Insurers resist EU’s shareholder rights push on disclosure of corporate engagement

More pressure from ‘buyside’ industry to planned reforms

The main European insurance industry trade body, Insurance Europe, is formally resisting demands from the European Commission for greater disclosure around investors’ engagement with companies.
It’s the latest pressure on the planned revision to the Shareholder Rights Directive, one of the main elements governing institutional investment in Europe. The reforms were tabled last spring by the then Internal Markets Commissioner Michel Barnier.
In September, PensionsEurope, the Brussels-based trade body for European pension schemes warned the directive’s provision covering disclosure of investor engagement with companies could cause unnecessary red tape and ‘box-ticking’.
Now, its fellow trade group, which represents 34 national member bodies accounting for 95% of total European premium income, has expressed its concerns in a brief position paper.
While welcoming the ‘comply or explain’ characteristic of the directive as it relates to engagement, Insurance Europe says it is “too arbitrary” and not clear enough to be “fully understandable”.
It warns of “unintended consequences” of disclosing sensitive engagements. “At the extreme, public disclosure of a disagreement between a company and their shareholders could impact shareholder value,” the group says. The industry holds around 18% of the European equity market.
Insurance Europe also weighs in heavily on the disclosure requirements, in the draft text, on the relationship between institutional investors and their asset managers.“Insurance Europe does not understand what the public interest is in such a disclosure,” it says.
Specifically, it is calling for the deletion of a requirement about how asset mangers are incentivised to align strategy with the profile and duration of liabilities, calling it “misleading”.

The rationale is that an investor, as part of overall strategic portfolio view, may want to use an asset manager with a short-term investment if that contributes to an enhanced portfolio performance. The institutional investors will themselves assess the asset liability matching at a total portfolio level.
The insurance lobby group also wants deleted the requirement for investors to disclose how their equity investment strategy is aligned with the profile and duration of their liabilities and how it contributes to the medium to long-term performance of their assets.
Lastly Insurance Europe takes issue with the whole section of the text dealing with the transparency of asset managers. This provision tackles investment decisions based on medium-to-long-term performance of the investee company, including non-financial performance, portfolio composition and turnover, securities lending and the role of proxy advisors. Insurance Europe says it sees “no clear benefit” of it – and warns it raises “significant confidentiality concerns”.
Earlier this month, RI reported that Jeroen Hooijer, Head of Unit, Corporate Governance and Corporate Social Responsibility at the European Commission, was optimistic a revised text of the directive would be in place by the end of the year.