Transparency on ESG requires greater company engagement

Increasing risks related to climate change and the demands from shareholders for greater transparency on environmental, social, governance (ESG) factors cause companies to engage more with their shareholders, according to VanEck’s 2022 Semi-Annual Stewardship Report.

The firm said it expected to bolster its company engagement in FY23 due to a growing importance of climate goals and decarbonisation in a society which demanded greater social responsibility from corporations.

As a result of the fund manager’s engagement, VanEck said it voted against the board on 508 motions regarding insufficient female board representation and engaged with senior management of different companies, including AGL Energy, Scentre, Dexus and Santos, to discuss board election, management, governance and ESG matters, among others.

“The main avenue we have for influencing the companies in which we invest in is the way we vote in the company’s formal proceedings and companies are now paying much more attention to improve their ESG ratings,” Alice Shen (CFA), senior associate – Investments & Capital Markets, said.

“As a shareholder in many companies, VanEck has amped up efforts this year with in-person meetings in addition to other communication channels such, discussing topics such as gender imbalance at the board level, ESG matters and executive remuneration.”

In case of Scentre, where VanEck was in top-20 shareholder, engaged in discussions around matter such as elevated use of temporary staff and high staff turnover as the company was lagging its peers in adipting strong measures such as annual surveys to gauge employee morale, as according to MSCI.

As far as AGL Energy was concerned, VanEck discussed with the firm’s management the potential takeover entity Grok Ventures as well as independent investor group regarding a demerger plan and board reshuffle.

With Santos, the firm spoke about the company proposals regarding how company funds were being spent and whether in a manner that furthered Santos’ stated climate objectives.

“A right to vote is the most powerful legal right that arising from owning shares. In addition, we supplement our voting by engaging directly with companies. As we continue to grow as an asset manager, VanEck is committed to utilising the avenues open to us to engagement with companies, either directly or through third parties, ultimately influencing portfolio companies to make well-informed and sustainable business decisions in the long-term,” Shen added.