Ethos published this Wednesday 10th of March the 2020 summary reports of its engagement programs. These reports present the dialogues carried out by Ethos with listed companies, whether to address environmental, social or governance (ESG) issues. Detailed reports are only available for members of the pools.
Ethos’s shareholder dialogue programs bring together a growing number of Swiss pension funds and foundations. Launched in 2004, the Ethos Engagement Pool (EEP) Switzerland focuses on companies included in the SPI index. It had 151 members at the end of 2020, eight more than a year earlier, representing some CHF 260 billion in assets under management. The EEP International, launched in 2017, had for its part 62 members at the end of 2020 (CHF 186 billion in assets), compared to 46 members at the end of 2019.
For pension funds, membership in Ethos' pools is an effective way to implement a responsible investment approach, to address the sustainability issues of their investee companies and to strengthen their impact on the companies in their portfolios by combining their forces.
Direct dialogue maintained despite the Covid-19 pandemic
Within the framework of the EEP Switzerland, the direct dialogue with the companies is the preferred form of engagement. Due to the Covid-19 pandemic, statements at general meetings were however not possible in 2020 and most physical meetings with chairmen and company’s representatives have been replaced by video conferences.
This has not prevented the dialogue conducted by Ethos for many years to continue and to achieve significant improvements in 2020. For example, the objective announced by LafargeHolcim to achieve carbon neutrality by 2050 or Credit Suisse's decision to align its investments and financing with the Paris Agreement objective of limiting global warming to + 1.5 ° C. For Ethos, it will now be a question of ensuring that these announcements are effectively implemented and accompanied by concrete measures to achieve these objectives.
After three years of dialogue on the theme of corporate tax responsibility, Ethos also notes progress on the part of the companies concerned, 27% of Swiss companies now publish their policy on fiscal responsibility.
The objective of the "Say on Climate" in the crosshairs
At the international level, engagement is generally conducted in collaboration with other institutional investors around ESG themes of common interest. The EEP International participated in 30 engagement initiatives in 2020, of which 14 were related to environmental issues, 13 to social issues and 3 to governance issues. A total of 1'264 companies were targeted as part of these initiatives.
Climate change once again occupied a very important place in the activities of Ethos in 2020. As “Lead Investor” for the dialogue with the two Swiss companies included in the universe of "Climate Action 100+", an initiative that aims to encourage major CO2 emitters to reduce their emissions, Ethos urged Nestlé and LafargeHolcim to hold advisory votes on their climate alignment report at their general assembly (AGM). This annual vote, called "Say On Climate", aims give shareholders an annual say on the effectiveness and ambition level of the climate strategy implemented. Ethos is optimistic that the discussions it held with the two companies in the past months will lead to such votes being introduced in the future, whether from the 2021 AGM or from the 2022 AGM.
The Covid-19 pandemic has also drawn more investor attention to social factors. Ethos and the members of EEP International, for their part, continued to play a very active role within the "Workforce Disclosure Initiative", the objective of which is to obtain standardized information from listed companies regarding the management of their employees, in their own operations as well as in their supply chains. This initiative allows investors to compare the practices of different companies and push them towards improvement.
For 2021, the main dialogue topics for the Ethos’ engagement programs will be climate change, compliance with good governance practices, working conditions within supply chains and social and environmental reporting. New themes will also be discussed with companies, such as digital responsibility or the fight against deforestation.