Robeco has been convinced for many years that sustainable corporate behavior can be enhanced by actively exercising our rights as stockowners through voting and engagement activities. These activities are undertaken by Robeco’s Active Ownership department and are aimed at improving the risk return profile of our investments while positively contributing to society.
We advocate for good governance and sustainable practices when casting our votes at shareholder meetings. Engagement entails a constructive and structured dialogue with investee companies to discuss how they manage ESG risks and seize business opportunities associated with sustainability challenges.
Research shows that a gender-balanced workforce positively supports corporate performance in relation to the company’s profitability, risk reduction or share price. A gender diverse workforce at all levels of the organization, with equal opportunities for all employees, supports business and financial performance while improving human capital management. This approach has been the cornerstone of the RobecoSAM Gender Equality Impact Equities fund since its inception in 2015.
Engagement program initiated
In 2017, an engagement program was initiated in collaboration with RobecoSAM that was framed around the guidelines used to determine the eligibility of companies in the Gender Equality Fund. The objectives of the engagement dialogue focus on increasing the disclosures related to gender diversity throughout the workforce, equal remuneration practices, disclosure of well-being programs and how gender diversity is approached at the board level. In the first one and a half years of this project, we engaged with US-based companies operating in the financial and information technology sectors.
During our engagement, we found that commitments put forward by the companies to enhance diversity were not always followed by concrete policies or robust disclosures. This insufficient disclosure was also the topic of a shareholder resolution filed at one of the companies under engagement requesting further disclose of its workforce breakdown.
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Female workforce representation
As a result, the first objectives addressed during our engagement discussions were aimed at enhancing disclosures on both female workforce representation at different job levels and equal remuneration opportunities. We believe that addressing these topics would support our investee companies to better attract and retain talent while enhancing the value of their human capital.
Throughout our engagement discussions, guidance was provided in terms of specific disclosures that would be valuable for investors and other stakeholders. Companies responded positively to our engagement input and have taken it into account in their recommendations to management. We will continue to engage with these companies, following up regularly on our discussions and actively tracking their progress.
More women on boards
Gender diversity has become a very relevant topic in the international corporate governance arena. A Spencer Stuart survey found that in 2017, half of the incoming directors on S&P 500 boards were women or from minorities. Government intervention in this area has increased, as several countries such as India and France adopted legislative measures to promote gender diversity at board level through mandatory gender quotas.
In several markets, it is common to find director nominations to serve on the board included on the shareholder meeting’s agenda. Before casting our votes, a thorough assessment of the overall board diversity in terms of tenure, skills, gender and external commitments is conducted, and compared to local best practices. Our voting guidelines have recently been updated to reflect this assessment criteria.
Shareholder resolutions
In the last couple of years, an increasing amount of gender-related shareholder resolutions have been filed predominantly in the US. The content of these resolutions ranges from requesting companies to issue either a gender pay gap or employment diversity report to enhance diversity at the board level. Receiving on average 28% of votes in favor, it sends a clear signal to the company regarding the relevance of the topic for a large proportion of shareholders and creates an incentive to address the topic.
We firmly believe that enhanced disclosures on gender diversity within the workforce and remuneration opportunities would benefit shareholders, as failure to address these matters could present significant legal, reputational, and retention concerns for companies.