ICGN Conference Report: BlackRock, CalPERS and APG on ESG, stewardship and engagement

Major investors attend the ‘Crisis in Capitalism’ event

Senior figures from some of the world’s major investment institutions met in London this week at a conference organised by the International Corporate Governance Network entitled: “Capitalism in Crisis priorities for recovery and reform”.
Among the speakers was Janine Guillot, Chief Operating Investment Officer at the $225bn (€169.7bn) California Public Employees Retirement System (CalPERS), who articulated her response to the UK’s Kay Review.
Noting that CalPERS has $9bn invested in the UK, she said how impressed she was with the “fundamental questions” being asked by the Kay Review into markets and short-termism.
But she disputed the idea of a growing governance deficit due to increased foreign ownership of UK companies.
She saw “good long-term owners, global pension funds global sovereign wealth funds, committed to corporate governance principles”, although she saw a logistical problem on collective engagement action by investors. “There needs to be some way to manage action collectively,” she said.

And she said the interim Kay report has made her re-think performance reporting: “Quarterly reporting to trustees may reinforce this short-termism. That’s something we should all think about.”
“Have we shifted collectively as owners and managers to a trading mentality?” she asked.
Also speaking at the conference at the Guildhall in the heart of the City financial district was Michelle Edkins, Managing Director of Corporate Governance and Responsible Investment at BlackRock, the US funds giant with $3.5trn under management.She said the corporate governance community is doing itself a “huge disservice” by creating its own terminology. “Portfolio managers do not talk about governance but they have strong opinions about board and executive leadership,” she told delegates.

She argued real governance can get “sidelined” by albeit important issues such as director independence and that companies and shareholders are “talking at cross purposes”.

Edkins floated the idea of a code of conduct or an agreed ‘modus operandi’ to cover collective action by investors, taking in a view about how sensitive information from investor-corporate engagement is treated.

“ESG is our business”

Edkins, who recently relocated to San Francisco, reflected on how polarized the public debate between investors and companies in the US. “It’s almost like people are looking to pick a fight,” she said, although she did say that most engagement is not as inflammatory as it can appear in the media.

Eduard van Gelderen, Chief Investment Officer, Capital Markets at Dutch pension management giant APG Asset Management, declared APG’s commitment to environmental, social and governance integration. He said: “I would claim ESG is our business.”

He explained how ESG become fully integrated two years ago; there was some resistance from APG’s portfolio managers, although most now accept the value “of having the discussion before making the decision”. Van Gelderen said APG applies ESG to 14 asset classes in total, not just listed equities.