Shareowner Power: Using proxy votes for real-world action

Shareowner Power: Using proxy votes for real-world action

Advertising Material for professional investors only*

30 March 2022

When it comes to ESG investing, most people think about excluding “bad” companies from their portfolios. But there’s another very effective way to influence corporate behaviour—voting.

In a nutshell:

  • Active ownership, which includes both engagement and voting, sends a signal to companies that their behaviour on environmental and social issues is important to shareholders.
  • While voting performance of the industry overall has remained stagnant in recent years, Nordea in contrast supported 91% of Environmental and Social resolutions in 2021.
  • The 2021 ShareAction report shows that members of Climate Action 100+ or the Net Zero Asset Managers initiative vote more supportively than non-members on climate resolutions. Nordea was one of only three asset managers that voted for 100% of its holdings’ climate resolutions.
 

The way asset managers use their votes is crucial to a company’s behaviour. The 2021 Voting Matters report by ShareAction, examining large asset managers’ voting performance on Environmental and Social resolutions, revealed that many asset managers miss out on oppor tunities to facilitate real change by not voting. Worse, the world’s largest asset managers frequently block efforts to make progress on environmental and social issues.1

As shareholders, we have the power to help companies improve the management of their environmental, social and governance risks. At Nordea Asset Management (NAM), we believe this is an important part of safe- guarding the long-term interests of both shareholders and society. NAM has a long history of driving change through actions like fieldtrips, dialogues and voting, as part of our goal to offer investors returns with responsibility.2 These engagement efforts enable us to address material sustainability risks and opportunities.

Voting for change

In 2021, NAM voted at more than 4,200 General Meetings on thousands of proposals, including ESG issues such as climate. This reflects our ambition to vote in the majority of all General Meetings in our portfolio companies, which is supported by an internal cross-departmental framework that is increasing our voting capacity.

This initiative is in stark contrast to the broader market. According to the 2021 ShareAction report, overall voting performance across our industry is unimpressive. Even in ESG and climate resolutions, an area of growing investor interest, industry performance is notably poor. Just 21% (30 of 146) of environmental and social resolutions assessed received over 50% support in 2021, which was little changed from the previous year.3

When it comes to climate, the proportion of ‘for’ votes on climate resolutions by each asset manager, including those who are members of Climate Action 100+ or the Net Zero Asset Managers initiative, is broken down in the 2021 ShareAction report.4 In this ranking, NAM is one of only three managers with a 100% score, despite the fact that many of the peer group are pledging to support green agenda initiatives. The report goes on to point out that “although the vot¬ing performance of the industry as a whole remains stagnant, some individual managers have shown sub¬stantial improvement”. Nordea was one of these, sup¬porting 91% of Environmental and Social resolutions in 2021.”5 The longstanding efforts of our Corporate Governance and Active Ownership teams continue to pay off. We are regarded as among the best in the industry, placing 8th overall in Europe and first in the Nordics in terms of voting activity.

What is becoming increasingly clear is that voting and engagement can overlap. Engaging with our investee companies to influence outcomes is nothing new, but increasingly attention is being placed on the fact that it also enables us to address material sustainability risks and opportunities. Investor actions can make a mean¬ingful difference. One example of this is the case of ExxonMobil. NAM co-filed a proposal requesting that the company begin reporting on how its direct and indirect lobbying aligns with the Paris Climate Agreement goals. Increased dis¬closure has taken place within the sector on this topic and so we saw this resolution as a way for ExxonMobil to align themselves with best practice. Other sharehold-ers clearly welcomed the idea of additional information on the company’s lobbying activities and trade associa¬tion memberships, and we are pleased to report that our resolution was passed on 26 May 2021.

The asset management industry has a vital role to play in addressing climate change and other pressing issues. Proxy voting is an effective and public way to influence companies in the right direction and drive real-world change.

Initiatives like CA100+ and NZAM are one way that we influence corporate behaviour

We are a member of Climate Action 100+ a global investor initiative on climate change launched in 2017. The initiative’s aim is to engage with the 100+ companies that are most critical to the transition towards net zero emissions. CA100+ has over 545 signatory investors and is one of the largest investor driven climate initiatives to date.

We are also a founding member of the Net Zero Asset Managers initiative, which implements a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with ambitions for all assets under management to achieve net zero emissions by 2050 or sooner. Net zero refers to the aims of reducing greenhouse gas emissions and fully offsetting the remaining emissions by activities that remove greenhouse gasses from the environment (such as planting trees).

1 Voting Matters 2021 by ShareAction examined how 65 of the world’s largest asset managers voted across 146 social and environmental resolutions in 2021.

2 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money.

3 Voting Matters 2021 by ShareAction

4 ibid page 40 & 41

5 Voting Matters 2021 by ShareAction page 27

Source: Nordea Investment Funds S.A. and Bloomberg Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB (“the Legal Entities”) and their branches and subsidiaries. This document is advertising material and is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. Consequently, the information contained herein will be superseded in its entirety by such Offering Memorandum or contractual arrangement in its final form. Any investment decision should therefore only be based on the final legal documentation, without limitation and if applicable, Offering Memorandum, contractual arrangement, any relevant prospectus and the latest Key Investor Information Document (where applicable) relating to the investment. The appropriateness of an investment or strategy will depend on an investor’s full circumstances and objectives. Nordea Investment Management AB recommends that investors independently evaluate particular investments and strategies as well as encourages investors to seek the advice of independent financial advisors when deemed relevant by the investor. Any products, securities, instruments or strategies discussed in this document may not be suitable for all investors. This document contains information which has been taken from a number of sources. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information and investors may use further sources to form a well-informed investment decision. Prospective investors or counterparties should discuss with their professional tax, legal, accounting and other adviser(s) with regards to the potential effect of any investment that they may enter into, including the possible risks and benefits of such investment. Prospective investors or counterparties should also fully understand the potential investment and ascertain that they have made an independent assessment of the appropriateness of such potential investment, based solely on their own intentions and ambitions. Investments in derivative and foreign exchange related transactions may be subject to significant fluctuations which may affect the value of an investment. Investments in Emerging Markets involve a higher element of risk. The value of the investment can greatly fluctuate and cannot be ensured. Investments in equity and debt instruments issued by banks could bear the risk of being subject to the bail-in mechanism (meaning that equity and debt instruments could be written down in order to ensure that most unsecured creditors of an institution bear appropriate losses) as foreseen in EU Directive 2014/59/EU. Nordea Asset Management has decided to bear the cost for research, i.e. such cost is covered by existing fee arrangements (Management-/Administration-Fee). Published and created by the Legal Entities adherent to Nordea Asset Management. The Legal Entities are licensed and supervised by the Financial Supervisory Authority in Sweden and Luxembourg respectively. A summary of investor rights is available in English through the following link: https://www.nordea.lu/documents/engagement-policy/EP_eng_INT.pdf/. The Legal Entities’ branches and subsidiaries are licensed as well as regulated by their local financial supervisory authority in their respective country of domiciliation. Source (unless otherwise stated): Nordea Investment Funds S.A. Unless otherwise stated, all views expressed are those of the Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and subsidiaries. This document may not be reproduced or circulated without prior permission. Reference to companies or other investments mentioned within this document should not be construed as a recommendation to the investor to buy or sell the same but is included for the purpose of illustration. The level of tax benefits and liabilities will depend on individual circumstances and may be subject to change in the future. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and/or subsidiaries.

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