The deal struck at the 2015 UN Climate Change Conference in Paris will influence significantly the actions of companies, politicians and investors to reduce carbon emissions and help keep global warming at a manageable level. The coming year is also set to build on the record number of shareholders proposals on environmental issues submitted in 2015* – we expect similarly frequent filing of these resolutions in the US, particularly on climate change.
Human and labour rights
Walking the talk will also become a reality on social matters. The spotlight will be on human and labour rights after 2015 saw the introduction of the Business Supply Chain Transparency on Trafficking and Slavery Act in the US and the Modern Slavery Act in the UK, as well as the European Parliament’s support for legislation on conflict minerals. The force of the law means companies can no longer afford to ignore what is going on in their supply chains. However, we are confident that the laws will not be burdensome for businesses but build on existing commitments to responsible corporate practice.
Another social issue that has been climbing up the agenda for shareholder engagement is diversity. Often acknowledged as a gender and board concern, in reality diversity in business also encompasses nationality, ethnicity, religion, cultural background, education, personality traits, experiences and skill sets. It needs to go beyond the board level at companies and support creativity and business success at lower levels of management. We are currently developing a methodology that can be tailored to our engagements with companies on diversity.
Cyber security meanwhile will continue to grow in prominence, representing a big risk to companies’ operations and intellectual property.
An understanding of the materiality of governance issues will continue to spread as an ever-increasing number of shareholders push for more independence at the companies in which they invest. We anticipate proxy access – the right of shareholders to nominate candidates to be elected as board directors at AGMs – to again dominate the dialogue between shareholders and companies in the US in 2016. Positively, engagement with US directors has been on the rise and improving in quality and we expect this to continue.rnrnSimilarly, dialogue between companies and shareholders continues to improve, even in traditionally difficult markets. To support this trend, we have launched a project aimed at developing guidelines and best practice in the dialogue between investors and non-executive directors in Germany, which we expect to bear fruit next year.
Last but not least, stewardship codes will be launched in several more markets. The launch of Hong Kong’s Principles for Responsible Ownership is imminent, while Singapore is expected to launch its own version of a stewardship code in early 2016.
Digging through the oil sands