The proxy season is a pivotal time for investment teams. It offers a unique opportunity to shape corporate governance and long-term strategies through voting and engagement. The evolving landscape of shareholder engagement and growing ESG focus highlights the need for a strategic plan for the 2024 season.

2024 Proxy Season Landscape

ESG Priorities Take Center Stage:

• Climate Accountability:
  With global attention on climate change, companies face growing pressure to disclose environmental impacts, set ambitious carbon targets, and show progress.
  

• Social Responsibility:
  The social dimension of ESG, encompassing workforce diversity, human rights, and labour practices, will command heightened focus. Companies will be urged to provide transparency around their policies and their implementation effectiveness.
  

• Governance for Sustainable Growth:
  Robust corporate governance practices that align with long-term sustainability objectives will be under the microscope. This includes board diversity, executive compensation tied to ESG metrics, and shareholder rights.
  

Regulatory Dynamics:

• New regulations will demand greater transparency and accountability, impacting corporations, asset managers and investors alike.
  
  
• Enhanced Disclosures:
  A global trend towards more nuanced ESG disclosure requirements is emerging. This has compelled companies to provide more comprehensive, standardised reports on their sustainability efforts and achievements.
  

Emerging Focus Areas:

The 2024 AGM season is also expected to witness an expansion in the scope of topics addressed by shareholder resolutions and will reflect the broadening agenda of sustainable and responsible investing.

• Biodiversity and Natural Capital:
  These areas are poised to gain more attention, reflecting a growing recognition of their importance alongside traditional climate concerns.
  
  
• Technology and Cybersecurity:
  With the rise of generative AI, there is an increasing focus on how companies manage cybersecurity risks and guard against misinformation and disinformation.
  
  
• Methane Disclosures:
  Beyond CO2 emissions, methane is emerging as a critical focus area, driven by regulatory trends and growing awareness of its environmental impact.
  
  
  

On Voting

The Vote Reporting Group initiative is advancing voting disclosure standards amid growing stewardship responsibilities and a focus on sustainable investments. Anchored by the Financial Conduct Authority (FCA), this effort not only seeks to standardise vote reporting but also explores the potential for a public registry and enhancing transparency in the voting process. These voluntary proposals underscore the growing importance of using voting as a tool to drive positive change. As the investment world seeks more accountability and impact, informed and clear voting grows crucial. It steers the economy toward sustainable growth.

Strategic Preparation pre Proxy Season

• Review Policies and Practices: Update voting policies to meet current ESG standards and review past records for improvements.
  
  
• Enhance ESG Integration:
  Employ strategies for a more comprehensive integration of ESG factors into investment and voting decisions, utilising technology for better ESG evaluation.
  
  
• UN PRI Resources: Familiarise with PRI (Principles for Responsible Investment) tools and platforms, including the PRI Resolution Database.
  
  
• Stakeholder Engagement:
  Engage with companies on ESG issues well before the proxy season to specifically understand their positions on key issues and express your expectations. Early and continuous engagement fosters stronger relationships, a deeper understanding and ability to influence companies’ long-term strategies positively.
  
  
• Collective Engagement:
  Where appropriate, collaborate with other investors to amplify the impact of your engagements. Collective action can be particularly effective in addressing systemic ESG issues.
  
  
• Risk Management:
  Be proactive in risk management by understanding the implications of your voting decisions on compliance and reputation.
  
  
• Educate and Train:
  Ensure your team is well-educated on the issues and trained on the proxy voting process and policies.
  
  

^{Source: Proxy Season 2024 : PRI tools and investor insights – FEBRUARY 2024}

The Role of Technology

• Informed Voting:
  Technological advancements and data analytics are increasingly integral to the proxy voting process. This allows asset managers to make informed decisions based on robust ESG data, historic engagement progress and AI-driven insights.
  
• Streamlining Engagement:
  Technology boosts communication efficiency and impact between companies and shareholders. Furthermore, it promotes transparency and productivity in engagements. Advanced platforms like Maanch Engagement Tracker offer incisive insights and analytics. Enabling investors to make data-driven decisions and track the impact of their stewardship activities.

Conclusion

It is clear that the landscape of responsible investing is evolving rapidly, underscored by the increasing emphasis on ESG considerations. This strategic guide highlights the critical importance of a well-considered approach to proxy voting and engagement. Aiming to shape corporate governance, sustainability, and responsible business practices for the better. Using technology for data management is essential for the 2024 proxy season. It ensures insight and integrity. Moreover, technology’s role in ESG and stewardship is transforming the landscape. It brings commercial benefits and improves data and processes.

Drawing from the “Proxy Season 2024: PRI Tools and Investor Insights” webinar, we’ve developed a practical checklist. It aids in navigating the AGM season with an enhanced ESG framework. Focusing on investor engagement, reporting standards, and regulatory compliance.

Click here to request the 2024 Proxy Season: ESG Integration and Stewardship Checklist.