20 February 2019 at 15:23 BST

Investor pressure mounting on governance teams

Fast-growing number of investors focus on sustainability and human capital, putting more pressure on corporate governance teams says survey.

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New research from Morrow Sodali underlines the increasing pressure on companies to respond to demands from investors with effective engagement, disclosure and policies on an ever-broader array of topics, including human capital.

Sustainability pressure

Eighty-five percent of investors polled say climate change will be the most-prioritized sustainability topic of their corporate engagements in 2019, an increase of 31 percent from last year. Morrow Sodali consulted senior governance specialists at 46 global institutional investors that manage a combined $33 trillion in assets under management. Human capital, say 54 percent of investors, will be a key engagement topic this year, an increase of 30 percent. The same percentage also point to corporate culture. Other sustainability issues on the agenda are cyber-security, sustainability development goals metrics, supply chain management and data privacy protection.

Human capital

The survey highlights a range of human capital issues, including workforce diversity, hiring and firing practices, fair pay and opportunities for advancement to safety and community concerns. Morrow Sodali chair John Wilcox says the focus on human capital is ‘recognition of the fact that companies are human enterprises’ and have an impact on those around them. Executive pay continues to be an important consideration for investors, with 65 percent of investors saying pay-for-performance is the most important consideration when evaluating executive pay, down 23 percent from 2018. The importance of companies applying rigorous performance targets has risen by 10 percentage points over last year, from 46 percent to 56 percent.

 
   
 
 
 

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