(Interview with Ana Rivero Fernández, Global Head of Investment Content and ESG,Santander Asset Management, published in Morrow Sodali,s Ligthouse Magazine. October 2020.
The incidence of items that diluted equity (capital raising authorities, issuance of convertible debt tools) has grown in this 2020 proxy season in Spain, as well as the average support of shareholders before said items. Are investors announcing that they are able to put liquidity into the markets?
Yes. Investors are ready to add liquidity in capital and financial tools that used to be seen merely as tangential years ago. Indeed, the current long-term horizon of zero interest rates opened the door to diversify investment opportunities and search for risk-balanced alternatives. Nonetheless, it is worth noting that these new investing perspectives stopped being a no-brainer to became increasingly complex.
This has been the second year where Spanish issuers had to submit to the binding vote of shareholders the verified non-financial report. The average levels of support seem to be very satisfactory. What are the key aspects that Santander AM evaluates to support items like this?
Transparency is of great importance for us and we value very positively that issuers improve their ESG reporting. The regulation that fosters transparency on this matter is helping to have a much better information from issuers, but we like going even further since we engage not only with those companies that are subject to this law, but also with those who are not so they can anticipate and improve their reporting.
Do you think Directors’ performance should be assessed by investors using both financial and non-financial performance criteria, including, where appropriate, environmental, social and governance factors?
This is indeed the path to follow. If we agree that sustainability adds value and helps to manage risk and opportunities, it makes sense that ESG factors are taken into account when assessing the performance of those who sit on the board of directors and that are part of the management of the company.
In addition to the first question, the outcome of our analysis does not seem to show any significant new trend in the 2020 season regarding the previous one. Shall Boards expect the consequences of the Covid-19 pandemic on proxy season 2021 (i.e higher levels of scrutiny on the appropriateness of executive pay in relation to the overall economic and social situation)?
The pandemic has implied a deep transformation in all aspects and the greater interest in sustainability is one of those changes. In the last months, we have seen inflows and better performance data in ESG funds. The raise of ESG investment will imply a greater pressure on issuers to prove that they are able to manage this type of risks and the opportunities triggered by a situation like this.
What are the most significant engagement trends spotted by Santander AM regarding its listed investees that emerged during the last years?
Our engagement activities with issuers are planned ad-hoc. Often it addresses the improvement of companies’ ESG transparency. In other cases, we dig in how companies give answer to certain controversies identified in our analysis. We also promote our involvement in collaborative engagement activities. In fact, our recent adherence to the Institutional Investors Group on Climate Change initiative highlights our commitment to promote more engagements focused on climate change.