Euan Stirling presented on ESG and Impact Investing to over 100 clients as part of the UK Pensions and Investment Seminar in London.
Deborah Gilshan attended a discussion organised by APPCCG on diversity and heard from Denise Wilson, OBE and Chief Executive of the Hampton-Alexander Review, and Sir John Parker GBE, Chair of the Parker Review.
Deborah Gilshan attended the launch of a paper on improving stewardship across the investment chain. This is a consultation paper from Tomorrow’s Company which builds on the work of the Stewardship Alliance of institutional investors comprising Aviva Investors, BlackRock, Hermes, HSBC Global Asset Management, Legal & General Investment Management, RPMI Railpen and USS.
As member of the Investor Forum, Deborah Gilshan attended their annual event to hear an update on their activities and for a discussion on the current state of stewardship in the UK.
Alison Kennedy attended the International Corporate Governance Network Conference in Paris. ESG integration was a major theme and it was useful to hear from a number of investors and asset owners regarding how they are going about this, particularly in asset classes other than equities. There was also significant focus on the new French law requiring companies and investors to report on climate issues. It is likely that this type of reporting will be required more widely over time.
Deborah Gilshan presented at the European Pensions Fund Investment Forum on the importance of addressing the gender gap in investee companies and our work on diversity as a lead of the 30% Club Investor Group.
Deborah Gilshan attended a seminar at the London Business School on Investor Stewardship and contributed to the debate on stewardship undertaken by passive and active managers.
Mike Everett and Beth Meyer met with a number of representatives of the European Commission (EC) and Finance Watch to discuss our process for impact investing. The EC is currently developing future policy relating to sustainable finance and we felt it would be useful to share our methodology centred around the UN Sustainable Development Goals (SDGs). EC developments appear to be focused on increased transparency for companies and asset managers relating various aspects relating to sustainable business. Our methodology relies on transparent reporting on the SDGs by our investee companies and us as the asset manager. We welcome changes to policy that will assist in delivering clear transparent reporting in this area.
Mike Everett attended the ACGA annual conference held in Mumbai. This provided an opportunity to learn at first-hand about the corporate governance developments in Asia generally and India specifically. As a significant developing market in Asia, India has been making strides in developing corporate governance practices to encourage international investment in its companies. Although change and improvements are occurring there remain some areas of increased risk such as the prevalence of owner controlled listed companies and the lack of an independent audit regulator.
Mike also attended and sat on a panel at a roundtable arranged by the National Stock Exchange of India on the Long-term impact of institutional ownership on governance and sustainable investment. The panel covered the role of proxy advisors in the stewardship role of institutional investors.
Deborah Gilshan spoke at a gathering of Chairs of Audit Committees to explain our approach to stewardship and engagement with companies and to highlight our heightened focus on audit and accounting issues in our investee companies.
We attended a Westminster Business Forum on the future of corporate governance, where we heard from a range of speakers including Professor John Kay, Sanu de Lima from the Department of Business, Energy & Industrial Strategy, Professor Alex Edmans from the London Business School, Paul George from the Financial Reporting Council, Catherine Howarth from Share Action, Kerrie Waring from the International Corporate Governance Network and Janet Williamson from the Trades Union Congress.
Andy Mason attended business Greens inaugural one-day summit which brought some of the world’s leading thinkers together to discuss how the green economy has evolved over the past decade and where it will develop as it continues to gather pace. Speakers included Alan Whitehead MP, Jonathon Porritt Co-founder of Forum for the Future and Dr Emily Shuckburgh, Climate Scientist and Deputy Head of the Polar Oceans Team British Antarctic Survey.
The event highlighted that 2017 marked a critical moment for green industries. The goals of the Paris Agreement require the urgent scaling up of low carbon infrastructure and business models. Falling clean tech costs, innovative financing models, and effective policies all suggest mass deployment of these 'survival technologies' is both possible and desirable. But at the same time fresh headwinds have emerged in the changes to US policy the growth of economic populism and the challenges presented by Brexit. The question of what happens over the next decade is challenging business leaders, entrepreneurs, investors and policy makers the world over.
We found it slightly discouraging that some of the speakers believed that the investment community was slower than other sectors to address the challenges which climate change presented. As one of the leading ESG investment houses we believe that our actions will not only serve our clients in tackling the areas above but also serve to improve the sector as whole.
An event was held at the London Business School to present new research findings from a study, which was funded by the Norwegian Finance Initiative and conducted by Professors Marco Becht (Solvay Brussels School of Economics and Management), Julian Franks (London Business School) and Hannes Wagner (Bocconi University). It is part of an ongoing project based on a unique data set of engagement records, provided by Standard Life Investments, covering the period 2003 - 2015 and documenting the active ownership exercised by its fund managers and ESG Investment team. The presentation of initial findings from the study described the internal governance and stewardship workings of Standard Life Investments as an active owner, how voice and exit interact in practice, which topics stirred the most frequent engagement activities, and how corporate governance influences fund manager decisions.
The presentation was followed by a panel discussion chaired by Professor Colin Mayer CBE FBA (University of Oxford). Participating on the panel were John Kay CBE FRSE FBA, Supernumerary Fellow in Economics, University of Oxford; Sir Richard Lambert, Chairman of the British Museum; Keith Skeoch, CEO at Standard Life Aberdeen; and Euan Stirling, Head of Stewardship and ESG Investment at Aberdeen Standard Investments.
We took part in a roundtable arranged by the City of London Corporation to provide views on the Commission on Economic Justice’s paper entitled ‘Corporate Governance Reform: Turing business towards long-term success’. This allowed us and other investors and companies to provide views on the suggestions raised in the report. We welcome the opportunity to share our views on the important issues relating to corporate governance reform and the role played by investors in driving improvements in governance and in holding companies and their boards to account.
We attended a roundtable held by the FRC seeking input from a number of investors on the update to the UK Corporate Governance Code. This review of the Code is an important step in the ongoing development of corporate governance standards in the UK and occurs at a key moment with the increased focus on the role of companies and investors. The FRC are gauging views from multiple stakeholders and so it is important for us and other investors to take the time to support this work by providing views on improvements to the code.
Deborah Gilshan organised an event of her network, The 100% Club. 70 female governance professionals gathered at Vanguard Asset Management to hear from Helen Dean, CEO of NEST, who talked about her career to date, her role at NEST, her work in encouraging diversity in the workplace, NEST’s stewardship work and pensions savings for all.
Deborah Gilshan attended the open annual meeting of the FRC, which provided an opportunity to hear about the FRC’s current and future plans for their work, including the consultation to the UK Corporate Governance Code and their thinking on the UK Stewardship Code in the wake of the UK Government’s Green Paper on corporate governance, and their plans for developing corporate governance in private companies.
We hosted Branko Milanovic, who came in to talk about his book, Global Inequality: A New Approach for the Age of Globalisation. Branko identified the winners and losers of globalisation over the last 25 years. The winners have primarily been in the emerging world, particularly in China and India, who have benefited from the shift in manufacturing from west to east. The other set of winners have been the 1%, the highest paid and highest educated, whose skills are in demand in a more globalised world. The primary losers have been the middle class in the old world, Europe and the US, whose incomes have stagnated as the jobs they were previously doing have moved offshore. The other set of losers are the world’s poorest, who remain unconnected to the rest of the world. These trends have led to a decline in inequality when measured on a global basis, but an increase in inequality within countries. The book describes the long cycles seen in inequality. The drivers of rising inequality in the US and Europe remain in place. By contrast, China has reached the stage where the benefits of three decades of strong growth could start to be shared more widely if the right policies are pursued.
We had a meeting with representatives of the Financial Reporting Council’s Business Lab. The Lab is conducting a project to review risk and viability disclosures in company Annual Reports and we were happy to provide our views on good practice in this area and what we would like to see improved.
We hosted Sarah Harper, who came in to talk about her book How Population Change Will Transform Our World. The drivers of population change are strikingly simple but have profound implications. Since the industrial revolution, rising levels of prosperity have led to a fall in mortality rates followed, with a lag, by a fall in fertility rates. This lag has proved to be crucial. The initial fall in mortality rates leads to a rise in population. The eventual fall in fertility, combined with increased longevity, leads to an aging population. The economic success stories of the last fifty years – from Hong Kong and Singapore in the 1980s to China today – have all enjoyed the combination of a bulge in the working age population at the same time as a fall in the number of young dependents. The developed world now faces rapidly aging populations. Increased longevity is happening alongside fertility rates that are below the rate of replacement. Most of the developing world is expected to follow this pattern over the coming decades. The one outlier is Africa. Fertility rates remain significantly above replacement rates even in those countries enjoying economic growth. Population growth in Africa is likely to see the world’s population reach 12 million by the end of this century.
We met with partners at PricewaterhouseCoopers (PwC) to discuss auditor independence in general and specifically in relation to PwC’s appointment as both auditors to Vodafone Group plc and as administrators to a company in liquidation that is considering litigation against Vodafone. We subsequently raised our concerns at the AGM of Vodafone on 28th July 2017.
Alison Kennedy attended the 2017 Women in Governance lunch, an annual gathering of 50 women on global 100 company boards of directors and 50 women who work with the largest global institutional investors who elect them. This event is normally held in New York but was held in London this year. It provides a forum for the exchange of views on current governance topics and allows board directors to hear directly from some of their major shareholders.
Euan Stirling and Beth Meyer attended the RI Europe conference in London, which discussed and debated developments in sustainable business and investing. The speakers and panel discussions highlighted the need to genuinely invest for the long term and made a very strong connection between that and achieving stronger long-term risk adjusted returns which represents the achievement of their fiduciary duty for trustees of pension schemes and foundations.
Euan Stirling met with two representatives of BMGI (Bill and Melinda Gates Investments) to discuss collaboration on corporate governance areas of common interest. The Gates foundation invests globally and aspires to partner with other global organisations in order to share best practice in corporate governance and engage collaboratively with companies in common ownership.
Euan Stirling attended an Impact Investing conference organised by The Economist publication. This brought together industry participants who have been helping to develop the concept of impact investing over a number of years. As impact investing begins to reach public equity markets there is concern that the concept is diluted by participants whose marketing races ahead of their impact methodology, described as ‘impact-washing’. The best way to address that issue was generally agreed to be rigorous measurement of impact outcomes, although that is clearly at an early stage in public equity investing.
Euan Stirling attended and spoke at a conference focused on energy efficiency which was organised by ‘2020’, a business-led climate group and the Edinburgh Centre for Carbon Innovation (ECCI). The purpose of the conference was to bring together financiers and programme sponsors from across industry and government in order to help accelerate investment in this area.
Jamie Butterworth from Circularity Capital came into our offices to discuss the circular economy and how this is being used to develop a private equity fund. Circularity Capital is an Edinburgh based specialist private equity firm focusing on investing in companies that are involved in circular economy business models. This includes businesses that help maintain, repair, refurbish and remanufacture goods, supply chain management solutions, reverse logistics, asset tracking and predictive maintenance. All these businesses alleviate and reduce the need and reliance on using raw materials.
Amanda Young and Euan Stirling attended an industry conference convened by government and the World Economic Forum to explore developments in ‘Impact Investing’.
Euan Stirling presented to c.180 wealth managers in London on the benefits of an integrated approach to ESG investment and the potential to invest for positive social and environmental impact as part of our 2017 Investment Forum.
We submitted a response to the Financial Services Agency consultation on proposed revisions to the Stewardship Code in Japan. We were broadly supportive of the changes put forward, particularly the requirement to disclose votes at individual company AGMs which would improve transparency and accountability of asset managers’ voting decisions.
Alison Kennedy attended a roundtable event on Corporate Governance Reform hosted by the Financial Reporting Council. This was part of their preparatory work for the forthcoming review of the Corporate Governance Code. The FRC are consulting with investors, companies and other stakeholders to discuss their approach to the review and to canvas views on what should be included.
Standard Life Investments co-hosted the Innovation in Sustainable Investment Conference with the University of Edinburgh and the Investment Innovation Benchmark (IIB). At the event methods to innovate in sustainable investing, the need for focused sustainable investments sales forces and innovation in Scottish sustainable investing were discussed. The events key speakers included Euan Stirling the Head of ESG and Stewardship at Standard Life Investments, Donald Macdonald the Chair of the IIB and Andreas Hoepner, Associate Professor of Finance at Henley business School. Speakers considered how different stakeholders can collaborate to create more sustainable financial systems, the consolidation of stock exchanges, and how financial data could support returns within fixed Income investments.
Standard Life Investments sponsored the ecoDa annual dinner at which the topic of "Building trust in boards – supporting responsive and responsible leadership” was discussed. Mike Everett welcomed invitees on behalf of SLI, highlighting the importance of the role played by boards in creating and maintaining trust in companies and the role of shareholders in holding directors to account in building trust. There were three presentations on recent research into trust and detailed discussions on how boards and directors could improve the current low levels of trust. This was a useful opportunity for us to support debate and discussion in this area and to give our views on the role played by boards and directors.
We reviewed our ongoing commitment to support the work of Assogestioni, the representative association of the Italian investment management industry, in the proposal of independent directors to the boards of listed companies. Their work is vital to ensuring that minority shareholders have a voice in the boardrooms of Italian companies. We have supported them for some years and have agreed to do so again this coming year. This involves adding our shares to the list of those supporting the slate of directors proposed by Assogestioni for eating contest at the AGM.
Mike Everett attended a round table event, hosted by the Investment Association, to meet and discuss the UK Governments Corporate Governance Green Paper with BEIS representatives. The event was attended by a number of asset management firms and provided a good opportunity to share our views on aspects of the Green Paper. We were also able to get a better understanding of the views of other asset managers and the aims of the UK Government.
Mike Everett attended a round table hosted by the FRC to discuss the future of remuneration reporting. The event was attended by listed companies, remuneration and reporting consultants and investors. The FRC were seeking input from interested parties on the remuneration reporting particularly looking at the expectations of investors and the difficulties faced by corporate issuers of shares. This is an important topic to us and seen as a good opportunity to share our views.
Standard Life Investments have endorsed the Investor Stewardship Group’s (ISG) new US governance & stewardship code. The Investor Stewardship Group (ISG) is a collective of some of the largest U.S.-based institutional investors and global asset managers, along with several of their international counterparts. The ISG was formed to bring all types of investors together to establish a framework of basic standards of investment stewardship and corporate governance for U.S. institutional investors and boardroom conduct. The result is the “Framework for U.S. Stewardship and Governance” comprising of a set of stewardship principles for institutional investors and corporate governance principles for U.S. listed companies.
Standard Life Investments joined the Investor Forum in 2016. Mike Everett and Euan Stirling attended the organisation’s first AGM which included presentations from John Kay, the author of the Kay review of UK equity markets and long-term decision-making, and Sir David Walker, the former chairman of Barclays who led a post-crisis review of banks’ corporate governance.
Euan Stirling was asked to present to our distribution team of 500 people on the subject of integrating ESG factors into our investment process, and the creation of a new breed of equity funds targeting positive environmental and societal outcomes as well as strong financial returns.
Alison Kennedy attended the International Corporate Governance Network (ICGN) and International Integrated Reporting Council joint conference in London. The focus of the event was the progress and future challenges of Integrated Reporting. Standard Life Investments are supportive of the Integrated Reporting framework and it was encouraging to hear about the process that some jurisdictions and companies have made in improving their reporting. Alison also took part in a panel as part of a stewardship workshop arranged ahead of the conference by the ICGN and the FRC. This provided a forum for signatories to the UK Stewardship Code to pass on their views on implementation of the Code.
Mike Everett attended a meeting of the APPCGG at which Margot James MP, minister responsible for corporate governance, provided her thoughts on corporate governance in the UK and the Government’s Green Paper seeking input on possible improvements to the corporate governance regime in the UK. This was a useful opportunity to hear directly from the minister on a topic which we believe is important to our clients and our work in the ESG Investment team. We will engage further on this topic and will be providing our own written input to the Green Paper.
Alison Kennedy attended the Asian Corporate Governance Association Conference in Tokyo. This was very well attended by both local and international investors. The conference focused on the significant improvements that have taken place in the Japanese governance and stewardship framework in recent years and the implications of these for both investors and companies. In conjunction with the conference, meetings were arranged with a number of other organisations including the Financial Services Agency, the Japanese Stewardship Forum and the Government Pension Investment Fund.
Alison also attended the International Investors’ Conference in Wiesbaden arranged by DSW, the German retail shareholders’ association. She participated in a panel on ‘What Investors can expect from Supervisory Board Members’. This panel debated the changing expectations of investors regarding engagement with Supervisory Boards, particularly the Chairman. Historically, there has been limited direct engagement with the Board Chairman but this is changing. The panel debated the form that this engagement might take and the potential limitations in the German context.
The BEIS Select Committee issued a call for evidence in relation to a number of questions covering aspects of corporate governance. Standard Life provided written evidence that can be found here. In addition we were asked to provide oral evidence to the committee which was done as part of a panel on 15th November. A transcript of the meeting can be found here.
Mike Everett met with Sir Michael Peat who is an INE at Deloitte and chair of their public interest oversight committee. As with the dinner held by EY this meeting was part of our engagement with INEs at audit firms and provided a good opportunity to share our views on various aspects in relation to audit.
Mike Everett attended a dinner held by the EY INEs in order to share views with a number of UK asset managers and asset owners. We see the work done by auditors as a key mechanism by through which we, as investors, can get comfort over the reporting by companies as well as an important aspect by which non-executive directors of companies can oversee the activities of executive management. Therefore engaging and holding to account those who are responsible for the oversight of audit firm’s forms part of our stewardship engagement activities. The audit firm governance code which came into place in 2010 instigated the creation of the INE role and the need for them to engage with investors and the code has been updated in 2016. The updates to the code are designed to raise its profile and to increase the levels of engagement between INEs and investors. Events such as this are designed to improve the contact between INEs and investors and it provided an opportunity to raise any current concerns that we may have in relation to EY specifically and the audit environment in general.
Alison Kennedy hosted an event at Standard Life Investments’ London office marking the 5th anniversary of the 100% Club. The 100% Club is a body which offers women working in ESG, and in the wider financial services industry, networking opportunities, often including high profile women speakers. We have been supportive of this initiative since it was founded and were delighted to be able to host this event which was attended by around 100 women.
Nick Duncan attended the Council of Institutional Investors (CII) conference in Chicago, where speakers were discussing topics ranging from executive compensation to climate change. There were more than 400 CII members attending the conference, this included investment professionals, regulators and governance experts. There were a number of high profile speakers including Microsoft Chairman John Thompson, Vice Chancellor of the Delaware Court of Chancery J. Travis Laster and Jeffrey Smith, CEO of Starboard Value.
Mike Everett attended the launch of the Investor Forum collective engagement framework. We are members of the Investor Forum and have taken part in a number of collective engagements through them and we see their work as being important for the ongoing development of successful engagement between companies and their shareholders. The Investor Forum engagements focus on the promotion of long term investment and encouraging companies to seek success over the long term. The framework sets an important standard for the management of collective engagement in the UK.
Mike Everett met with the European Commission (EC) to discuss their current work on developing policy in relation to encouraging sustainable finance, the use of environmental, social and governance (ESG) factors by investors and the role of investors in transitioning to low carbon economies. The meetings were useful to understand the possible direction of policy development and also to share our views and practices in relation to the use of ESG factors when investing on behalf of clients and the development of products that may help transition to a low carbon economy.
The investment teams within Standard Life Investments received a presentation from representatives of EY, KPMG, Deloitte and PwC about the methods used for providing assurance over annual reports and expectations that could be placed on this assurance. This was a useful interaction between our investment teams, who are users of annual reports relying heavily on the assurance of auditors, and those who undertake this assurance. We continue to engage with audit firms in order to provide our thoughts in relation to the standards of reporting and assurance and will seek to further develop these interactions in order to ensure the continued improvements in corporate reporting.
Euan Stirling attended the AGM at the company’s premises in Shirebrook and gave a statement to express our views on governance practice at the company. We welcomed the publication of the company’s Working Practices Report however asked the board to commit to a full and independent review of governance at the company along with a commitment to publish and act on its conclusions and recommendations.
Alison Kennedy attended an event on ‘The Evolving Governance Landscape’ organised in Dublin by Davy Group. This was attended by a number of Irish corporates and included presentations by the FRC on its recent report on culture, and the proxy advisors ISS and Glass Lewis. Alison took part in a panel discussing what investors expect of the companies that they invest in.
Mike Everett attended an FRC conference to present their report entitled ‘Corporate Culture and the Role of Boards’. This report provided detail of their analysis of the role played by boards in defining and managing culture within a company. The conference provided an opportunity to hear the views of senior non-executives, senior executives from accounting firms, executive managers and the FRC on corporate culture and particularly the board’s role in creating it. We believe that the creation of an appropriate culture is a key role of boards and so this work is very important in defining standards and expectations in this area.
Mike Everett attended a roundtable discussion jointly hosted by the Investor Forum and EY. The discussion centred on the current long term value disconnect between investors and management and sought to develop a framework for measuring long-term value. EY have been concerned about the future relevance of financial reporting and their role as an auditor because of the increase in the level of intangibles in the valuation of companies. The role of shareholders in promoting the long term success of companies is a key focus at this time and so we feel it is important to be involved in discussions such as this.
We are participating in the FRC’s Financial Reporting Lab project on business model reporting. The objective is to help companies understand what investors are looking for in terms of business model reporting and how they use this information. Alison Kennedy took part in a workshop which brought together companies and investors to discuss various aspects of good practice including specific examples of how companies are currently reporting on their business models.
Nick Duncan attended the publication of the Executive Remuneration Working Group’s final report. The working group was set up in 2015 to "bring forward proposals for a radical simplification of executive pay". The final report, which follows a consultation of more than 360 investors, asset owners and company employees, outlined ten recommendations for all boards. The main recommendations include proposals to simplify pay structures for executives and also to give companies more flexibility to choose a pay structure which works for them and their shareholders.
Euan Stirling attended the AGM in London and gave a statement providing our views on succession planning for CEO Sir Martin Sorrell and our concerns regarding his remuneration arrangements. This action followed our statement at the 2015 AGM, and subsequent engagement on these topics. At the AGM, together with 33.5% of shareholders, we voted against WPP’s remuneration report. Euan said WPP’s current remuneration plan could hand Sorrell more than 15 times his £1.15m salary. “We expect that is more than would be required to recruit, retain or motivate even someone with the redoubtable talents of Mr Sorrell.” A copy of our statement can be found here.
Mike Everett attended a seminar organised by the Audit Committee Chairmen's Independent Forum (ACCIF) to discuss communications between audit committees and investors. This provided an opportunity to share the views of audit committee chairs and investors regarding the current engagement practices. It was clear from the seminar that meetings between investors and audit committee chairs is not commonplace and tend to be focused on specific issues. Standard Life Investments do engage with audit committee chairs and would agree that these meetings do tend to focus on companies where we have the largest holdings and where there may be particular audit issues we wish to discuss such as auditor tendering.
Mike Everett attended and spoke at an event at the European Parliament to discuss current investors practices and and the European Commission views on sustainable and long term investment and the use of Environmental, Social and Governance (ESG) factors by investors. The European Commission are undertaking research and developing possible policy actions to encourage more long term investing and the use of ESG factors. This event provided Standard Life Investments with the opportunity to provide information on the practices they currently use in order to provide some insight to policy makers on current industry practices.
Standard Life Investments supported a presentation, arranged by ICAS, by Stuart Mackintosh the Executive Director of the Group of 30 which is an international think tank of the most senior figures in global banking and economics. Mike Everett introduced Stuart Mackintosh who presented views on the impact of the global financial crisis in creating a paradigm shift in the policies applying to banks in particular and increasing to financial services as a whole. As an investor in banks, the presentation by Mr Mackintosh and the questions from the floor were of interest to us in terms of the impact of changes thus far and possible changes in the future. Standard Life Investments were happy to support this event which provided the opportunity to hear from a significant thought leader in the banking world.
Mike Everett attended the launch of the report on the role of the nomination committee published jointly by EY and ICSA the Governance Institute. The launch included presentations by Sir Win Bischoff, the Chairman of the Financial Reporting Council, and a panel discussion including non-executive directors from large UK companies. The report and the launch event gave insight into the current views on the role of the nomination committee in ensuring adequate succession and board composition. We view nomination committees as important in ensuring the ongoing smooth management that is required to deliver successful companies over the long term.
Mike Everett attended a round table discussion to provide feedback on the interim report issued by the executive remuneration working group. This provided an opportunity for major shareholders to give their views on the report and the suggestions it makes in relation to executive remuneration. We will continue to monitor the work of the working group with a view to looking to provide views on solutions to some of the current issues relation to remuneration.
Alison Kennedy attended a meeting with the FRC to discuss their Financial Reporting Lab project on business model reporting. They are interested in understanding how investors use the information which companies provide on their business model and what good reporting looks like. We provided a number of examples of good and bad reporting from our perspective. The aim of the project is to provide some guidance to companies on what investors are looking for and how best to provide this.
Mike Everett was part of a delegation of the Business and Industry Advisory Committee (BIAC) that presented to the OECD Corporate Governance Committee. The presentation focused on providing input to the methodology for the assessment of the implementation of the OECD Corporate Governance Guidelines by countries around the world. In addition input was provided on the role of bond holders in holding companies to account for standards of corporate governance.
Standard Life Investments sponsored an ecoDa dinner in Brussels at which ‘Trust in Boards’ was debated. The members of ecoDa represent associations of board directors from across Europe and this dinner provided an opportunity to give our views, as shareholders, on the role of the board in defining and overseeing culture and the importance of trust in the creation of long term success. The financial crisis and various recent events relating to corporate governance and other non-financial risks have significantly impacted the levels of trust in business. We encourage boards and directors to take active steps to define and oversee values and business practices which we believe will help improve trust.
The 2016 Standard Life Investments Prize for the Best Paper in the ECGI Finance Working Paper Series was awarded on Friday 22 April, at the London School of Economics, to Professor Karl Lins (University of Utah), Professor Henri Servaes (London Business School), and Ane Tamayo (London School of Economics) for their paper on “Social Capital, Trust, and Firm Performance during the Financial Crisis”. Standard Life Investments’ support of academic research in the area of Environmental, Social and Governance (ESG) impact on companies is important to help develop our use of such factors in our investment process and helps raise the standards of companies’ management of ESG matters.
Alison Kennedy took part in the International Corporate Governance Network conference in Frankfurt which was attended by around 200 investment managers, asset owners, auditing firms, regulatory bodies and proxy agents. The theme of the conference was German corporate governance in the context of global capital markets. There was an interesting and informative discussion of the German supervisory board structure and the similarities and differences with other board structures around the world. The conference also debated the importance of culture. Alison participated in a panel on the Shareholder Rights Directive and its likely implications for investors.
Mike Everett attended the CFA workshop on the EU corporate governance landscape. This workshop was an opportunity to provide input, from an investors perspective, on key corporate governance issues in Europe and to hear the views of others on these issues. This input will be used by the CFA to publish a paper articulating the investor vision on European corporate governance in the context of the EU policy framework. We believe that it is important to represent what we believe to be our clients’ best interests in discussions such as this.
Mike Everett attended an APPCGG event at the House of Lords where Baroness Bowles made a speech on the development of financial services regulation in Europe since the financial crisis. Baroness Bowles had previously been an MEP and Chair of the Economic and Monetary Affairs Committee of the European Parliament. Her speech provided an opportunity to further understand the role of Europe in developing financial services regulation and the subsequent discussions and questions from members of both houses of the UK parliament also provided an insight to the views and possible direction of policy in the UK.
Mike Everett attend a workshop organised by Robbins Geller Rudman and Dowd (RGRD) to discuss the impact of the pooling of local authority pension schemes in the UK. This was an opportunity to meet with the representatives of local authority schemes to share view on items relating to governance and stewardship including engagement with investee companies and the decision making process for voting at company meetings. The pooling process and possible future structures are still under development and so these discussions provided an opportunity to understand the concerns of local authorities and also to share our thoughts on possible impacts.
Mike Everett attended the launch of the IA productivity action plan. SLI had been signatories of a letter to the Chancellor of the Exchequer committing to develop a plan for asset managers to influence the improvement of UK productivity and were represented on the steering committee responsible for the development of the action plan. The launch event provided an opportunity to hear the views of government representatives, senior members of the asset management industry and companies regarding the work to be done in influencing improvements in UK productivity.
As previously announced, Guy Jubb retired from his role as Head of Governance & Stewardship on 31st March. Guy was responsible for creating Standard Life Investments’ governance and stewardship function in 1992 and since then has been influential in the development of stewardship and the role of investors in holding boards and companies to account in the UK and overseas. Under Guy’s influence SLI have become a leader in this area providing clients with an investment process that integrates corporate governance and stewardship.
Euan Stirling took up the newly created role of Head of Stewardship and ESG Investment on the 1st of April. The creation of this role reflects the importance that Standard Life Investments and their clients attach to this significant part of their investment process across all asset classes. Euan will be responsible for the Governance & Stewardship and Responsible Investment teams, bringing further alignment to the work of these two teams to integrate environmental, social and governance (ESG) factors into Standard Life Investments’ investment process.
Guy Jubb and Mike Everett held meetings in Mumbai with representatives from the investment community, search firms , the major audit firms, the British High Commission and companies involved with the India UK Financial Partnership (IUKFP). The meetings provided us with an opportunity to assess the progress made in India in relation to governance and stewardship matters particularly since the changes to company law and the listing agreement. The impression we got from our meetings was that there continues to be progress with ongoing focus on reducing bribery and corruption, increasingly professional board directors and the required spend in relation to Corporate, Social Responsibility (CSR) matters being used positively. There also appeared to be continued willingness to develop partnerships and raise standards through exercises such as IUKFP.
Two members of the team attended the ACGA conference in Kuala Lumpur. This conference provided the opportunity to better understand the development of governance and stewardship practices in countries across the Asian region. There were presentations and round tables involving regulators and practitioners across the region providing good insights into current practices and possible future developments. Our involvement also provided opportunities to input our views into the discussions.
In addition we had an opportunity to visit Bursa Malaysia, the Malaysian stock exchange, to hear how they are promoting governance and environmental and social considerations through their FTSE4Good index and the Association of South East Asian Nations (ASEAN) governance index. We also received presentations from shipping and palm oil companies about their handling of ESG issues in their industries and had the opportunity to visit a palm oil plantation.
The visit was useful to hear about developments and to engage directly with those involved in developing ESG practices. This will help us as we continue to increase our own engagement in the region.
In early November Guy Jubb concluded a trip to Northern America with a visit to Washington to attend a meeting of the Standing Advisory Group (‘SAG’) of the Public Company Accounting Oversight Board (‘PCAOB’), the US audit regulator. Guy is a member of the SAG and the agenda for its meeting, which spanned two days, focussed on audit quality indicators. Emerging issues that could affect the PCAOB and the use of specialists in audits also featured. The discussions about audit quality considered what audit quality indicators should be used and whether or not they should be disclosed to shareholders. The emerging consensus in terms of the advice of SAG members to the PCAOB was that it would be better to take a principled rather than a prescriptive approach to which indicators should be used, recognising that the benefits of a case by case approach. Also, many SAG members highlighted the importance of qualitative indicators, not least professional judgement, when it comes to audit quality. Regarding disclosure, Guy encouraged the PCAOB to consider mandating disclosure by the auditors of whether or not audit quality indicators had been discussed and agreed with the audit committee.
Whilst in Washington Guy also attended an informal meeting of senior figures in the US audit field to discuss current and emerging issues. The audit implications of cyber security was discussed and yielded some useful insights, not least in respect of the boundaries of responsibility for auditors in this regard. In addition, Guy met the Executive Director of the Group of Thirty for an introductory discussion about the Group, in general, and its role in promoting improved culture in the global banking sector, in particular.
Guy Jubb attended the ECGI’s Annual Assembly, which this year was held in Oslo. Guy presented the Standard Life Investments Prize for the best paper in the ECGI’s Finance Working Paper series to:
for their paper "The Corporate Value of (Corrupt) Lobbying".
On making the award Guy commented on the innovative research approach used and the relevance of the subject to corporate governance around the globe.
Mike Everett visited Brussels in early December to meet with a number of entities to discuss the current Governance and Stewardship developments in Europe and to brief them on Standard Life Investments activities in this area. These included Finance Watch, who present the consumer's view in the various EU legislative developments, and the European Confederation of Directors Associations (ecoDa), who are an independent voice advocating good corporate governance. Both of these entities are useful contacts in our ongoing work to be a positive influence on the development of new corporate governance legislation in Europe. In addition to these meetings Mike took part in a delegation representing Scottish Financial Enterprise at meetings with a number of MEPs and UK representatives in Brussels.
Guy Jubb was privileged to attend an invitation-only event held at The Institute of Chartered Accountants of England & Wales to celebrate the publication of The Cadbury Committee: A History by Laura F. Spira and Judy Slinn (Oxford University Press). The book follows the history of the Committee and discusses how it came to publish the Cadbury Report and Code of Best Practice in 1992. Drawing on the papers in the Cadbury Archive at the Judge Business School, Cambridge and interviews with Committee members, it records from the origins of the Committee to its conclusion, its working processes and the responses to its Report. The Cadbury Committee was the watershed that launched corporate governance principles and the ‘comply or explain' approach into Britain's boardrooms. Sir Adrian Cadbury enthralled the audience by sharing his personal memories of the Committee. Also, Laura Spira, on behalf of the authors, gave an engaging account of how they approached their research - challenged by the mysterious disappearance of the Committee's minutes! The book can be obtained via the following link: http://ukcatalogue.oup.com/product/9780199592197.do