Engagement - voting
To motivate and stimulate change within companies included in the portfolios, the fund votes at the Annual General Shareholders’ meetings (AGM) of those companies. In 2017, the fund voted at 100 shareholder meetings. Voting advice is obtained from Pensions & Investments Research Consultants (PIRC) Services. Triodos SICAV I then applies its own voting guidelines and reviews each recommendation before voting. The fund has deviated from PIRC’s standard voting recommendations for 7% of all agenda items. The fund voted in line with company management on 60% of the agenda items, slightly up from 59% in 2016. The fund remains critical towards board remuneration policies. Consequently, the fund voted against 60% of the resolutions related to remuneration. However, this is significantly less than in 2016, when the fund opposed 79% of remuneration-related resolutions. A general trend is that companies are more careful with developing excessive remuneration packages and policies. At 23 meetings, the fund did not support the election of new directors and/or the re-election of the Chair of the nomination committee, due to a strongly skewed gender balance on the board which would not improve post-meeting.
In 2017, the fund voted on 48 shareholder resolutions. It voted in favour of 30 of these resolutions. At the AGM of H&M 15 shareholder resolutions were brought forward. The fund voted in favour of only six of these resolutions. Three of the resolutions that the fund supported related to the adoption of a ‘zero vision’ calling on the company to take a public position and adequate steps within the industry to support prevention of anorexia.
Other interesting resolutions were put to the vote at the Annual General Meeting of Verizon, including resolutions to implement a human rights committee, to report on greenhouse gas reduction targets, and to implement a remuneration clawback provision. A clawback provision means the provision that (part of) variable compensation already paid to company directors can be “clawed back” in case the results on which variable compensation was based proved to be inaccurate, e.g. after accounting corrections. The fund is in favour of clawback provisions and supported these resolutions. The fund also supported a resolution on reporting on the gender pay gap at Aetna, and a resolution on improving sustainability reporting at PayPal.
In preparation for the 2017 AGM season, the fund sent a letter to 104 investee companies in December 2016, announcing that for the 2017 AGMs the fund would focus on diversity. The fund called upon companies to publicly disclose their policies, programmes and targets for promoting diversity within the organisation, to develop targets for board diversity and to publicly disclose evaluations of this policy and the actual achievements. Seventeen companies responded, and only four of those set targets: Novo Nordisk, Canadian National Railway, Inditex, and Smith & Nephew. The fund will keep board diversity on the engagement agenda and continue to look for opportunities to press for progress at the investee companies.
In 2018, attention will focus on integrated financial and sustainability reporting. We believe this will increase a company’s understanding of the relation between financial and non-financial performance factors and risks, and provides insights to identify opportunities for value creation for the long term.
We will call upon companies to further develop integrated annual reports that bring together financial and sustainability information in one concise report with a focus on long-term value creation, and to share with us the advantages and challenges of integrated reporting.