Environmental, social and governance polices disclosed by companies are receiving more attention each year as a factor in the risk assessment and investment guidelines by fund managers and pension funds. Ratings and research applied by specialist Sustainable and Responsible Investment (SRI) and Corporate Governance (CG) research firms heavily influence institutional investors. The researchers include the proxy advisers, plus others. These agencies also frequently incorporate an assessment of executive remuneration and incentive plans in their research. It is suggested that it is useful for board directors to know whom these firms are, and how influential they may be, as they review their engagement process with stakeholders who have an impact on company value.
Directors often complain that these proxy advisers and a small group of other researchers have too much influence and are not as accountable as they should be. As usual, the story is never quite that simple. It should provide some level of comfort that the research firms are also ‘researched’.
The Independent Research In Responsible Investment (IRRI) 2013 survey invited responses from all participants in the Sustainable and Responsible Investment (SRI) value chain: asset managers, sell-side research houses, independent SRI agencies & quoted companies. It received 668 votes from 142 different firms in 30 different countries. Among the research outcomes were rankings for the best independent SRI and CG research firms. The rankings are global, and are not specifically related to firms operating in Australia. However, firms with research personnel operating in the Australian market that ranked highly were ISS, Glass Lewis, and Regnan Governance Research and Engagement.
The report provides an interesting insight into what investors prefer, and provides some guidelines on how they make an informed assessment. See the report (and the rankings which can be found on page 55 and 56) HERE.
As an aside, Australian listed companies mentioned among the top companies for disclosure and engagement on SRI and CG policies include BHP Billiton and Qantas (see p.50 of the report).© Guerdon Associates 2021 Back to all articles