An investment industry initiative set up to help escalate material issues with UK-listed companies has reported its strongest year to date for collective engagement activity.

The Investor Forum said 2020 had proved to be a watershed year for the development of its investor stewardship agenda and that it had engaged with more companies than ever before in terms of both the number of cases considered and breadth of issues pursued.

The forum was established in 2014 to help investors work collectively to escalate material issues with the boards of UK-listed companies. Its 52 members have £695bn invested in UK equities, representing 33% of the FTSE All-Share market capitalisation.

In its review of 2020, the forum reported 11 engagements with companies including Aviva, Barclays, Boohoo Group, Burford Capital, Pearson, Playtech, Royal Mail, Ryanair Holdings, Snam SpA and SSP Group.

The engagements covered succession planning, strategic direction, environmental strategy, societal impact, board effectiveness and capital allocation.

The Investor Forum said one of its biggest engagement successes was with Boohoo, which is now taking steps to address claims of widespread labour rights abuses and poor practices within its Leicester supply chain.

It was also successful in pressuring Barclays to commit to further climate action and in creating an investor-led solution for SSP to conserve cash.

The Investor Forum said the Covid-19 pandemic had accelerated the move to “stakeholder capitalism”, forcing it into the heart of investment and boardroom decision making.

Simon Fraser, chair of the Investor Forum, said: “2020 has arguably been a watershed year in the development of the stewardship agenda as well as for the relevance and impact of the work of the Investor Forum.

“A number of our 2020 engagements with corporate boards involved climate and social issues, demonstrating the fact that managing companies for all stakeholders is becoming an integral part of long-term value creation.”

Projects

In response to changes to the UK’s Stewardship Code, the Investor Forum has initiated a number of projects to promote improvement of the functioning of financial markets, including addressing risks such as climate change or those that may lead to business failure.

During 2020 it worked with members on issues such as voting transparency as well as helping small companies understand the expectations of stakeholders as they grow.

It has also provided analysis for members on the various capital-raising structures utilised by companies in response to Covid-19 and worked with the Pensions and Lifetime Savings Association to produce new joint guidance on stewardship for asset owners.

Climate engagement

As the UK looks to take a leadership position on climate ahead of COP26 in November 2021, the Investor Forum is calling for the introduction of a mandatory non-binding shareholder say on climate issues relating to the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

It said proposals on climate disclosure from HM Treasury, the Financial Conduct Authority and the Department for Business, Energy and Industrial Strategy provided an opportunity for investors to make the case for higher reporting standards.

The forum said a non-binding shareholder vote would provide a powerful signal on the effectiveness of any mandated climate disclosures, enabling the investment community to take a leadership position in advancing the UK’s net zero commitments.

This would provide investors with a mechanism to signal which companies are making good progress and those that are lagging, helping to align the focus of listed companies with the UK’s increasingly ambitious climate commitments.

Andy Griffiths, executive director of the Investor Forum, said: “In 2020, we saw tangible evidence of the value of stewardship and the positive contribution that engagement can make. However, we believe that the important need for engagement is still not fully recognised – we very much hope that the FRC Stewardship Code reports will generate a wider discussion on the value of engagement in delivering effective stewardship.

“In 2021, the focus on how companies and investors can advance the UK’s net-zero commitments will rise still further. We argue that the UK has a unique opportunity to lead the world by embracing a ‘say-on-climate’ ahead of COP26.”

Last Updated: 21 January 2021