ESG and engagement continue amid Covid-19, says Nuveen’s Reali

The Covid-19 pandemic has yet to have much of an impact on shareholder engagement or Nuveen’s pursuit of ESG issues, according to Peter Reali, senior director of responsible investing at Nuveen.

The coronavirus outbreak has caused unprecedented disruption to daily and economic life globally in the build-up to the peak of this year’s proxy season, including forcing millions of people to work from home and practice social distancing.

But Reali notes that at this time of year much of the engagement taking place with issuers involves ‘quick check-ins’ on specific proxy-related issues. Although face-to-face meetings are out of the picture, there has been no reduction in the number of companies Nuveen, the asset management arm of TIAA, has been able to reach or that have reached out to the firm, Reali tells Corporate Secretary. Online tools help in this regard and have meant a relatively smooth transition, he adds.

Technology also offers the potential for companies to avoid in-person shareholder meetings – with their attendant health risks – by switching to a virtual-only AGM. The Council of Institutional Investors (CII) has generally opposed virtual-only shareholder meetings in favor of a hybrid approach. In the context of the pandemic, however, ‘it is entirely reasonable that some companies will go to virtual-only annual meetings,’ CII executive director Ken Bertsch said in a March 16 statement.

According to a new survey by ISS Corporate Solutions, 47 percent of US companies polled say they have not yet decided which type of annual meeting they will hold, 37 percent have moved to a virtual-only AGM and 4 percent are going with a hybrid in-person/virtual meeting. Only 11 percent say they will convene their annual meeting in the same manner as they did last year, the survey finds.

The findings of the survey, which ran from March 19 to March 25, are based on 230 responses, one third of which are from S&P 500 companies.

Reali expresses hope that companies switching to virtual AGMs will ensure they take practical steps to accommodate shareholders presenting proposals at their meetings. ‘If companies use the situation in ways we deem inappropriate, we’ll talk to them about it,’ he says, though he adds that he has not seen evidence of this.

Reali notes that more than 200 companies outside the US have already announced they are delaying or cancelling their shareholder meetings in light of the pandemic, but that no US issuers have done so as yet. Despite this, his team is making contingency plans to manage its workflow across the year if there is a delayed proxy season.

Reali says the implications of Covid-19 for companies will inevitably be discussed and Nuveen will be looking at companies’ risk-management processes and supply-chain issues, among other things. But in terms of the topics covered in engagement at this time, he notes that much of what’s outlined in proxy statements is a look at what the company has done in the past year and plans it has made before the pandemic.

As such, it’s difficult to say what information regarding the pandemic will be included in proxy statements this season, he adds. Although Nuveen will be looking for potential outliers in terms of their risk management, he cautions against ‘throwing the baby out with the bathwater.’ Similarly, executive compensation issues have largely been set for this year’s proxy statement, but Reali’s team will be asking questions about what companies may be thinking about in terms of next year.

With regard to ESG, he notes that there will be some gravitation in interest toward topical issues, including those raised by the pandemic. But Nuveen takes a materiality approach to climate change and human capital, for example, and those topics are not likely to be fundamentally impacted, Reali says, adding that he hasn’t seen any change in clients’ attitudes toward ESG.

‘Our rationale for responsible investing and looking for long-term value doesn’t go away in times of crisis,’ he says. ‘If anything, this will only highlight [the extent of] ESG-related risks and opportunities.’

Earlier this week, meanwhile, Morningstar issued a note stating that almost 500 actively managed funds added ESG criteria to their prospectuses last year – in other words, considered ESG factors in their investment process – up from around 50 that did so in 2018.