Corporate Governance and Remuneration. How Institutional investors are increasingly requesting better corporate ESG performance in Italian listed companies

The Covid-19 context led the institutional investors to become more demanding with companies and to increasingly adopt a ‘supervisory’ role with respect to executive remunerations and dividends. The relationship between shareholders and listed companies is substantially changing: a trend in line with the findings of Morrow Sodali’s Institutional Investor Survey 2021, the annual poll of 42 institutional investors with $29 trillion in assets under management.

The survey points out how the investors’ attention shifts from just a good financial performance of a company to a meaningful ESG commitment. For the vast majority of them (95%) ESG criteria have an increasingly important role for investment and engagement decisions. Not surprisingly in the 4th quarter of 2020, the trend of capital inflows in ESG-oriented investments reached a record $1.65 trillion, an increase of almost 29%.

According to the survey, climate change (85% of respondents), followed by board composition (64%), human capital management (64%) and executive remuneration (55%), are themes prioritized by institutional investors in their decision making.

While ESG and pay-for-performance topics will continue to dominate the market, “the real challenge and responsibility for the companies should be a regular engagement with the shareholders to endorse this cultural change that is taking place," explains Andrea Di Segni, Morrow Sodali’s Managing Director, interviewed with Milano Finanza on this subject.

Read the full article here (in Italian).