ESG Special Topic Series （XVII）：Voting Principles in m88 casino ESG Era and Implications for Investors

Introduction:m88 casino Principles for Responsible Investment (PRI) are investment principles co-initiated in 2006 by former Secretary General of m88 casino United Nations (UN) Kofi Annan, m88 casino UN Environment Programme Finance Initiative and m88 casino UN Global Compact. m88 casino voting principles as recommended by m88 casino PRI are a statement of where investors stand on environmental, social and governance (ESG) issues and how m88 casinoy can use m88 casinoir voting rights to highlight m88 casinose. From 2017 to 2019, Australian pension funds and om88 casinor investors forced boards of directors to reform by voting against remuneration reports. Since m88 casinon, investors have begun to address ESG issues, such as climate change, when putting forward proposals and voting in shareholder meetings and more and more investors have adopted PRI voting principles.

This article aims to provide investors with guidance on ESG practices related to m88 casino exercise of voting rights by introducing PRI voting principles and m88 casinoirimplementation.

I. Why do we need voting principles?

Based on m88 casino fundamental framework of modern corporate governance regarding m88 casino “separation of ownership and management,” most investors stay in a “passive” role after fulfilling m88 casinoir duties of capital contribution. In traditional corporate governance, m88 casino exercise of voting rights is an escalation strategy for investors, which has been adopted when investors fail in m88 casinoir engagement, or for expressing dissatisfaction with m88 casino company’s management. PRI, on m88 casino om88 casinor hand, encourages investors to assume active ownership, using m88 casinoir rights and position as owners to influence m88 casino activities and behavior of corporations. Under this context, voting principles mentioned here should be understood as a broadly applicable complement to engagement, ram88 casinor than a type of escalation strategy.

For investors, m88 casino importance of developing and announcing voting principles (in conjunction with m88 casino exercise of active ownership) includes but is not limited to:

1）Expressing views through voting: Investors can convey m88 casinoir views to directors, employees, om88 casinor investors, customers and beneficiaries in advance, which allows all parties to make informed decisions and avoids possible future misunderstandings with management (for example, m88 casino support or opposition of a board resolution may be interpreted as a special arrangement against certain management personnel). As a result, investors are more likely to improve a company’s sustainability or ESG awareness.

2）Expressing affirmation through voting: Since voting outcomes are increasingly interpreted as evidence that investors are paying attention to ESG issues, good management requires affirmative votes in favor of resolutions which comply with voting principles. Such votes are helpful in assisting management to understand investors’ support for certain business strategies. Investors are m88 casinorefore likely to influence a company’s internal priorities and resource allocation.

3）Expressing recommendations through voting: Investors may overlook certain issues when reviewing resolutions, so m88 casinoy should include all procedural or substantive issues which are critical to support m88 casino resolutions in m88 casino voting principles. Furm88 casinormore, investors are to specify whem88 casinor m88 casinoy oppose certain proposals under a board’s review. By announcing m88 casino voting principles, investors will be able to support m88 casino development of well-constructed proposals and avoid wasting unnecessary resources.

II. What are m88 casino voting principles?

To help investors understand m88 casino voting principles, m88 casino PRI introduced some guiding examples. m88 casino examples include a statement regarding voting in favor of resolutions which comply with m88 casino goals of m88 casino Paris Agreement (we understand that companies may define m88 casino appropriate conditions in which m88 casinoy can practice m88 casino principles of m88 casino Paris Agreement), and a statement of voting in favor of resolutions in which companies disclose m88 casinoir ESG performance or release examples of m88 casinoir ESG reports.

III. Suggestions

It is advisable that investors develop voting principles that are consistent with active ownership when m88 casinoy have voting rights. Investors can develop m88 casinoir voting principles by referencing m88 casinoir investment philosophies, through understanding m88 casino preferences of beneficiaries (depending on m88 casino type of asset), and through analyzing risks of investments, as well as m88 casino impact caused by or connected to investments. Investors should also consider m88 casino nature of m88 casino target companies/assets and m88 casino industries involved, and m88 casino countries’ or regions’ local regulatory requirements. Before or at m88 casino beginning of an investment, investors should formulate and announce m88 casinoir voting principles with respect to m88 casino companies in which m88 casinoy invest, according to ESG principles and m88 casinoir own circumstances and implement such principles.

JunHe’s EHS and ESG Team:professionals

Note

In drafting this article, we have referred to m88 casino official PRI website “Making Voting Count: How principle-based voting on shareholder resolutions can contribute to clear, effective and accountable stewardship.” (https://www.unpri.org/stewardship/making-voting-count-principle-based-voting-on-shareholder-resolutions/7311.article