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Looking into 2017 – Our key engagement themes in the new year

Following the strong votes against proposed pay packages at a number of companies in 2016, remuneration will again be in the spotlight in 2017. This is particularly the case in the UK where companies will face a new round of binding shareholder votes on pay policies as part of the three-year voting cycle on this. Following much thinking and consultation with key stakeholders, we launched new remuneration guidance in the second half of 2016, setting out expectations to help steer companies in the right direction ahead of the voting season. We also provided a response to the corporate governance inquiry by the UK Parliament’s Business, Energy and Industrial Strategy (BEIS) Committee.

We were delighted that our remuneration principles featured in the government’s green paper on Corporate Governance Reform, which was published in November. Subsequently, we provided evidence on remuneration and board composition to the BEIS committee. All this could pave the way for reform in the new year.

Stewardship Codes
Stewardship codes and guidelines were introduced in a number of markets in 2016 – such as Brazil, Hong Kong, Singapore and Taiwan – as efforts to implement existing ones, like those in Japan and the UK, intensified. As such, more investors will have the task of effectively implementing stewardship across the globe. In 2017, the long-awaited Shareholder Rights Directive could be passed in Europe, giving stewardship additional momentum. We have been closely involved in the development of the codes in Brazil and Singapore and look forward to contributing to the progress of stewardship practice and culture in these and other markets in 2017.

Board composition
In meeting their obligations as active and responsible, investors will continue to focus on getting the right people on corporate boards, exercising their key rights as shareholders. As part of this, we promote board diversity in its broadest sense. On behalf of our clients, we will assess the composition of boards, question how they discharge their roles and assess their effectiveness by engaging directly with executive and non-executive directors. We welcome the proposals in the UK government’s green paper and the Parker Review, which recognise that there continues to be a need for more diversity and different perspectives in many boardrooms.

Human rights
Supply chain management and human rights will once again be among our key engagement subjects in 2017 following the introduction of legislation on modern slavery in the US and the UK in 2015.

With prominent hacking incidents emerging in recent years, we will continue to push companies to put in place prevention and mitigation processes in relation to cyber risk.

As part of our collaboration with the Access to Nutrition index, we will also step up our engagement with companies on malnutrition and obesity.

Climate change
Building on the 2015 Paris Agreement, our environmental engagements with companies exposed to climate change will continue to focus on the resilience of their portfolios to this risk and the results of stress-testing and emissions reduction commitments. After the success of the shareholder proposals filed – often with our help – in 2015 and 2016, our efforts will concentrate on companies facing material climate change risks. The recommendations by the Task Force on Climate-related Financial Disclosures released yesterday by the Financial Stability Board will aid this.

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