The week in GRC: SEC proposes increased proxy voting disclosure and private equity firms target ESG reporting

– Bloomberg spoke to activist investor Engine No 1’s CEO Jennifer Grancio about her firm’s strategy, its ExxonMobil boardroom victory earlier this year and the appeal of ESG investing.

– Reuters reported that FedEx Corp shareholders approved CEO Fred Smith’s $54 mn pay plan at the company’s AGM despite it facing scrutiny from the Teamsters labor union for including a reinstated cash bonus and extra stock options. FedEx asked investors to support its executives’ pay packages in a supplementary securities filing, explaining that the board’s compensation committee made ‘decisions in real time, based on the best information available.’

– The SEC announced that Commodity Futures Trading Commission (CFTC) member Dan Berkovitz has been named SEC general counsel, effective November 1. John Coates will leave the agency in October and return to teaching at Harvard University. Michael Conley, the SEC’s solicitor, will serve as acting general counsel upon Coates’ departure until Berkovitz joins the agency.

Berkovitz has been a member of the CFTC since September 2018. Before that, he was a partner and co-chair of the futures and derivatives practice at WilmerHale. He was the CFTC’s general counsel from 2009 to 2013. Coates was named acting director of the division of corporation finance in February 2021 and SEC general counsel in June. Among other things, he has advised on ‘meme stock’ volatility, special purpose acquisition companies, the proxy system, disclosures of climate-related financial risks and human capital, insider trading and the Treasury market.

– The SEC also said Erik Gerding has been named deputy director for legal and regulatory policy with the division of corporation finance, effective October 4. Gerding will join the agency from the University of Colorado Law School, where his focus has been corporate and securities law and financial regulation.

– CNN reported that Activision Blizzard said it will pay $18 mn to settle a lawsuit by the Equal Employment Opportunity Commission (EEOC) alleging harassment and discrimination. As part of the settlement agreement, which is subject to court approval, Activision Blizzard said it will create an $18 mn fund ‘to compensate and make amends to eligible claimants.’ Any remaining amount will either be donated to charities focused on harassment, gender equality and women in the video game industry, or will be used to create diversity and inclusion initiatives within the company, it added.

‘There is no place anywhere at our company for discrimination, harassment or unequal treatment of any kind, and I am grateful to the employees who bravely shared their experiences,’ said Activision Blizzard CEO Bobby Kotick in a statement. ‘I remain unwavering in my commitment to make Activision Blizzard one of the world’s most inclusive, respected and respectful workplaces.’

Kotick said the company will ‘continue to be vigilant’ in stamping out harassment and discrimination. ‘We thank the EEOC for its constructive engagement as we work to fulfill our commitments to eradicate inappropriate conduct in the workplace,’ he added.

– Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec, said it will drop all of its oil production assets, valued at C$3.9 bn ($3.08 bn), by the end of 2022 and reduce carbon intensity by 60 percent by 2030, according to Reuters. It said it would be the first institutional investor in Canada to exit oil production assets.

As part of a plan to reach net-zero emissions by 2050, Caisse plans to hold green assets worth C$54 bn by 2025 and dedicate C$10 bn to decarbonize carbon-emitting sectors. Pension funds globally are under pressure to act on climate change, with several announcing divestments from fossil fuel companies. The new emissions targets for Caisse follow the Ontario Teachers’ Pension Plan board’s September 16 announcement of interim plans to cut emissions.

– Climate change ‘is a mega-trend that, if you take advantage of it and get ahead of it, [is] going to be an alpha generator for the next 30 or 40 years,’ CalSTRS chief investment officer Christopher Ailman told CNBC. ‘If you don’t pay attention to it, it’s going to be a negative alpha and you’re going to be stuck with a low-beta return.'

Wendy Cromwell, vice chair at Wellington, which had $1.4 tn in assets under management as of the end of the second quarter, said of climate change that ‘investors need to study it, and companies need to be prepared for it.’ Global assets in sustainable funds reached $2.24 tn at the end of June, according to Morningstar. Assets first topped the $1 tn mark in the second quarter of 2020.

– The WSJ reported that the SEC proposed rule-making that would require money managers to disclose more information on how they use their voting power. The agency’s new proposal would require asset managers to categorize votes more clearly in SEC filings to help investors more easily identify and compare funds’ voting patterns. Under the proposal, the reports would need to be filed in a format that is easier to analyze. It would also require more disclosure around the effect of securities lending by funds.

More disclosures on proxy voting would help accomplish a key priority of SEC chair Gary Gensler: giving investors more information to decide whether funds are living up to their promises on ESG goals. The proposal will likely prompt pushback from asset managers.

– CNN reported that General Motors CEO Mary Barra will become the first female chair of the Business Roundtable, beginning in January. Barra pledged to continue to ‘help advance policies that offer greater economic growth and opportunities for all Americans.’ She will replace Walmart CEO Doug McMillon.

The roundtable has opposed the proposed tax hikes in US President Joe Biden’s $3.5 tn Build Back Better plan. But GM just became one of the few major companies to back the climate investments in the plan. ‘Build Back Better lays the foundation for sustainability policies that will help address climate change and improve environmental quality and resilience,’ the company said in a statement.

– Reuters reported that a group of global private equity firms and pensions funds that together manage more than $4 tn in assets have joined forces to standardize reporting on ESG performance of portfolio companies. The group, led by Carlyle Group and CalPERS, will track data on greenhouse gas emissions, renewable energy, board diversity and other metrics of companies in their portfolio. Boston Consulting Group researchers will aggregate the data into an anonymized benchmark and the member firms plan to meet on an annual basis to assess prior years’ data and build on initial metrics.

‘We have found it challenging to effectively measure impact in our private equity portfolio because of the multitude of frameworks and definitions used,’ said Marcie Frost, chief executive officer of CalPERS. ‘This initiative simplifies sustainability reporting by using comparable metrics that allow us to gain insight into the investment risks and opportunities in our private markets portfolio.’

– Reuters reported that Credit Suisse shareholders approved the appointment of two external risk experts to the board of directors. Chair Antonio Horta-Osorio has promised a new strategy for the bank by the end of this year and a review of the bank’s risk management and culture. ‘We have made significant progress in assessing and debating the bank’s strategic options, and continue to expect to finalize our long-term vision and mid-term plan by year-end,’ Horta-Osorio said in a speech broadcast for an extraordinary general meeting.

Shareholders approved the appointment of former UBS executive Axel Lehmann and ING Group audit and risk executive Juan Colombas to the board. Credit Suisse plans to appoint Lehmann as chair of the bank’s risk committee.