Covid-19 pre-empts shareholder engagement at 2020 AGMs

On the 07/23/20 at 7:41AM


Thibaud Vadjoux

According to Novethic, shareholder engagement is only slowly gaining a foothold in France despite the obligations of the PACTE law. The Covid-19 crisis hasn’t helped matters.

After very strong equity market performances in 2019, annual general meetings of May and June 2020 were shaping up like a lovefest for shareholders. That was before Covid-19, which ended up depriving shareholders of part of their dividends and left them more concerned about the pandemic than next year’s financial results. The pandemic also managed to obscure ESG issues at meetings that ultimately took place behind closed doors or, at best, via Internet, Novethic found in its first survey of shareholder engagement.

Some investors felt that the crisis had cast the spotlight on ESG issues, but “many others ultimately made short-term financial thinking and EBITDA the focus of their concerns,” regretted Anne-Catherine Husson-Traore, managing director of Novethic at a press conference on Tuesday 21 July. “Most companies did not allow shareholders to take the floor during the online AGMs. There was no real discussion, as it was based on answers to written questions, published on their websites … some companies even pre-recorded their AGMs, which turned them into mere formalities !” said Olivier de Guerre, president of Phitrust, quoted in the survey.

18 institutionals have reported on their engagement policies

With or without the pandemic, shareholder engagement is getting off to a slow start in France. And yet, the PACTE law passed in 2019 requires institutional investors to draw up and publish their shareholder engagement policy based on the “comply or explain” principle. But almost half of the 97 institutional investors surveyed by Novethic do not publish their engagement policy (and do not say why), and only 18 of them make a public rendering of their engagement policy. And few of these reveal much that is very concrete. Eight investors explained their votes and four presented case studies.

French institutionals prefer dialogue to engagement and coalitions. While 27 French institutionals have signed up for the PRI platform, only eight have decided to be a part of PRI’s Climate Action 100+ coalition. “And yet, shareholder engagement at AGMs is the most effective responsible investor way to push companies to change their practices,” Husson-Traore believes.

Meeschaert may submit a new resolution at Total’s 2021 AGM

Some AGM’s, however, resonated powerfully this year. Total pledged to become carbon-neutral by 2050 (Scope 3 Europe), urged on by the Climate Action 100+ coalition and another group of investors that had submitted the first climate resolution. This resolution (Scope 3 World) was rejected, but did garner 16.80% of the votes, with 11.12% abstentions. “This is an extremely positive outcome ... It works out to one in five voting shareholders … We showed shareholders that it is possible to go through with a climate resolution in France,” Aurélie Baudhuin, head of SRI research at Meeschaert, told Novethic. The asset manager behind the resolution is thinking of submitting it again next year.  

Engie’s AGM was also a big event earlier this year. Shareholders approved the group’s mission giving priority to the energy transition. But tensions in the executive suite led to the departure of the CEO, Isabelle Kocher, who advocated exiting gas. Novethic also cheered the resolution on manager compensation and decent salaries submitted by Fondazione Finanza Etica and Shareholders for Change at H&M’s AGM. The resolution had been rejected in 2019 by the shareholders as it had not been translated into Swedish. In 2020, it received 3.6% of the votes, including those of Caisse des Dépôts, CNP Assurances, Amundi, Nordea and JP Morgan.

After a year disrupted by Covid, Novethic is turning the page to the 2021 AGMs, hoping for a “life-size test” for investors.