Key Governance Developments - February 2022

European authorities give priority to efforts to curb greenwashing

EU regulators continue to prioritise efforts to tackle greenwashing in the investment industry and more broadly throughout the economy, including misleading or exaggerated claims by asset managers as well as by companies that issue investment securities. The European Securities and Markets Authority has published a Sustainable Finance Roadmap to avoid misleading differences in sustainability criteria for investment funds, warning against regulatory arbitrage by financial institutions that exploit less strict rules in some EU member states. ESMA is looking for greater consistency from national regulators in the way sustainable investment rules are applied.

Company boards face growing shareholder pressure on ESG issues: S&P

Company boards are set to face increased pressure from shareholders to demonstrate they understand and can act on sustainability issues, including climate change and human rights, according to a report from S&P Global. The authors say shareholder activism and engagement increased in 2021, including a number of votes against directors to protest against companies' lack of a credible climate action plan.

Best source: Investment Week

See also: S&P Global

Investors push back as Amazon and Starbucks clash with employees over unionisation drive

Employees at Amazon and Starbucks in the US are continuing efforts to join unions, despite attempts by the companies to prevent or discourage them. Starbucks has warned investors that unionisation poses a risk to the company's public image and business model, but ESG investors are pushing back, arguing that the company's interference with the process is a human rights issue. During a unionisation drive at Amazon last year, a group of 70 investors called on the company to not interfere, while Trillium Asset Management and other investors have urged Starbucks to respect the decision of workers at an outlet in Buffalo, New York, who last month voted to unionise.

Best source: Financial Times (subscription required)

See also: Bloomberg

See also: Associated Press

Investors seek to hold Rio Tinto to account over sexual assault, racism and bullying claims

Anglo-Australian mining group Rio Tinto has admitted to uncovering cases of sexual assault, racism and bullying in a report commissioned by new CEO Jakob Stausholm. Investors including abrdn and Health Employees Superannuation Trust Australia say they intend to hold Rio Tinto and other mining companies to account for misconduct within the business, and are seeking information on how it plans to implement zero-tolerance policies.

Best source: Reuters (registration required)

Monte dei Paschi CEO Bastianini targeted by Commission after expiry of privatisation deadline

Guido Bastianini, CEO of Italy's troubled Banca Monte dei Paschi di Siena, is at risk of losing his job next week after a board meeting of the bank, which is 64% owned by the Italian state. Bastianini's dismissal is reportedly among the European Commission's conditions for granting an extension of the deadline for privatising the bank, which expired at the end of last year. The Commission is believed to lack confidence that he can push through transformation at Monte dei Paschi, and he has disputed with both the Rome government and the bank's chairwoman, Patrizia Grieco.

Best source: Börsen-Zeitung (subscription required, in German)

See also: Reuters

ESMA aims to help curb greenwashing in investment funds

The European Securities and Markets Authority has published a Sustainable Finance Roadmap in a bid to prevent misleading differences in sustainability criteria for investment funds as well as to curb the risk of greenwashing. The EU regulator has issued a warning against regulatory arbitrage as financial firms exploit less strict rules in some countries and criticises an overall lack of clarity on how rules are being applied. Tackling greenwashing will also affect companies with listed shares and bonds, as fund managers will apply stricter criteria to their ESG claims as a result.

Best source: Börsen-Zeitung (subscription required, in German)

See also: European Securities and Markets Authority

UK financial institutions call for delay to introduction of duty of care requirements

The UK's financial industry is seeking more time to adapt to the Financial Conduct Authority’s duty of care requirements, which should be finalised at the end of July and require financial institutions to implement changes by May 2023. Industry group UK Finance argues that banks and other institutions need two years to introduce the changes, which are intended to protect customers and help the regulator to spot harmful practises more quickly.

Best source: The Times (subscription required)

See also: UK Finance

Repsol CEO and former CaixaBank chairman investigated over alleged corporate espionage

The chairman and CEO of Spanish energy group Repsol, Antonio Brufau, and former CaixaBank chairman Isidro Fainé have been placed under formal investigation by Spain's high court for a second time on allegations of corporate espionage. The previous examining magistrate had halted an investigation into whether Repsol and CaixaBank had hired the security firm owned by ex-police chief José Manuel Villarejo to spy on Luis del Rivero, then chairman of construction company Sacyr.

Best source: El País (in Spanish)

See also: Reuters (registration required)

UK government ready to unveil long-awaited corporate audit reforms

The UK government is planning to unveil its long-awaited reforms of corporate auditing, drawn up in response to a number of company failures that were accompanied by apparent negligence or oversights on the part of their audit firms. The sector's supervisory body, the Financial Reporting Council, is set to be replaced by a regulator with greater powers, the Audit, Reporting and Governance Authority. However, the proposals, already put forward more than three years ago, may be further delayed because the government may not make time in its legislative programme.

Best source: Financial Times (subscription required)

See also: City A.M.

RWE chairman dismisses activist investor’s criticism of supervisory board

Werner Brandt, chairman of German utility group RWE, has dismissed criticism of its supervisory board by an activist shareholder. Enkraft, which has called for RWE to divest its brown coal business to boost its value, believes the board does not give sufficient priority to the sector’s need to adapt actively to climate change and emissions concerns.

Best source: Reuters (registration required)