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BlackRock’s 2020 Investment Stewardship Report: Hits Record Level for Firm in Engagements and Director Accountability

BlackRock released its Investment Stewardship 2020 Annual Report. The report provides an overview of the asset manager’s engagements, views and voting statistics related to the 12-month period ended June 30, 2020. The report, which is double the length of last year’s, describes how the asset manager prioritized engagements with its portfolio companies, reaching the firm’s highest levels. In addition, the report indicates that the firm held more directors accountable this proxy season than it has in any other.

Key Takeaways.

Adaptation/Resilience. BlackRock predicts more engagements and voting proposals will center on corporate risks, such as climate change, social and racial equity, and demographic and technological changes.
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Vanguard Spotlights Climate Change and Diversity as Priorities in its Latest Stewardship Report

Vanguard announced the publishing of its Investment Stewardship 2020 Annual Report.  The report shares the highlights of the asset manager’s engagements with its portfolio companies, observations and voting statistics relating to the 12-month period ended June 30, 2020. The firm’s key focus areas are primarily climate change and diversity.

Vanguard believes environmental, social and governmental (ESG) matters came into sharper focus during the 2020 proxy season because of certain events and circumstances, including the COVID-19 pandemic, economic uncertainty, escalating climate risks and historic social justice movements. Vanguard wants to know how boards plan to preserve long-term relevance.

Engagement Data.
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Key Sustainability Standard Setters Converge to Promote Consistency in Corporate Sustainability Reporting

Five framework- and standard-setting institutions announced a joint statement on September 11, 2020 reflecting their collaborative vision to develop a comprehensive global corporate reporting system for disclosing sustainability topics such as climate change, biodiversity, wages and skills. The participants include the Global Reporting Initiative (GRI), CDP (formerly the Carbon Disclosure Project), Climate Disclosure Standards Board (CDSB), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB).

Relevance to Companies.  The overarching purpose of the new system is to reduce the reporting burden on companies while improving the completeness, consistency and comparability of sustainability data available for decision-making. The participants’ plan is that companies who choose to disclose sustainability topics need to collect data only once.
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SEC’s Q2 Roundtable Offers Insight to Investor Views

On June 30, 2020, Chairman Jay Clayton moderated a virtual roundtable titled “Q2 Reporting: A Discussion of COVID-19 Related Disclosure Considerations” to solicit views from a small panel of highly experienced and well-informed private investors and asset managers (“Roundtable”).  The Roundtable included the following panelists: Gary Cohn, Former Director of the U.S. National Economic Council; Glenn Hutchins, Chairman of North Island and Co-Founder of Silver Lake; Tracy Maitland, President and CIO of Advent Capital Management; and Barbara Novick, Vice Chair and Co-Founder of BlackRock. The Director of the Division of Corporation Finance, William H. Hinman, also participated in the Roundtable.

Standardization, Transparency and Forward-Looking Information

There was a general consensus among panelists that companies’ providing greater transparency and forward-looking information is crucial when there is a lot of economic uncertainty, such as presented by the COVID-19 pandemic.
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SEC Urged to Mandate Disclosures on COVID-19 Risks and Responses

On June 15, 2020, Americans for Financial Reform (AFR), a nonprofit coalition founded in the wake of the 2008 financial crisis, called on the Securities and Exchange Commission (SEC) to require public companies to disclose how they are protecting employees from coronavirus (COVID-19), citing that consistent, comprehensive information is critical to investors and public health.

Although the SEC Division of Corporate Finance issued Staff Guidance in March 2020 providing companies with its views on COVID-19 disclosures, followed by a joint statement on COVID-19 disclosures in April 2020 by SEC Chairman Clayton and Corp Fin Director Hinman which statement recommended that companies “provide as much information as is practicable” about how they are responding to the pandemic, AFR claims that these efforts were only one step in the right direction.
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World Economic Forum Pledges to Stand By Stakeholders in the COVID-19 Era

The novel coronavirus (COVID-19) pandemic has posed unprecedented health risks and has led to global economic disruptions. The World Economic Forum (WEF), an international organization that fosters public-private cooperation on global, regional and industry agendas, released this month the “Stakeholder Principles in the COVID Era” (Stakeholder Principles) as part of its COVID Action Platform and called businesses to action stating that, during this time of crisis, “[t]he business community’s contribution: [is] to be leaders of responsiveness and stewards of resilience.” In January 2020, the WEF made headlines by issuing its Davos Manifesto 2020, challenging companies to incorporate stakeholders into their corporate purpose, as well as issuing, through its International Business Council (IBC) a draft corporate sustainability disclosure framework, “Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.”
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Davis Polk Client Memo: Human Capital and Climate Risk Disclosure – Analysis of 2019 Mandatory and Voluntary Reporting

To help guide public companies in preparing their annual reports and proxy statements for the 2020 season, we examined the climate change and human capital management disclosures that have been provided by the largest public companies in six industries. A key finding is that to date 10-Ks and proxy statements have generally contained only disclosures that are required by law. Nonfinancial information – which may be important to certain stakeholders, though may also be immaterial under federal securities laws – is overwhelmingly limited to standalone, voluntary ESG reports. Our memo looks at broad trends shaping this ever-changing disclosure landscape and what may be to come.
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