According to Morrow Sodali's always eagerly awaited annual Institutional Investor Survey, many institutional investors remain keenly focused on board engagement to influence and effect change, with a view toward tapping other means or resources only after reasonable engagement efforts have failed. Notably, however, investors are increasingly willing to use other means to influence board policies and decision-making.
Key takeaways include:
Engagement - Climate risk was the #1 issue prompting engagement with companies, followed by board composition and effectiveness (64%), human capital management (64%), water scarcity (63%) and executive pay (55%).
Climate disclosure - All respondents said they review their portfolio companies’ climate-related disclosures. Investors most commonly identified “clear connections to financial risks/opportunities” as an area of climate-related disclosure that could be improved, as shown here:
ESG reporting frameworks - Investors prefer companies report material ESG topics in accordance with the TCFD framework by a large margin; however, more than half prefer SASB and nearly 40% have proprietary frameworks:
Means to influence board policy - Investors overwhelmingly (94% of respondents) believe that engagement with the board is the most effective way to influence board policies and decisions. However, collaborating with other investors and voting against directors are preferred by 23% and 20%, respectively, of investors, compared to 14% and 18%, respectively, in last year’s survey.
The annual survey captured responses from a diverse mix of 42 global institutional investors and pension funds/asset owners (17% US) representing $29 trillion in AUM.
See Morrow Sodali’s release.
This post first appeared in the weekly Society Alert!