The members of the Ethos Engagement Pool (EEP) International, comprising 122 institutionalinvestors representing more than 1.5 million insured people and CHF 300 billion in assets undermanagement, have decided to engage in a constructive dialogue with their main asset managers toensure that their voting rights at the general meetings of the companies in which they invest areexercised in accordance with their wishes and sensitivities . This campaign will be conducted jointly by representatives of Ethos, CPEG and MBS Capital Advice.
The exercise of voting rights is one of the main tools available to shareholders to influence the behaviour and practices of the companies of which they are co-owners. At least once a year, they can vote against the re-election of members of the board of directors, against remuneration or against the sustainability report. They can also support resolutions filed by other shareholders that aim to force the company to improve its governance or the management of its environmental and social issues, and thereby send a strong message to management.
Voting at the general meeting (AGM) is now an integral part of the fiduciary duty of asset holders. It alsorepresents the natural extension of the shareholder dialogue in which more and more investors areparticipating. As continuous and constructive dialogue often leads to changes in corporate practices,particularly on ESG issues, it is essential that an opposition vote be used to sanction any regression orinaction by a company at its AGM. Without this, dialogue and shareholder engagement lose credibility.
Recent studies, notably those conducted by MBS Capital Advice, have shown that asset managers who exercise the voting rights of their clients who have invested through investment funds do so without necessarily taking into account their sensitivities and preferences. However, it is their clients' assets that enable them to acquire the shares of companies and the associated voting rights. Thus, too often, managers oppose shareholder resolutions whose objective is perfectly aligned with the engagement activities carried out in parallel by their clients, or support proposals from boards of directors that would not be accepted if asset holders exercised their voting rights directly, particularly on issues related to executive remuneration.
The Ethos Engagement Pool (EEP) International has therefore decided to launch a dialogue campaign with several asset managers. The aim is to ensure that their voting rights are exercised consistently in the future and, above all, in line with their dialogue activities with investee companies.
Specifically, the members of EEP International are asking the targeted asset managers to approve shareholder resolutions aimed at implementing ambitious climate strategies, respect for human rights or the reduction of a company's environmental impact on biodiversity and deforestation. The objective is also to hold board members more accountable by opposing, for example, the re-election of a chairperson whose company fails to address material sustainability issues or define a strategy ambitious enough to remedy its negative impacts.
This campaign will be carried out over several AGM cycles and by representatives of Ethos, CPEG and MBS Capital Advice. It will initially target the following asset managers: Amundi, Blackrock, Pictet, StateStreet, Swisscanto, UBS and Vanguard.
Vincent Kaufmann, CEO of the Ethos Foundation: “For several years now, we have been encouraging our members to contact their asset managers to ensure that they vote in line with their expectations at general meetings, particularly on sustainability related issues. Unfortunately, we still see differences between the votes cast and the engagement activities of our members. That is why we felt it was important to bring together the members of EEP International to launch an official and joint campaign for dialogue with the main asset managers operating in Switzerland.”
Grégoire Haenni, CIO of CPEG: ”When asset managers’ votes are not consistent with the priorities set by EEP International members, this dilutes the collective influence of investors and undermines the credibility of engagement efforts. Through this dialogue with managers, EEP International members aim to ensure a better match between voting behaviour and EEP International's engagement activities, in accordance with Principle 7 of the Swiss Stewardship Code, which stipulates that investors remain responsible and accountable when management activities are delegated.”
Mohammad R. Nadjafi, CEO of MBS Capital Advice: “Voting is an essential lever enabling investors to influence the behaviour and decisions of economic actors. However, our analyses of the votes submitted at general meetings have revealed a divergence between the votes of the main asset managers and the engagements carried out by EEP International. This campaign aims to reduce this gap in order to contributeto the success of the engagements undertaken.”
