F&C’s annual Responsible Investment Report 2011, published today, gives a snapshot of how one of the UK’s leading responsible investors exercised its influence on environmental, social and governance (ESG) issues over a turbulent year.

F&C engaged 1,222 companies across 54 countries across a wide span of ESG issues on behalf of its clients, and exercised voting rights at over 5,300 companies. 

Highlights of the year included:

• Bank pay: where we voted against management on pay proposals at many of the world’s leading financial institutions, including Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Barclays and HSBC
• Shale gas: where we engaged with companies, their financiers and regulators on the emerging risks in this fast-moving industry
• Listing standards: where we argued against the dilution of governance standards for issuers listing on the London Stock Exchange

Karina Litvack, Director of the Governance and Sustainable Investment Team, commented: “In a world facing daunting economic, social and environmental challenges, F&C believes that investors more than ever have a compelling interest in spotting hidden risks and engaging with companies and policymakers to drive change.”

Voting trends in 2011

F&C voted on all companies held in its clients’ portfolios: more than 73,000 resolutions at over 5,300 companies in 64 countries. We engaged with all of them before the vote to explain expectations, and afterwards to raise concerns. 

Overall, F&C supported management in 76% of all proposals – a slight increase from 2010 (72%). This was mostly accounted for by an increase in support for resolutions related to Board elections, where we saw an improvement in practices in a number of markets including Brazil, China, South Korea and Japan.

But F&C took a harder line on pay. Having abstained on 16% of pay proposals in 2010, sending a strong warning signal that poor practices would not be tolerated, we shifted to outright opposition in 2011, voting against 20% of all pay votes globally. In the US, we opposed almost half of all ‘Say on Pay’ proposals put forward by companies – many of whom were only reluctantly putting the issue to the vote for the first time following the implementation of the Dodd-Frank Act.

Outlook for 2012

F&C’s look ahead to 2012 identifies the following issues for investors:

• Regaining the social license to operate: How will financial institutions respond to public anger at irresponsible practices?
• The Rio+20 meetings: An opportunity to reflect on a resource-constrained world: what are the implications for investors?
• Unconventional energy: How can investors and regulators keep up with the risks associated with fast-moving technologies?
• Accounting for failure: What lessons should companies learn from the costly scandals of 2011?
• Investor responsibility: Will market turbulence lessen the focus on short-term returns, and drive a greater focus on genuine long-term performance?