"ESG is increasingly considered to be a fiduciary duty of investors," according to the 2018 Annual Investor Corporate Governance Report by UK-based investor relations and capital markets intelligence group CMi2i. The report, which surveyed institutional shareholders representing $8 trillion of assets under management across over 1,200 funds in the US and Europe, aimed to discover which ESG areas would be key in 2018 and beyond and how this will impact shareholder behavior in the future. Major findings included:
- The majority (71%) of respondents said they have increased their ESG stewardship teams over the last five years as asset managers face increasing pressure to integrate ESG into their decision-making process (88% of investors "systematically integrate" ESG factors into their investment process).
- Investors expressed a desire to hear directly from board directors on ESG issues, including the chair (94%), senior independent director (76%) and committee chairs (71%); 59% of respondents said ESG issues would affect how they vote in director elections.
- Investors are increasingly willing to collaborate with each other to force change, with 59% of respondents claiming they would consider escalating engagement by seeking to call a shareholder meeting or supporting others who did, versus only 13% claiming this in 2017; as the study notes, this could "suggest that strategies previously perceived as 'shareholder activism' could now just be considered 'constructive investing.'"
- Gender diversity increased from 9th position to 2nd position on the list of items for which investors frequently request further disclosure, with over 70% of investors saying they very often or often requested this in 2018. Human capital management received about the same level of interest.
- About 59% of respondents agreed that executive pay is "too complex," but about the same amount still believe that long-term incentive plans are the most effective at aligning pay and performance. However, about 65% of respondents said they believe deferred bonus plans will become more common in the next three years as a simpler alternative to LTI plans.