Sustainability and Voting
Minerva Analytics adds value for our clients by incorporating ESG factors directly into the voting process. Minerva’s Say on Sustainability module enables investors to vote their shares using comprehensive, material and timely data including climate change metrics.
ESG & Sustainability Governance
ESG and sustainability risks have long been shown to have material impact on company success. Understanding how companies are addressing their sustainability challenges and opportunities is critical to understanding your portfolio’s stewardship risk. But ESG or sustainability index solutions are only just the beginning. Integrating sustainability considerations throughout the full range of stewardship is now as straightforward with our Say on Sustainability voting support.
The Say on Sustainability Rating Framework
The Say on Sustainability framework rates global companies on an A-F scale based on six pillars of good sustainability and ESG governance disclosure, including GHG data.
These pillars, and the underlying questions, were developed after of a year-long review of the world’s leading academic papers, together with legal, regulatory and independent sustainability disclosure initiatives. From this, our expert team identified the critical features of good sustainability governance which support superior company performance.
|Disclosure & Transparency||What and where are companies disclosing information? Is there risk recognition, socio-environmental performance data or target-setting? Is data timely and accessible?|
|Management Processes||Who owns sustainability in the firm, who is responsible, how senior?
Are management systems disclosed &/or certified?
|Risk Management||Policies, performance, targets, linkage to executive pay|
|Stakeholder Relations||Suppliers, value perception, staff rewards, charity, political donations|
|Audit & Verification||Assessment standards used, external verification|
|Public Participation||Recognition of initiatives including CDP, UN Global Compact, GRI, SASB etc.|
Minerva Analytics’ dedicated ESG research team is qualified to MSc level in sustainability and have a profound knowledge and understanding of integrated reporting.
The Say on Sustainability score has been designed to be fully incorporated into shareholder voting policies so that investors can, for example, vote to encourage change at companies which fail to disclose their climate change risk management plans or encourage board responsibility for sustainability. The underlying data points can also be used to support stewardship screening and portfolio bench-marking models.
Integrated sustainability voting
- Published through the Bloomberg ESG platform
- Include key metrics to support the Financial Stability Board and Tranisition Pathway Initiative
- Incorporated in the Association of Member Nominated Trustees Red Lines Voting
- Incorporated into extended, custom voting guidelines for asset managers and pension funds
- Incorporate GHG disclosures and targets to monitor progression and integration with pay and reward
- Five year time-series data sets can be downloaded into spreadsheets
- Develop custom benchmarks and quant strategies
Say on Sustainability is fully integrated with Minerva Analytics’s global governance, director pay and biographical data, AGM vote results and key performance/risk indicator relational data sets.
What do companies Say on Sustainability?
A surprising amount. Historically many companies have used a great deal of boiler plate or so-called greenwash to describe their sustainability governance. There are, however, promising signs of better integrated reporting on the horizon. Despite many positive developments, Minerva Analytics’s most recent annual review of sustainability reporting showed:
- 62% of independent sustainability reports were not up to date with the financial year assessed
- Worrying, 11% of those were two or more years out of date – with six years being the most tardy example
- Only 32% of companies dedicate responsibility for sustainability to a board leader or specific committee
- Just 8% of the US companies analysed were able to meet the quality of reporting achieved by their peers in the UK, EU or Oceania
- Only half of the companies surveyed were linking some form of sustainability metrics to variable pay
Support for the Minerva sustainability framework
Commenting on the publication of Minerva Analytics’s 2015 annual review, Bob Eccles, founding chairman of the Sustainability Accounting Standards Board said: “The Minerva Analytics ‘Say on Sustainability” is a carefully done and important action-oriented research project. While it notes some modest progress in sustainability disclosures by some of the world’s largest companies, it also points out some very specific areas where improvements are needed such as in quality through standardized metrics, timeliness with financial reporting, more explicit linkages between financial and non-financial performance, and materiality determination. The latter ultimately rests with the board. Here too the report notes progress but areas where corporate governance needs to be improved. Minerva Analytics rightly points out that boards have a fiduciary duty to the company, not only to shareholders. This means they need to identity the significant audiences to the company which is the basis of determining materiality for reporting purposes. I suggest that this be done on an annual basis through a simple one-page board of directors ‘Statement of Significant Audiences and Materiality.’ This modest suggestion will lead to big improvements in all the key areas this report discusses.”