Back to Insights
March 17, 2022

Featured Podcast (Boardroom Alpha): Why Companies Should be Focused on ESG in 2022

Our Chief Operating Officer & Managing Partner, Rob Main, was featured on the podcast “Boardroom Alpha”. Listen here to listen more about why companies should be focusing on ESG in 2022.

From Boardroom Alpha:

The Environmental, Social, and Governance (ESG) investing trend has been gaining steam over the last decade and has never been more prevalent than ever. While research continues to differ on the market performance of “good” and “bad” ESG companies, the facts remain that investors care and that developing a sound ESG strategy for corporates should be top of mind.

This week on Know Who Drives Return we talk to Rob Main, a longtime Vanguard veteran, who’s now Managing Partner and COO of Sustainable Governance Partners, a corporate ESG advisory firm. We discuss trends in ESG, what it means for companies and directors alike, and what to look out for in in the 2022 Proxy Season.

ESG is Not Going Anywhere and Companies need to Prepare

With record inflows into ESG-related products and the giant investment managers (e.g. Larry Fink’s annual BLK letter is always a must read) implementing stricter ESG investment policies, ESG is not going anywhere. Investment managers are under increased pressure from their stakeholders to maintain stringent ESG policies.

Thus, companies need to be prepared and armed with both a concrete ESG strategy and board comprised of directors that are ESG knowledgeable and proficient.

4 Themes Companies Should Be Focused on

  1. Investors now expect boards to be ESG fluent
  2. Boards need to implement the right structure to provide ESG oversight
  3. ESG should be part of the board’s regular agenda and strategic conversations
  4. Board should be involved in holding management accountable on ESG

The ESG track records of board directors are becoming more front and center. Hedge fund activists are paying attention.

Activists are Paying Attention

Hedge fund activists are making E+S issues paramount in campaigns they are running. Recent examples have included:

  • Engine1 winning against giant Exxon Mobile (XOM)
  • Genesco (GCO) fending off Legion Partners
  • Ongoing Shell (RDS) and Third Point

Expect a busy activist environment in 2022 with more activity and hedge funds being vocal. There is also a possibility that more of these situations will end up with a vote, rather than a settlement.

Record Support for Shareholder Proposals

More ESG-related shareholder proposals are being added to the docket for annual meetings than ever before. In the past these often get voted down, oftentimes likely to the delight of management who typically recommend against.

However, this year, look out for more of these proposals to pass despite as shareholder support is hitting all time high levels. Just recently Costco’s shareholders overwhelmingly approved a resolution to adopt more science-based GHG emissions reductions targets.