Views from Mumbai
It does what it says on the tin. The Asian Corporate Governance Association (ACGA) championed the “G” in Asia before sustainability was fashionable, and remains on the case now that it is.
Association members met this week in Mumbai to review a laundry list of issues facing the region: geopolitical tensions, SOEs in India and China, Adani, family-owned companies and governance, corporate fraud and more.
It’s been 22 years since ACGA formed to prevent a repeat of the Asian financial crisis – the smart money says it will be around for a few more.
Our man on the ground noted the following snippets of conversation with speakers and delegates (names removed to respect the rules of engagement).
“Truth be told, I don’t even know what ESG stands for.”
A speaker on the geopolitical risks facing investors
“India doesn’t need another dozen or two dozen privileged women like myself on boards. What we need is a safe working environment that women can go to and come home safely.”
A regulator on India’s gender diversity priorities
“I personally believe that someone with a full-time executive role should be limited to one board seat.”
A listings regulator on overboarding
“Japan should top the list for investors looking for alternatives to China.”
An investor on minimising exposure to China’s geopolitical risks
“A lot of directors see the role as a retirement job and become enslaved and dependent on keeping that board seat.”
A provider of director training on selecting candidates for company boards
“Allowing class-action lawsuits could be the turning point that Southeast Asia needs to stamp out corporate fraud.”
A veteran Asian fund manager
“Prior to 2022, I would have said that divestment should be avoided and investors should always remain in the conversation. Post the Ukraine invasion, I am less certain.”
An investor with historical exposure to Russia
“There is no empirical evidence linking dual-class shares with poor corporate governance on any level.”
An Asian exchange operator
“Regulators should not bring in requirements to have an accountant on audit committees, that is too prescriptive and will exclude many talented candidates. You don’t need to have an accounting degree to have the necessary expertise.”
Said during a robust exchange of views on the skills needed at board level to provide competent oversight
“Boards at Indian SOEs have no power since it’s the responsible government ministry which appoints them. It is almost useless for investors to push for change at board level.”
A panellist discussing engagement strategies for SOEs
APPGs under scrutiny
British Green Party MP Caroline Lucas hit the headlines last week after dropping out of the All-Party Parliamentary Group (APPG) on ESG in a dispute over its decision to accept funding from organisations including Bayer and BAE Systems.
APPGs, which bring together like-minded MPs on single issues such as a country, campaign or industry, are often Trojan horses for lobbyists and corporate interests, so their funding should be subject to scrutiny.
However, Lucas remains a member of the larger APPG on the environment, which has previously taken cash from RWE and and two water utilities.
In response to queries from RI, Lucas told us she had reviewed the funding of all APPGs of which she was a member and raised concerns where appropriate. The environment APPG has put in place new partnership and funding guidelines as of this summer in response to her queries, she said.
“It’s right that the rampant funding from fossil fuel interests and other unethical business across a large number of APPGs in parliament is under the spotlight,” she added.
Quote of the week
“You wouldn’t put $130 billion of capex into acquisitions if you didn’t feel you’re going to get that money back. And clearly, they do”
As one investor points out, Chevron and Exxon’s bet on peak oil – as demonstrated in blockbuster acquisitions of Hess and Pioneer Natural Resources, respectively – is wildly at odds with predictions by the IEA.
The week in RI
Regulation was top of our agenda again this week. In the EU, we took a deep dive into the political wrangling around including financial institutions in the Corporate Sustainability Due Diligence Directive (CSDDD).
We also reported on auditors’ concerns about the quality of disclosures in the first round of reporting under the Corporate Sustainability Reporting Directive (CSRD), which so far do not seem to be striking a chord with investors.
In the UK, our analysis of responses to a consultation published by the Financial Reporting Council (FRC) showed near-unanimous support from market participants for implementation of the first two ISSB standards with minimal deviation.
And in Australia, the Treasury has given stakeholders until the end of November to provide feedback on its sustainable finance strategy, which included plans for a fund-labelling regime for sustainable investment products.
The ESG backlash also featured this week, following publication of the results of two surveys on the topic.
Perhaps surprisingly, one by law firm Linklaters found that the anti-ESG movement is not discouraging non-financial corporates in the US from collaborating on climate initiatives.
And in the latest annual benchmark policy survey by proxy adviser Institutional Shareholder Services (ISS), investors delivered a clear message to corporates that the politicisation of ESG is no excuse for rolling back on disclosure.
In other news, Apple and Microsoft were hit with pioneering proposals on their use of AI, the World Benchmarking Alliance shared plans to launch a nature engagement initiative in 2024, and we reported on investors’ frustration with progress on the PRI’s human rights initiative, Advance.
ARC of diversity?
The first conference of the innocuously named Alliance for Responsible Citizenship (ARC) has been making headlines in the UK for its collection of eccentric speakers and incendiary speeches.
Panel titles include “The unconsidered risks of renewable energy” and “Discussing the sexual revolution”, and both Vivek Ramaswamy and State Financial Officers Foundation CEO Derek Kreifels made anti-ESG appearances.
While the alliance’s website speaks optimistically of a “vision for a better world”, there are more sinister undertones in its literature about the decline of Western civilisation and a “rejection of our traditional beliefs”.
The ARC advisory board, as might be expected, counts hard-right Conservative MPs and Republican officials among its members, alongside Ramaswamy and controversial Canadian psychologist Jordan Peterson.
Another member runs a “Children’s Rights” charity which sent a letter to the Ukrainian interior minister warning her that plans to legalise same-sex civil partnerships would leave Ukrainian children without mothers or fathers in a manner comparable to those orphaned by the Russian invasion.
More surprisingly, the board also includes Helena Morrissey, founder of the 30% Club, which advocates for better gender diversity on boards, and current chair of the Diversity Project, which works to champion DE&I issues in the UK investment and savings industry.
In response to queries, Morrissey told RI that she did not agree with many views of individual advisory board members, but had joined “because we need a more optimistic and intentional path to a better future and renewed hope, given the current gloom and despondency, particularly for young people”.
During her time at the conference, she said she had met many women campaigning for gender equality and discussed improving corporate governance with other investors.
RI USA: The final countdown
In less than two weeks, we will be back in New York for the 15th edition of RI USA.
We have a fantastic agenda covering everything from net zero and nature to fiduciary duty and the ESG backlash, while our speaker line-up includes senior representatives from the Department of Treasury, Utah Retirement Systems, CalSTRS, Phoenix Group, GFANZ, the PRI, ICI Global, R Street and many more.
Full details of the agenda and speakers, as well as how to attend, are available here. Hope you can make it!
Today’s letter was prepared by the RI editorial team.