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11 May 2021 • Press Releases

Morrow Sodali

Climate Change Tops the Agenda For Institutional Investors in 2021

Institutional investors with assets under management of USD 29 trillion unanimously confirm that climate change and ESG (Environmental, Social and Governance) risks and opportunities played an increasingly important role in their investment decisions and their evaluation of portfolio companies during the past 12 months, according to our latest Institutional Investor survey, released today.

The annual global poll of over 40 institutional investors highlights the main areas of focus for them in determining how to exercise their voting rights at annual shareholder meetings, and identifies the latest trends in company engagement, including ESG (Environmental, Social and Governance) and sustainability, remuneration and AGM-related issues, and shareholder activism.

The 2021 iteration of the survey, which is now in its 6th year, underscores how the focus on ESG continues to intensify. The institutions surveyed see a clear link between ESG performance and good financial performance, and they want companies to improve their engagement and reporting on these topics.

Several findings stood out:

  • Climate change, closely followed by human capital management, remuneration and board composition, is at the top of investors’ ESG agenda, in terms of prompting them to engage. All companies, regardless of their sector, are experiencing increased investor scrutiny on how they approach this issue.
  • Investors expect to be privy to the inner workings of the board, underlining the importance of board/shareholder engagement.
  • TCFD is overwhelmingly the most popular ESG reporting framework, followed by SASB and then in-house proprietary frameworks focused on material topics.
  • Statements of company purpose are considered to be one of the driving forces behind creating sustainable long-term value.
  • In general pay-for-performance continues to dominate as a key pressure point for investors, in both short and long-term incentive plans, where a weighting for ESG metrics and targets between 5% and up to 25% is most supported.
  • Many investors express a need for more explicit non-financial information, which they see as an important indicator of underlying corporate culture, integrity and sustainability.
  • Shareholder activism continues to evolve in 2021, and the survey reflects growing investor support for activist campaigns, both traditional and ESG-related. Aside from poor financial performance, poor strategic decisions are the factor most likely to lead an investor to support an activist.

Read the full press release here and download a copy of the survey here.

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