The disconnect between the UK equity markets and long-term investors’ objectives that led to 2011’s Kay review provided both sides with some key recommendations to improve this relationship.
The thinking goes, if investors intervene to improve how investee companies are run, that company will succeed over a longer period – with the end investor sharing in the spoils. Win-win.
Introducing a series on corporate longevity in the FT last week, Michael Skapinker explained that most multinationals last fewer than 50 years. For those that go beyond, the nature of ownership could be a factor of success, alongside the ability for a company to innovate and reinvent itself.
But despite institutional investors acknowledging the benefits of bestowing more time to these areas, it has taken a while for many to figure out exactly how to decide where action is needed and how best to take it.
In this week's Any Other Business analysis piece on p7, Tom Dines examines the power of shareholder engagement and the issues that drive schemes to the ballot box at AGMs,such as executive remuneration and environmental concerns. But it seems engagement is largely the domain of the public sector and the largest private sector schemes.
Catherine Howarth from responsible investment campaign group ShareAction, said the part-time nature of trusteeship had a role to play in this.
However, last week ShareAction announced several European institutional investors – including not-for-profit multi-employer scheme The Pensions Trust – would join the list of shareholders already supporting a resolution on climate change at oil giant BP’s AGM this week.
Illustration by Ben Jennings
Responding to the news, Claire Molinari, ESG research analyst at asset manager Sarasin & Partners, said and BP had recognised the business risks posed by climate change.
In The Outline of History, HG Wells said human history is a race between education and catastrophe, which could be analogous to the once-blind commercial objectives of an oil company versus the perils of climate change.
But increasing investor confidence in shareholder activism – and companies’ growing willingness to engage – can only help to accelerate the positive feedback loop.
Maxine Kelly is acting editor at Pensions Expert. You can follow her on Twitter @MaxineEK and the team @pensions_expert.
