Summer 2021 Newsletter
Summary of the Juntas season
Inditex brings to a close the 2021 Board season in Spain, still marked by the pandemic. Issuers have faced new challenges, such as virtual-only Boards and activist investors. This year, we have seen an increase in the number of companies with Sustainability Committees appointed to address the climate crisis. As usual, directors' remuneration was one of the most contested issues, with an average of 10% opposing the Annual Remuneration Reports, including Amadeus' being rejected with 62% voting against.
There has been a clear improvement in the transparency and quality of non-financial reporting by companies, which have included more data on employee, social and environmental issues, although some companies still do not measure their Scope 3 emissions.
Promoted by Chris Hohn's activist fund TCI, the first Say On Climate motion came to Spain in 2020 with Aena, which was asked to publish a climate action policy with annual reports. Other companies, such as Ferrovial and Iberdrola, have voluntarily joined this initiative by submitting climate action plans in 2021.
We have also noted increased opposition to board appointments, reflecting shareholder dissatisfaction with both the composition of the board and its functioning and management. Even some institutional investors who are not usually opposed, such as BlackRock, explain in their latest involvement and voting report who have voted against 10% of the proposals for directors, mainly citing lack of independence and diversity. Finally, recent news about investigations affecting directors and senior managers of large Spanish listed companies have put the reputation of companies in the spotlight of investors.
These themes serve as a basis for developing the engagement agenda for the second part of the season.
Implication or Engagement
Like Proxy Advisor In Spain, we are conducting engagement activities for institutional investors, both local and international, with their portfolio companies in compliance with the new regulations.
These campaigns can be individual or collective, targeting specific companies or themes:
- Remuneration policies: inclusion of ESG targets in variable remuneration and alignment of incentives with long-term interests
- Independence and diversity on the board
- Dividends, buybacks and capital increases/decreases
- Corporate transactions (M&A) in the wake of the crisis
- Board management and corporate reputation
These classic points will be joined by new shareholder concerns
- Say On Climate: climate action plans, targets, metrics and annual reports
- Workers: employment, pay gap, health & safety, health & safety
- Supply chain & due diligence
- Human Rights
- Fiscal transparency
As every year, the alliance partners Proxinvest, formerly ECGS, update and publish their voting policies for the board season on which they base their recommendations.
Renewed sustainable finance strategy
The European Commission has just published the new strategy on sustainable finance accompanied by the proposal for a European green bond standard. The plan proposes six lines of action:
- developing a comprehensive framework
- improving inclusion
- improving the resilience of the financial sector to sustainability risks
- increasing the contribution of the financial sector and overseeing transition
- ensuring the integrity of the European Union's financial system
- develop international initiatives and standards.
BPPG launches consultation on its 2021 report
Following the first annual review of the Best Practice Principles signatories' compliance statements, the Independent Oversight Committee (IOC) invites interested parties to provide further information in relation to:
- the scope, content and structure of the Principles
- quality of service
- the management of conflicts of interest and
- communication policies.
OECD revises Corporate Governance Principles & SEC pushes for more diversity and less greenwashing
The OECD has announced that it will review the Corporate Governance Principles of the G20 with the aim of adapting them to the post-pandemic reality, highlighting the importance of strengthening governance to promote economic recovery.
The SEC makes recommendations to address gender and racial biases, as well as to curb the greenwashing, through improved reporting requirements.
The green and sustainable avalanche has reached the Ibex-35 boards: 23 companies already have a committee for these matters, following the recommendation of the CNMV in the reform of the Good Governance Code of June 2020.
Not only the more obvious companies have created a specific committee to deal with environmental, sustainability and governance issues.
Shareholders and rating agencies are also watching closely. The Proxy Advisors ISS and Glass Lewis, as well as the Spanish CorporanceThe rating agencies Fitch, Moody's and Standard & Poor's also include ESG issues in their assessments of companies, with the latter recommending a specific ESG committee. The rating agencies Fitch, Moody's and Standard & Poor's also include this issue in their assessments of companies, with the latter recommending the establishment of a specific ESG committee, according to KPMG.
Woman Forward: Future of Europe Conference, addressing the gender gap in organisations
Mirian Izquierdo, CEO of Woman Forward writes about the relevance for the EU to consider: promoting women's empowerment in economic and decision-making bodies, incorporating a regulatory approach to gender issues and strengthening and promoting women's entrepreneurship.
Social Investor: Inditex makes a full house. The rejection of the remuneration of all the IBEX heavyweights is growing
The big five of the Ibex 35: Inditex, Iberdrola, Santander, Cellnex and BBVA, representing more than 50% of the index, have this year found shareholders less complacent about board salaries.