s climate strategy. The purpose is to understand to what extent and by which means companies are working to improve their ESG practices, and for us to spur their progress. This is what makes shareholder engagement such an impactful driver for investors.
Claire Douchy: How can we implement this kind of system?
Nurcan Ilhan: Some asset managers band together as shareholders, giving them considerable clout with which to urge companies to improve their ESG practices. One example of such collective engagement is Climate Action 100+ — an international initiative for rallying and engaging greenhouse-gas emitters in the energy transition so that they contribute to the achievement of the Paris Accord climate goals. More local initiatives include the Institut de la Finance Durable(1), which is part of a coalition of investors dedicated to a just transition(2). SG 29 Haussmann(3), Societe Generale Private Banking’s portfolio management company, is party to both initiatives.
Claire Douchy: What about the second driver, voting?
Nurcan Ilhan : Portfolio managers have both the right and the duty to vote at the general shareholder meetings of the companies in which they invest. It is their opportunity to exercise their shareholder rights in a responsible way. A manager with a responsible investment policy usually takes on board non-financial considerations, such as voting in favour of:
- resolutions that improve the company’s social responsibility (for example, appointing independent directors to the board of directors);
- incorporating ESG criteria for calculating the remuneration of executive directors.
By the same token, they can also vote against resolutions that conflict with their responsible investment policy.
As with engagement, shareholders can form a group and submit specific resolutions, and provided certain conditions are met. Voting is an essential tool for investors to make themselves heard on companies’ key decisions.
Claire Douchy: Nurcan, to conclude, can you tell us about Societe Generale Private Banking’s investment policy?
Nurcan Ilhan: Our investment policy is underpinned by the idea of transition. We feel it is essential to keep in our portfolios companies that operate in key sectors, such as industry and energy, on condition that they incorporate ESG issues. Doing so allows us to engage in what we want to be a transformational dialogue with them, and to vote with impact. Excluding them merely displaces the problem to other investors who may not be as engaged as we are, and prevent us from using the tools at our disposal effectively. Find out more about our engagement and voting policies and their implementation from our activity report published on our website, as per regulatory requirements.
(1) Previously called “Finance for Tomorrow”, the Institut de la Finance durable is dedicated to coordinating and accelerating the sustainable finance action of the Paris financial marketplace in order to achieve the energy transition and transform the economy.
(2) The concept of a “just transition” refers to the energy transition that does not come at the expense of social justice.
(3) Authorised by the AMF at end-2006, SG 29 Haussmann S.A.S. is the asset management entity dedicated to Societe Generale Group’s network and Private Banking France clients, as well as some of the Group’s institutional clients.
Would you like to discuss this subject further with us?
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