Engagement policies and the promotion of sustainability

Abstract

The revised Shareholder Rights Directive from 2017 (the SRD II) imposed duties on institutional investors and asset managers in relation to their engagement with investee companies and disclosure hereof. These rules have now entered into force in Denmark and we have examined how Danish life insurance companies and pension funds have formulated their engagement policy and reported on the implementation hereof, and additionally we have examined how these investors engage on the general meetings of large Danish listed companies. Our research shows that the focus of the engagement policies for most of the funds is on ensuring that the investee companies are sustainable, whereas the focus on more traditional corporate governance issues that was the main focus of the SRD II is less prominent. If one reads the reports on how the policies have been implemented, there seems to be a more balanced approach where sustainability and governance issues seem to be given more or less equal weight in the engagement with investee companies. But given that the SRD II did not have a particular sustainability focus, it is interesting that it has been given such a prominent role. We also find that this focus on sustainability issues is most predominant when engaging with the management of the investee companies, whereas the institutional investors only to a very limited extent use their shareholder rights to promote sustainability issues at the general meeting.

Keywords: shareholder rights, institutional investors, engagement policies

JEL Classification: K22