Our 2022 report showcases the engagement and voting activity we undertook in our mission to maximize value for our clients and address material risks and opportunities in their portfolios – including those addressing sustainability issues.
We believe that companies that have sound governance and oversight of risk and opportunities will be better positioned to generate long-term value and manage risk.
As long-term holders of capital on behalf of our clients, the informed exercise of voting rights, coupled with value-driven engagement, is one of the most effective mechanisms of creating value for our clients. Accordingly, our stewardship program proactively identifies companies for engagement and voting in order to mitigate material ESG risks in our portfolios.
In 2022, we voted at over 22,500 meetings on over 200,000 management and shareholder proposals.
In 2022, we voted in over 22,500 meetings and engaged with over 950 companies. In all, our engagement activities encompassed companies representing 49% of our 2022 equity AUM.
We vote with accountability, consistency, and transparency. Our goal is to hold directors accountable for effective disclosures and oversight of material risks and opportunities.
Every vote is important to us. We pride ourselves on our consistent voting record.
We monitor and follow up with companies that we previously engaged with and evaluate their responsiveness to our feedback. This requires a long-term, multi-year approach to stewardship, which we believe is necessary and reflects the anticipated long-term nature of our investments into these companies.
In addition to voting, engagement is an important pillar in our asset stewardship program. Like voting, our engagements focus on material issues that may affect long-term value. State Street Global Advisors typically prefers engagement over divestment because we believe that engagement is a more appropriate and effective tool for asset managers like ourselves to promote client value.
We view our engagements with portfolio companies as ongoing conversations intended to help bridge the financial objectives of both our portfolio companies and our clients. The dialogue is intended to be interactive and evidence based, with all sides having a chance to share challenges and opportunities.
Engagements may be initiated by a company, or us directly. Prior to annual shareholder meetings, many companies approach us to discuss how we intend to vote. We strive to prioritize our asset stewardship resources on engagements that we believe have the greatest material risk or opportunity at stake, in line with client’s expectations for our stewardship of their assets.
We continued our focus on encouraging stronger corporate governance practices via effective board oversight.
Firms with poor corporate governance practices can be exposed to material risks, such as regulatory and legal risks, so we believe it is part of our duty to our clients to carefully monitor corporate governance practices of investee companies and engage with them on these matters.
We conducted more than 600 engagements on governance in 2022 in which we discussed concerns regarding board practices, shareholder rights, and executive compensation, among other topics. Many of these engagements occurred before company shareholder meetings. We also discussed governance topics in our off-season engagements, including an ongoing engagement campaign where we seek to understand best practices for executive compensation plans. This campaign is intended to inform our expectations on the topic and help us develop thoughtful objectives for our engagements with investee companies.
Engagement Topics Include
Climate risk is a longstanding core theme of our stewardship activities. In 2022, we continued our focus on this topic.
Climate risk has been a focus of our asset stewardship efforts since 2011. Companies across markets and industries are exposed to varying levels of physical, regulatory, and economic risks related to climate change.
As long-term investors, we are focused on value, and we continue to engage with investee companies to ensure that they are analyzing climate change-related risks and disclosing on them properly, which can also limit regulatory and legal risk.
Our climate-related engagements typically focus on understanding how companies are both managing climate risk and addressing climate as an opportunity. We use these conversations to discuss best practices and share our expectations regarding climate-related disclosures.
In 2022, we adopted voting guidelines to promote consistency in disclosures related to climate-related risks and opportunities, and we began considering voting against directors at companies in several major indices where companies failed to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate-related risks and opportunities, in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) framework.
Engagement Topics Include
We have prioritized the topic of human capital management since 2018. In 2022, we published our first formal guidance on the topic.
Companies without effective human capital management strategies may become exposed to material risks related to their operations, reputation, and strategic execution, among other areas.
We primarily focus on improving corporate disclosures regarding human capital management, with an emphasis on the largest employers in our portfolio. We leverage insights from engagements with companies to inform our guidance on this topic.
Engagement Topics Include
We have focused on the materiality of diverse perspectives — particularly gender and racial and ethnic identities — since 2017.
We conducted approximately 300 engagements on the topics of racial, ethnic, and gender diversity in 2022. We also have an ongoing targeted engagement campaign focused on DEI practices and disclosures at 35 of the largest US- and UK-based employers in our portfolio. Our goal is to increase our understanding of DEI best practices, monitor the state of DEI risk management at our investee companies, and drive greater adoption of our suggested disclosures across the market.
Companies that fail to oversee risks and opportunities related to diversity, equity, and inclusion can be exposed to material risks including reputational, strategic, financial, regulatory, and human capital risks. Our stewardship efforts in this area seek to encourage improved corporate disclosure and data on companies’ DEI practices.
Engagement Topics Include
Learn more about our successes and outcomes from our 2022 high-profile engagements with some of our investee companies.
Our Asset Stewardship program is focused on identifying issues that impact long-term sustainability of our portfolio companies.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended December 31, 2022, and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
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All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
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